Are you networking and creating alliances to grow your business?

This week I was speaking at a dinner for a business group called the Scottish Business Network. This network aims to connect Scottish Business people to proactively assist and support Scottish businesses expand internationally.

Our discussions focused on the benefits and pitfalls of expanding into new markets and the depth of the debate, and the collective knowledge in the room, really demonstrated the power of collaboration that businesses can harness if they utilize groups like the SBN when looking to expand into new markets. 

Most of us realise the benefits of such groups, and the impact that collaborations with other business people can have on our businesses. Despite this however many companies either ignore or avoid using collaborative business models when looking to enter new markets choosing instead to take a more “direct sales” approach. This approach can be very successful and can provide an effective route to development into new markets but may result in missed opportunities for growth resulting from factors including:

Resources: Often companies use existing sales resources are used to service international markets. Is this sufficient or could faster more sustainable growth be developed by utilising another model?

Culture and market knowledge: Success in new markets requires a strong knowledge of the market and its culture. This can be developed over time but are there other methods to obtain this knowledge?

Supply Chains: Is the customer experience best served by such a long supply chain or can other models create a better customer experience?

Competition: Can you effectively compete against locally based competition or will growth be constrained by the lack of proximity to the market.

Collaborative business models can provide an alternative option to the direct sales approach to create opportunities for accelerated growth into new markets utilizing locally based resources and knowledge. Business models can range from distribution or dealership type agreements through strategic alliances to joint ventures. The benefits of such models are numerous, not least the access to extended business networks and knowledge, a version of a private business networking group. So why do companies avoid using these models?

When we are talking to business leaders on this topic, the key issues revolve around control, trust and internal capabilities. Collaborative business models, by their very nature, require a sharing of control to be successful. New strategic, leadership and operational systems and processes are required to ensure trust between the parties and appropriate operational control. In other words, leaders are concerned about control and trust with a third party and the ability of their own organisations to learn the new skills required to manage such relationships. Many of the leading companies of today have developed these skills and have created highly successful global trading models with the pharmaceutical, technology and fintech companies leading the way in terms of innovative approaches to collaborative business models reaching far beyond sales and market entry into product development, shared services, etc.

We believe there are 5 key steps to successfully building collaborative models for growth:

Strategy: It is important to put this first. What do you wish to achieve, why do you want to do it, how are you going to achieve it and by when?

Shared objectives: Successful collaborative business models are built on clear shared objectives that are understood and agreed by all parties

Trust: Trust is the bedrock of business. Collaborative business models require a high degree of trust and understanding between the parties. 

Management: Developing the internal capabilities to manage collaborative business models including performance management

Plan the end: Some collaborative business models may be time limited, for example the establishment of a joint venture to fulfil a contract. Others will be more open ended in nature. In either case, it is important to plan for what happens at the end. This is effectively part of building shared objectives and trust but is often overlooked particularly when companies are establishing distribution type arrangements.

Collaborative business models require planning and, ultimately, changes to the way a business is run. But the benefits in terms of growth into new markets can be clear with the potential for increased growth and shared costs and risk.

In the interconnected world we live in today we believe that collaborative business models will play an ever more important role. Are you ready to network and creating alliances to grow your business?