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Frenemies – When Unlikely Partners Join Forces

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General Motors and Lyft; Target and Walmart; Netflix and Amazon - we call these “frenemies”. A strange trend is emerging as unlikely partner companies join forces, and they’re transforming industries around the world. Understanding what's driving the frenemies trend, knowing what options best fit your needs, and making yourself an effective partner are all critical to success.

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Frenemies – When Unlikely Partners Join Forces

  1. 1. ˙fren mi/e noun a person with whom one is friendly despite a fundamental rivalry.
  2. 2. | 2 | General Motors invested a half billion dollars into Lyft—a ride sharing service that provides an alternative to buying a car. Netflix eliminated its IT infrastructure and instead partnered with Amazon—which offers a nearly identical, competing media stream- ing service. Target and Walmart joined forces to build a mobile payment system consumers can use across dozens of retailers. A strange trend is emerging as unlikely partners join forces. Whether they seem more like competitors or seem incompatible these surprising partnerships are popping up across industries and includes some of the biggest names in business. Getting partnerships right can make the difference between decline and transformative growth. But there isn’t a formula for entering the perfect relationship. It’s art, not science. It requires taking some risk, having confidence in your brand, and a vision for tomor- row that’s bigger than the tasks of today. Understanding what's driving the frenemies trend, knowing what options best fit your needs, and making yourself an effective partner are all critical to success. HOW UNEXPECTED BUSINESS PARTNERSHIPS ARE REDEFINING COMPETITION
  3. 3. | 3 | EXPLAINING THE WEIRDNESS Beyond fawning press releases and happy photo-ops, there's a calculation that a diverse set of business leaders are making. At its most basic, the logic is simple: we can't do this alone. Despite their differences, leaders across industries are grappling with a fundamental economic shift: people no longer buy products, they buy services. Today, automakers don’t sell cars, they sell mobility. Hotels don’t just sell rooms, they sell wellness. Telecoms don’t just sell cell phones and service plans, they sell productivity. Products, software, and other platforms have become the conduit for an experience. And so across industries companies face similar challenges: THE NEW SET OF CUSTOMER EXPECTATIONS Customers increasingly look for a one-stop-shop, fully integrated experience. They don't want to move between locations or, even different applications, to get the services and conveniences they demand. That means it is now all about offering a brand experience: an immersive, curated, custom interaction with customers. THE QUICKENING PACE OF TECH DISRUPTION The pace of new technology is challenging every business. For large businesses, the culture shock is most severe. How do automakers—with lengthy production cycles— compete with tech companies that churn out new products at a fundamentally different pace? Organizations are struggling to keep up. THE EMERGENCE OF PERVASIVE CONNECTIVITY More and more business assets and customer products communicate with one another. This change allows under-utilized assets to be identified and deployed on-demand (part of what’s fueling the gig economy). That's why we see Nordstrom working with off-hour Uber drivers to provide same-day deliveries. Customer demands, transformative technology, and pervasive connectivity: companies now sell high-value experiences over low-margin products. The result is tantalizing business opportunities that feel just beyond reach, in danger of being captured by fast-moving newcomers. Rather than get into a bidding war over the next best thing—or being overtaken by it—we're seeing big business handle the pressure differently. They're reaching agreements with old enemies to outsmart the emerging competition. They're creating friendships with newcomers and parallel industries to benefit from new sources of innovation without giving up market share (and maybe even growing it). They're seeking out total opposites to rethink the value chain and the brand experience. And getting partnerships right starts with understanding your options.
  4. 4. | 4 | IT TAKES TWO: FINDING THE RIGHT PARTNER Pressured by customer demand for immersive, comprehensive experiences, competitors are forming partnerships that once seemed unimaginable. Frenemies, unite! IF YOU NEED TO Adapt to changing competition, and redefine your industry's value proposition. Double down on your strengths, and outsource your weaknesses. Transform what you do, how you do it, and/or where you do it. A LOVE-HATE RELATIONSHIP A MARRIAGE OF CONVENIENCE TO BE THE ODD COUPLE "The enemy of my enemy is my friend." —ancient proverb "Anything is better alone, but I don't think I can handle it alone.” —Ernest Hemingway "We go together because opposites attract." —Paula Abdul THEN YOU WANT IF YOU NEED TO THEN YOU WANT IF YOU NEED TO THEN YOU WANT When faced with new industry entrants, old enemies have good reason to band together. With disruptive start-ups and fast-changing technology, competitors are finding common ground, like setting industry best practices, co-investing in new infrastructure to support capabilities, our developing mechanisms for sharing cyber security threats. When the future of your industry is at stake, partnering with someone who understands your business as well as you do—your biggest competitor—can be surprisingly valuable. As tech giants forego traditional industry boundaries—retail, entertain- ment, manufacturing, payment processing and more—you'll find that you compete with a business in one market, but not in another. For example, Netflix and Amazon compete on on-demand video services, but only Amazon offers cloud services. So while House of Cards goes head-to- head with The Man in the High Castle, Netflix relies on Amazon Web Services infrastructure. Knowing what your value proposition is, while remaining open-minded to find partners to deliver it to your customers, is increasingly critical. To give your customers an integrated brand experience, you need to consider every interaction, from the moment the customer has a want or need, through purchase and delivery. But consistency is hard to deliver when customers demand so much variety. Delivering a unified experience across platforms and products—from your phone to car, to home—can't be done in isolation, no matter how big the company. You can't succeed in isolation or with traditional partner- ships alone. Don't be afraid of the unexpected partnership with the pizza company, the health care conglomer- ate, or the unique tech start-up. Those partnerships mean more opportunities to stay connected to your customers, increase your interactions, and grow.
