08 Key Partners in Business Model Canvas

Mục Lục

In this section, you will learn about the next building block in the Business Model Canvaswhich
is Key Partners (or Key Partnerships) that an entrepreneur needs to have to perform its key
activities and ultimately provide its value proposition to its customer segment.

We will look at 1) key partnerships, 2) types of partners, 3) motivation behind partnerships,
4)key partners and value propositions, and 5) case studies.

KEY PARTNERSHIPS

A business partnership is when two commercial entities form an alliance, which may either be a
really loose relationship where both entities retain their independence and are at liberty to form

more partnerships or an exclusive contract which limits the two companies to only that one
relationship.

The following factors are very important to keep in mind when forming partnerships:

 Right Partnership Agreements: Whether your partnership is with a business or an
individual, it is important for all the relevant parties to have clear partnership agreements
drafted along with legal counsel.
 Defining Expectations: Many times new businesses fail to establish their expectations
from the outset leading to much confusion and conflict later. An entrepreneur needs to
ensure that he has shared his expectations openly with his partner and vice versa from the
beginning.
 Impact on your clients: When forming a partnership, it is important to evaluate your
value proposition and your key resources and make sure your partner is filling any gaps in
either. This can only be done by also evaluating how the partnership will translate to the
customer.
 Win-Win situation: For a partnership to be healthy and sustainable, there need to be
visible gains on both ends.
 Selecting partnerships: Some partnerships may seem lucrative in theory but fail to get off
the ground practically. In addition, changes in the business context may also make some
business partnerships irrelevant. In such cases, it is important to end these partnerships
quickly to avoid further wastage of resources.

This building block refers to the network of suppliers and partners that make the business model
effective. The reasons for a company opting for a partnership are myriad, but healthy
partnerships are instrumental in making a business success or a failure. A company can optimize
its resource utilization, create new resource streams or mitigate risks behind major business
decisions by taking on a partner before starting a new course of action. It is important to note
here that your organization maybe partnering with a number of organizations for various reasons,
but not all their relationships will be key to your business.

Dutch company that specializes in producing cheese might choose to go into a joint
venture with milk producing local company to start making cheese in the new region.
4. Buyer-Supplier Relationships: These are the most common type of partnerships which
assures that you have a reliable source of supplies coming in and for your supplier this
means they have a steady confirmed buyer for their product.

MOTIVATIONS BEHIND PARTNERSHIPS

Partnerships are a tricky business involving a lot of negotiation and an element of trust. There
can be a number of reasons why organizations would make the decision to take on a key partner
rather than doing things themselves or taking on a partner but not considering them as key to the
success or failure of their business. Primarily, one of the three kinds of motivations can be
attributed when a business chooses to enter a partnership.

Optimization and economy of scale

Most organizations are heavily focused on the bottom-line. And many focus on cost-cutting or
smart spending through optimizing the allocation of either their resources or activities. This is
the most common motivation for people to enter into partnerships of different types.

When you are looking for efficiency in your company or optimizing your productions chains,
key partners can help you achieve this goal. It is unrealistic to think, as an entrepreneur that you
have the resources in place to conduct all your key activities in-house. Most partnerships give
organizations the ability to share their infrastructures or outsource some activities to more cost-
effective options.

Citroen, Peugeot and Toyota joined hands to create a small, cheap car for the masses that they
tried to sell for 5000-6000 euros. These cars looked almost the same except for the chassis and a
few internal and external details.

Reduction of risk and uncertainty

If you have a good relationship with a key partner, you reduce the inherent risk that comes with
doing your own business. You also guarantee supply to your business rather than being
dependent on suppliers who aren’t key partners and would therefore not give precedence to your
business over others.

Many competitors may form strategic partnerships to share the risk of bringing something new
into the market while still competing in various aspects in the industry. A classic example of this
is the advent of blu-ray technology which was developed in collaboration by some of the world’s
premier consumer electronics and computer technology firms. The development of this
technology was expensive and several competitors had to get together and decide that they would
all be selling their products based on blu-ray technology; hence they needed to collaborate to
make blu-ray technology more mainstream. The group joined hands to bring the technology to
the mass market but still competes on the basis of their various blu-ray based gadgets in the
consumer market.

Acquisition of particular resources and activities

If there are certain things that you don’t have in-house and which would require a heavy
investment of time, money or both, a key partner who already has these processes and the
infrastructure developed would come in extremely handy.

Business models can be extensive maps of the myriad activities that a business needs to perform
or the endless resources required to perform these activities successfully. However, it is rare for a
new company to have the resources or capabilities in place to fulfill the mandate set down by the
business model. Hence, many new companies are beginning their journeys by forming
partnerships that give them access to the required resources or processes that they require, but are
unable to own yet. Hence, many mobile operators partner with IT companies to develop the
operating system their handsets require rather than bearing the heavy investment such an
endeavor would require if done in-house. This also gives the IT company a steady source of
revenue as well as the advantage of publicity if the mobile manufacturer’s brand is well
recognized. Bicycle companies do not manufacture their bicycle accessories. Instead, they get
into selective partnerships with bicycle parts manufacturers who customize the parts like the
color or size of the bicycle seat according to the preferences of the manufacturer.

CASE STUDY

Starbucks

Starbucks has established several key partnerships worldwide such as with coffee growers
worldwide to grow eco and farmer friendly coffee beans. This key partnership is a typical buyer-
supplier relationship, motivated by a need to acquire key resources. Another key partnership is
with specialized coffee machine makers who make specialized coffee makers for Starbucks.
Again this helps Starbucks mitigate cost because it does not have to invest in infrastructure,
R&D, and manpower to create these coffee machines in-house. Instead, it is much more cost
effective to partner with an organization that already holds expertise in this area and has the
infrastructure in place already to cater to Starbucks’ needs. Conversely, Starbucks provides them
with a steady buyer for their product as well as the added boost that the Starbucks brand holds
for the coffee machine manufacturer.

A Comparative Analysis of Facebook’s and Google’s

Partner Networks

Though Facebook has a number of partners in its network, it isn’t entirely dependent on any of
these partners. Most of Facebook’s partners provide valuable content for its users so Facebook
partners with content providers such as Netflix, Washington Post, Hulu, etc. to provide movies,
articles, music and other forms of content to its subscriber base.

Conversely, Google has Google Network members who are content companies that partner with
Google to provide content on for its search engine. It provides Advertisers access to these
content companies web pages through the Google AdSense program and in return shares
revenues from the said program with the relevant companies, leading to a mutually beneficial
partnership. Additionally Google also partners with Distribution companies to attract traffic to its
websites. However, these are a group of Distributors and Google does not leave itself dependent
on any one distributor.