Best Practices for Partnership Growth (2 of 3)
Partnerships Success via a Partnership Operating Model

Partnerships Success via a Partnership Operating Model

In a prior post, we introduced the first 3 best practices in executing a successful partnership by developing a Partnership Operating Model™. While partnerships are easy to establish, they are very hard to execute for success. This post discusses the next set of best practices and continues to address the ways to overcome the root causes of disappointing partnership results.

Create Partner Profiles
What partner groups are a great fit – for both parties?

There are often multiple groups of potential partners; for instance, a wholesale payments provider might partner with digital banking providers, core vendors, or networks. At a high level, it is important to outline each of those group’s interests and roles, as well as any conflicts between the partners.

Each of those partner groups will have different interests than the others in defining partnership success. The remainder of the partnership definition should be based on the highest-priority partner group, measured by the highest payoff and best likelihood to succeed.

Detail Each Parties’ Interests
Achieve detailed goals, avoid damaging surprises

There are 3 parties in the partnership: the lead partner, the other partner(s), and the client. The partners must be clear on the benefits to each of the 3 parties. The more granular the benefits, the better. That will make the pitch to the potential partner more compelling and avoid lack of alignment on the partnership objectives. It will also avoid the partners seeing a great partnership, but one that the clients don’t actually need.

The parties’ interests must include not only what the payoff is, but how the partnership will work. The lead partner must develop a business case for the payoff to each party. Over time, the lead partner will turn that into more detailed financials like (1) the resulting revenue/profit plan over time, (2) the contribution of partnership revenue to overall growth, (3) buyer pricing, and (4) the partnership cost structure.

Focus on the Partnership Value Chain
Detail the partners’ roles in meeting buyer needs

The partners, together, must figure out the series of functions and processes that the partnership must deliver to meet buyer needs, i.e., the Partnership Value Chain, illustrated below:

The Partnership Value Chain must be focused on how the partners will deliver the solution in an integrated experience for the buyer. It must not be focused on what each party’s independent value chain is (i.e., the one they each use today to serve their customers).

For example, to provide customer support for a partnership solution, it is not enough that each partner continues to support the customer in a way that is not synchronized with the other partner’s customer support, since the customer expects that the partners will have designed seamless support mechanisms.

Being synchronized is not necessarily hard to achieve – it depends on how loosely/tightly-coupled the rest of the relationship is. A “loosely-coupled” relationship (like the referral model) requires the least integration of functions. A “tightly-coupled” relationship (like the private-label model) requires great integration, with a “modestly-coupled” relationship (like the reseller model) in-between.

Design the Partnership Model Using a Whole-Product Perspective
The software may not provide the most buyer value

The Partnership Operating Model™ defines the responsibilities of each partner in delivering the Partnership Value Chain to meet the buyers’ needs. It is the thing that details the “coupling” defined in the last section. The Model should be designed using a Whole-Product framework.

So what is the “Whole-Product”? It’s everything that brings value to a customer, in addition to the software. 

Most fintechs believe that most of the value of their solution to the customer comes from the software; however, most customers place high value on the other touchpoints with the vendor or partner. The vendor must be easy to do business-with. By example, the customer may highly value the nature of customer support, how they are onboarded, how innovations are made available to them, the vendor’s regulatory discipline, etc., etc.

In fact, a vendor can create a sustainable competitive advantage by focusing on its entire business model that creates the customer experience for contact points like contract negotiation, the structure of pricing, the onboarding process, business continuity, the innovation process, security & privacy, and much more.

The Partnership Operating Model must address the Whole-Product being delivered by the partnership.

Our next blog post will talk in some detail about properly detailing the Model and about best practices for managing the partnership, since partnerships on auto-pilot crash.