Top 3 Reasons Why Strategic Partnerships Fail

Did you know that (60-65%) of strategic partnerships fail? 

While strategic partnerships are increasingly vital to the success of your business, more than half of them are failing today, according to Mark Sochan’s, ‘The Art of Strategic Partnerships’. 

This week, on our Excellence in Vendor Management series, we spoke to two industry leaders: Carrier’s Strategic Sourcing & Partner Management Leader, Joel Gouder and President & CEO of Enlighta, Nipun Sehgal. Based on their extensive experience in vendor management and strategic partnerships, here are the top three reasons why partnerships often fall short:

1. Lack of Clear Communication & Misaligned Goals

Communication has always been the key factor in building trust, resolving conflicts and strengthening relationships. Different strategic partnerships have different expectations. 

Each partner enters this collaboration with specific objectives, metrics, expectations and completely different definitions for success. As partners, it is crucial to understand each others’ expectations. The problem occurs when partners neglect defining and sharing these goals with each other.

For example, one partner might prioritize short-term cost savings, while the other focuses on long-term innovation. This lack of strategic alignment can lead to frustration and ultimately negatively impact the collaboration. Therefore, to ensure long-term partnership success, focus on defining goals and regularly revisiting aspects of partnership like: shared vision, value exchange, and success metrics. 

2. Insufficient Commitment & Investment

In a recent study, 45% of executives believed that the biggest challenge when it comes to strategic partnerships is keeping them active and mutually rewarding.

Starting a partnership takes huge commitment from all the parties involved. If one party isn’t willing to make the same level of commitment and investment of their time, finances or resources, this will likely result in resentment and conflict. 

A successful partnership requires dedication, effort and resources from all involved parties. Both parties should demonstrate a genuine commitment to the partnership and be willing to invest in its growth and development over time. Having this information communicated beforehand in the agreement can prevent these conflicts in the future for strategic partnerships. 

3. Absence of Early Warning Indicators 

According to the industry experts, there are always some early warning indicators of partnerships that are struggling and aren’t moving in the right direction. Some of the indicators could be lack of performance,  failing to meet the goals and objectives of the partnership, poor communication, lack of accountability, no focus on mutual success, constant change of partnership scope, lack of value, and lack of commitment.

Failing to identify and these address performance issues, contractual obligations, and potential risks early on can lead to disputes and ultimately, failure. 

“Having early warning indicators, a process and tool support, adds a lot of value to most organizations when it comes to managing and sustaining partnerships” 

– Nipun Sehgal, CEO, Enlighta

Leveraging The Power Of Vendor management Systems

Did you know that a recent report by Ardent Partners found that organizations with mature Vendor Management System implementations reported a 38% higher rate of on-time deliveries and a 22% improvement in supplier performance. 

Let’s see how VMS can be a powerful tool to address the above mentioned challenges and foster long-term partnerships and improve supplier performance. 

1. Communication & Alignment of Goals

A Vendor Management System can act as a centralized system for all communication, documents, and tasks related to the partnership. All partners involved can set clear expectations from the beginning and can access real-time information, reducing the risk of misunderstandings and ensuring everyone is on the same page.

Furthermore, a vendor management system can facilitate shared goal setting and tracking. Features like collaborative whiteboards and shared calendars allow partners to define goals collaboratively, assign tasks, and track progress towards those goals ensuring transparency. Goal alignment can be a key performance indicator (KPI) of the annual vendor relationship assessment survey that key stakeholders are required to respond in the client-vendor partnership. 

This fosters a sense of shared purpose and accountability, keeping everyone aligned and motivated.

2. Commitment and Investment

Building successful partnerships requires a shared commitment of time, expertise, and resources from all parties involved. Unfortunately,  imbalances in commitment can often derail these collaborations. One partner might dedicate significant resources to the partnership while the other invests minimally. This can lead to resentment, hinder progress, and ultimately impact the partnership’s success.

While a vendor management system cannot directly help resolve the lack of commitment and investment, it promotes transparency and accountability by providing a central platform for tracking tasks, milestones, and resource allocation.

Performance dashboards and reporting tools within vendor management systems offer real-time insights into key performance indicators (KPIs) relevant to the partnership. This allows partners to quantify the impact of unequal resource investment and take steps towards resolving the problem. 

A well-defined partnership agreement outlines the roles, responsibilities, and expected resource investment from each party. Schedule regular meetings to discuss progress, address challenges, and ensure both parties are aligned on resource allocation and commitment levels.

3. Identifying Early Warning Indicators and Managing Risk

As discussed before, early detection of potential problems is crucial for preventing partnership failure. Vendor management Systems can help partners identify these issues before they escalate into a serious dispute or litigation or total misalignment. By tracking key performance indicators (KPIs), VMS can provide early warnings of potential issues, such as missed deadlines, declining performance metrics, or communication breakdowns, just as monitoring key health indicators in complex systems.

With this information, partners can take proactive steps to address these issues. This could involve modifying strategies,  or allocating additional resources. 

Some vendor management systems also offer functionalities that allow partners to track key milestones and contractual obligations, ensuring both partners meet their commitments. This can help build trust and prevent disputes down the line.

Want to know how Enlighta can help you with strategic partnerships and vendor management?

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