  5. 5. | 5 | IT’S NOT YOU, IT’S ME: BEING A GOOD PARTNER These peculiar new partnerships aren't only intriguing, they're increasingly necessary. Finding the right partners is key, but you need to be a good partner to attract them. It takes the right organization to have the confidence, focus, and agility to get a frenemy alliance right. Here are some tips: THE DO'S OF GOOD PARTNERS DO know where you want to go. When you see frenemy alliances popping up all over your industry, there's a natural impulse to go with the crowd and make a move. Good idea. But first, make sure you have a clear sense of where you're going to know what you need. Define and regularly evolve this vision by engaging with your customers and your staff. And it's OK to adapt your vision with where your partners are headed. Collaborate, iterate, and shape the future together. DO embrace the turbulence. Could you lose talent, IP, profit, or market share by partnering with your frenemies? Yes. Some bad things might happen. But have confidence that the overall impact will be positive. Together, you’ll expand your potential: tapping into new talent and IP; maximizing R&D funding; and increasing access to new customer pools. If it feels like you’re taking a risk, embrace it. The only thing more risky than joining forces with your frenemies is doing nothing at all. DO be real about who you are. You need to know what you're good at, what your core business value proposition is and what you bring to a new partner- ships. But focusing on strengths is only one step. You have to admit where you need help. Make an honest assessment of your operational limitations. Understand where you'll struggle to provide new services to customers. Keep an eye on new technologies, even when you aren’t sure exactly how they’ll impact your industry. Self-assessment, especially when it becomes part of who you are, helps you identify the types of partners you need.
  6. 6. | 6 | THE DON'TS OF GOOD PARTNERS DON'T lose sight of your brand. The sustainability of your business depends on your brand. Without it, you risk going from your special connection to your customer. As you engage your frenemies, stay brand conscious. Communicate clearly about who you are. Your evolution, driven in part by frenemy alliances, doesn’t have to undermine your core value proposition. Don't partner with companies that have values you can't live with or force fundamental change in what you do best. DON’T forget that this about people. This isn't just about C-suite handshakes and photo ops. To make a partnership work, there needs to be open communica- tions and trust. That requires personal rela- tionships. The challenge is to find the right personalities on both sides to champion connections that make your businesses better. Internally, you need catalysts who know how to navigate change, and advo- cate for the frenemy model. On the flip side—you need to find the right connection points into your frenemy. People who get your business and share your vision, have clout within their organization, and know how to play matchmaker. DON'T go it alone. Savvy leaders seek partners—big and small, rather than doing everything in-house. Even with your strengths, there's opportunity to do better, faster. New customers to reach and new services to offer. While big acquisitions were a dominant tactic in the old model, they can be constraining in today's fluid market. Technology disrupts and customer demands shift suddenly. Recognizing the need to quickly learn from others, companies are increasingly turning to venture capital investments, R&D partner- ships, and joint offerings. Diversify your frenemy relationships so you can readily adapt. Don’t just bet the business on one partnership.
  7. 7. | 7 | HAPPILY EVER AFTER Great advice for navigating these relationships stems from the second law of thermodynamics: entropy. Over time, your relationship will cool down, and you might drift apart. With your frenemies, that leaves you two options: 1. Know how to get out. Avoid a quagmire. Have an exit strategy. 2. Keep the relationship fresh. Keep challenging each other, especially when things are going well. With the right mindset, you'll find success from unconventional partnerships. Together with your diverse set of frenemies, you can tackle new challenges, inspire your talent, captivate your customers, and grow your businesses. Of course, an alliance between frenemies will have inherent tension. Remember that you’re different. The whole point of the frenemy alliance was to benefit from each other’s differenc- es. The near incompatibility and unlikely partnership is what gives these relationships their power. Even the best can’t win by themselves anymore. Market leaders will boldly–but smartly–form novel and surprising relationships. Look for your match now, before the most appealing partners are gone.
  8. 8. Booz Allen Hamilton has been at the forefront of strategy and technology for more than 100 years. Today, the firm provides management and technology consulting and engineering services to leading Fortune 500 corporations, governments, and not-for- profits across the globe. Booz Allen partners with public and private sector clients to solve their most difficult challenges through a combination of consulting, analytics, mission operations, technology, systems delivery, cybersecurity, engineering, and innovation expertise. With international headquarters in McLean, Virginia, the firm employs more than 22,600 people globally and had revenue of $5.41 billion for the 12 months ended March 31, 2016. To learn more, visit www.boozallen.com/international. (NYSE: BAH) © 2016 Booz Allen Hamilton, Inc. FOR MORE INFORMATION Sedar LaBarre Vice President labarre_sedar@bah.com Walton Smith Principal smith_walton@bah.com www.boozallen.com

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