It makes sense that for a start-up to thrive, they will need to develop a strong network of partners that can help them achieve the growth they aspire to. This network will offer them the scale and resources required to punch above their weight.
I’ve written before about the various approaches you can take to designing your collaboration network, with each approach typically dependent upon the level of connectivity between each member of the network.
Collaborating with external partners is traditionally thought to bring you one of three main benefits:
- Information –this includes insights on how to produce better products or services, create efficiencies or improved marketing.
- Power –power typically comes from having a team of partners able to help and support you in your operations.
- Cooperation –cooperation meanwhile allows you to pool resources or knowledge, therefore achieving more collectively than you could individually.
In essence, tapping into a partnership network can help your company derive a competitive advantage in the marketplace, with the stronger your network, the larger your advantage.
When looking at collaborating with external organisations, the relationships typically form one of three distinct types. I’ll be looking in more detail at each of these in subsequent posts throughout this week, but I wanted to introduce them here first.
- Level 1 partnerships –at this level, the collaborations are fairly straightforward and typically involve sharing resources and capabilities between one firm and another.
- Level 2 partnerships –the next level up sees an increasing amount of information shared in a timely manner so that cooperation can be more effective. It also sees the collaboration utilised to increase the power of all parties.
- Level 3 partnerships –the final level sees a firm strategically place itself in the centre of a valuable network and uses that position for competitive advantage
So what kind of relationship benefits a start-up business? A recent study from the University of Buffalo suggests that a new business is best off keeping things as small and simple as possible.
“Partnerships offer many mutual benefits; established companies can tap into a startup’s cutting-edge technologies and innovative potential, while young firms acquire knowledge and status from experienced partners,” the authors say.
“But more is not necessarily better,” they caution. “We found the benefits of alliances with larger companies do not increase proportionally with the number of partners, but instead start to level off and turn negative as more partnerships are formed.”
Interestingly, the study found that highly specialized companies tended to enjoy greater benefits from their partnerships than their more generalized peers.
“Small, specialized firms that have the opportunity to align with larger firms should put their expansion plans on hold to gain the full benefits of those partnerships,” they suggest. “Later, they can use their newly developed capabilities as a basis for growth and a more reliable path to expansion.”