Win Win Partnerships
The first section of the Business Model Canvas is Key Partnerships because for businesses large or small, young or old there is no such thing as end-to-end or “we can do it all”.
Every partnership has different commercial factors and nuances. Some may be more tactical than strategic. They are often asymmetrical, e.g. a small consultancy may consider its relationship with Microsoft as strategic but not vice versa.
Vignettes
With EV charging networks, a large part of the land grab has been about winning the support of points of traveler interest, along with getting published in popular online maps. Chargemaster executed this at national scale by leveraging a number of strategic partnerships. They have been rewarded with a £130M acquisition by BP.
Utility Warehouse has built a franchise network to proliferate their business model and grow market share.
With platforms like Apple’s HomeKit or Google’s Android Things, independent software developers can leverage APIs to transform these innovations’ features into benefits for consumers. It is also clear that smart home technology and energy supply is a fertile ground for partnerships.
The Energy Web Foundation is a promising example of an open source partnership. Operating in the distributed ledger (aka blockchain) space, they are creating shared infrastructure for solutions that accelerate the transition to a decentralised and democratised energy system.
Software vendors (e.g. Microsoft, Elastic, Bentley Systems, MaxBill) have partner ecosystems which reinforce their products by empowering others to add customer engagement and analytics features via APIs and micro services.
Piclo are proving that their software can be a vital component of future distribution networks through partnership deals with BEIS, UKPN and SSEN.
Collaboration Across the Value Chain
From R&D through sales to customer service, partnerships and collaboration can help small players punch above their weight and help larger organisations operate in markets where speed and agility is key.
Outsourcing
Outsourcing can optimise operations and enable a focus on core activity. These are often viewed as partnerships but are more often tactical buyer-supplier relationships than strategic alliances. Therefore, they are not considered in this short article.
Investment
Dealing with investors, as with any partnership, requires patience and mindfulness. Terms like dragons, tigers, sharks, lions and vultures paint a popular misconception of investors as hard-nosed, aggressive capitalists.
However if approached right, most investors are valuable sources of constructive criticism regardless of whether they are in or out. In dealing with investors as partners, it is important understand their view of the world.
The first decision investors make is what categories to invest in. Once they have determined that, then they choose specific companies. Once they hold stock in a company, they dig into the dynamics of the markets it serves, the competitiveness of its offers, and its track record for executing to the forecasts it provides. Geoffrey A. Moore, Escape Velocity
Innovating with Partners
Over the last 50 years, R&D in the energy industry has only added up to a percentage point or two of turnover. However this amounts to billions and certainly should not be treated as being immaterial.
For the past decade or so, almost every other sector has been going through wave after wave of innovation. In particular, the energy sector is ripe for transformation and is reframing its approach to innovation.
Partnerships can help position firms to catch the next wave of innovation can help in establishing systematic approaches to getting value out of new technology, business models and markets.
Incubators, joint ventures, alliances and consortia for developing new products, services and software are becoming more and more prevalent. For example, IdeaLondon, EIC, KTN and others are doing some great work in the UK.
Distribution
Distribution deals are a common way to increase sales. Sometimes they are agent/principal relationships rather than strategic partnerships.
In these relationships there are two key protagonists: the Owner and the Provider. The former holds the ultimate customer relationship and brand. The latter provides a channel to market.
Distribution Network Operators (DNOs) offer a delivery mechanism rather than a channel to market. There are mandatory Buyer-Supplier relationship between a licensed energy retailers and DNOs rather than strategic alliances.
Whitelabel energy supply are classic distribution deals. For example, British Gas offers products and services under the Sainsbury’s Energy brand, while SSE works with Marks & Spencer to provide M&S Energy. Even with Ofgem clarifying its position on the regulatory treatment of these types of deals, it is not all a bed of roses. In 2016 Age UK was criticised roundly after over its relationship with E.ON.
Digital Partnerships
In digital markets partnerships embodied as APIs, microservices, open data and platforms are proving to be critical for the success of many businesses. Within the energy and home services space, many entrepreneurs see a future where customers can access the information they need and interact wherever is most convenient for them. This might mean viewing bills through a digital banking app, or managing council tax bills through a WhatsApp bot. This is a natural way for digital natives to interact. To achieve this, platforms and APIs are needed behind-the-scenes to glue it all together.
There are many APIs and data sets for energy industry software engineers to leverage. However, developers moving in from other sectors find interfaces within the energy industry are not as modern, useful, findable or as open as in other sectors.
The energy sector’s systems are certainly not easy to work with compared to say financial services. However, I actually think that the industry is so far behind that it has a great opportunity to do things really well through applying lessons learnt from elsewhere. It’s a huge area to tackle but I do see that there could be comprehensive API access to gas, electricity and water utilities on a par with what we are seeing in open banking. Hedley Smith, Homebox
To date the energy industry has no major digital platform offering like we see from Amazon in retail, Apple in music or Uber in transport. But there may well be one just around the corner. Don’t forget that the decline of BlackBerry and Nokia was due to competition from Apple and Google who are platform companies.
We’re not even fighting with the right weapons, … The battle of devices has now become a war of ecosystems. Stephen Elop, whilst Nokia CEO
Conclusions
Possibly the most important cultural requirement for strong partnerships is trust, which is readily achieved through having open minds, open hearts and open will.
Thanks to the Internet, information and knowledge is readily available to almost everyone. Yet many business people are still terrified of revealing too much about themselves. This hampers partnerships and creates mistrust. Tim Waterlow, Affinia Partners
Other key ingredients in most successful partnerships are a good understanding of partnership eco-systems and a long term, strategic mindset.
Before partnering you should:
- Know the market your entering
- Know your own strengths and weaknesses
- Understand how a partner can amplify your strengths, cover your weaknesses or help produce something entirely new.
- Be realistic.
Don’t hesitate to seek the advice of specialist consultants and your peers in other industries. Unsurprisingly people who have been successful in forming strong partnerships are usually open, approachable and happy to share there knowledge and expertise.