Strategic partnerships can be good way to grow

Smaller businesses almost always have limited finances, people and time to expand and solidify a competitive advantage. In today's fast moving, global economy, many firms are choosing to grow through strategic partnerships rather than to go it alone.

What is a strategic partnership? It is working with another business to enhance sales, distribution, exports, product development, design, training or technology. These could be simple vendor relationships or more complicated, longer-term contractual agreements. They can be with both small and large firms.

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Strategic partnerships are more than just two firms transacting business. Such a partnership is a collaboration where each company has a capability that can enhance both firms' success and competitive advantage. One company focuses on what it does best, while the partner focuses on its area of expertise. The right partner can help reduce risk and uncertainty, bring new products and services to the market faster, reduce costs, and increase effectiveness and return on investment.

Building trust is crucial for both parties, and a trial relationship can be used to test the partnership.

The keys to success include:

•  Clear expectations of each firm's responsibilities, costs and outcomes

•  A champion from each firm to manage the partnership

•  A formalized decision-making process

•  Regular communication, coordination and commitment between the partners

•  An understanding and management of cultural differences

•  Intellectual property agreements

•  A predetermined way to end the partnership should it not meet one or both of the company's expectations.

Ancora Coffee Roasters of Madison created a valuable strategic partnership with Phyllis Johnson, president of BD Imports shortly after she started her business. Rob Jeffries, coffee buyer and master roaster for Ancora, says coffee grows in more than 80 countries so it is a daunting task for a small company to find and secure the best beans. Ancora has developed strategic partnerships with a number of firms that specialize in importing coffees from particular regions.

BD Imports of Rockford, Ill., a source for specialty African coffees, is one of them. Jeffries says several beneficial synergies have emerged with BD Imports: "We cooperate in roasting and cupping samples of prospective purchases," Jeffries says. "Ancora consults on quality management issues for BD Imports; we work together to bring coffees to market - as we did in 2004 with Rwanda, an exciting new origin in the specialty coffee marketplace."

Jeffries says a few simple rules guide Ancora's partnerships. "Ensure that expectations are well understood by both parties," he says. "Each company must stick to what they're good at - don't alter your essence to meet the needs of the other. Find companies to work with whose principles are similar to those of your business."

Dr. Hector DeLuca, president and chief executive officer of Deltanoid Pharmaceuticals in Madison, does early and mid-stage pharmaceutical research and development. Deltanoid is involved in several strategic partnerships on advanced drug development and later phases of clinical trials.

The partnerships, DeLuca says, "have all been successful but to varying degrees and for different reasons." DeLuca offers the following advice:

Stay involved. Insist on joint steering committees to keep lines of communication open and accurate.

Keep it "human." Try to meet face to face regularly and particularly whenever significant issues arise.

Be flexible. Make sure you are staying on task but allow for the twists and turns that are a part of all development activities.

"Trust but verify." Allow for bumps in the road but know when the potholes call for serious repairs or termination of the relationship.

Neil Lerner is director of the UW-Madison Small Business Development Center, a partner in the Wisconsin Entrepreneurs' Network. On the web: www.uwsbdc.org.