Services Global Viewpoint – November 2015

Broadcasters need partners

There is a "guy phrase", which says, "Who’s your buddy?" While whimsical, it parallels what broadcast and media CEOs must be saying to themselves.

Latest research from the Economist Intelligence Unit and Telstra shows that businesses are increasingly relying on digital partnerships to innovate and drive new revenue. The partnerships are not the legal kind, where a dozen lawyers clog up the process of working together, but less formal ones where company A works with company B toward a mutual goal. The media industry used to call this “co-opetition”.

The global survey of shows that a majority of businesses believe that companies need a network of partners to succeed. Those companies are responding to an environment of rapid change and technological disruption by establishing partnerships across firms, industries and geographies

The second report in Telstra’s global research series, Connecting Companies: Strategic Partnerships for the Digital Age, found companies driving innovation today are increasingly relying on partnerships rather than traditional in-house R&D or acquisition strategies.

The Connecting Companies research found the primary motivation of digital partnerships is to develop new capabilities that serve the ‘always on’ customer including the mobile-first customers of the rising middle classes in Asia. The research also showed:

● The media industry has entered an era of the co-corporation, with 53 per cent of respondents believing that companies will have to be part of a network to maximise future technology trends

● Fifty per cent of executives believe their digital partnerships will result in a change to their business model

● Forty-four per cent of respondents took the view that "companies going it alone will soon be a thing of the past"

● Half of those surveyed believe their digital partnerships have already proven their value

● Sixty percent say they expect their partnerships will generate at least one tenth of their revenue over the next 12 months

Not every company can develop and release a new product or service with only in-house resources. Sometimes, they just need a bit of help.

Not every company can develop and release a new product or service with only in-house resources. Sometimes, they just need a bit of help.

Martijn Blanken, Group Managing Director, Telstra Global Enterprise and Services said the research confirms that across multiple industries the pace of technology change is so great, that to keep up, most successful global businesses are pursuing strategies based on the power of many.

Broadcasters operate in a tight knit community. Building strategic relationships can be difficult for competitive reasons.

"I’m not suggesting that the age of in-house R&D and product development is dead, but in many industries you just can’t go it alone anymore… partnerships have become a key business strategy," said Mr Blanken.

"It doesn’t always come easily, it’s natural for a business to want to compete rather than collaborate, but to succeed in this environment requires a mindset that is open to experimentation. As the EIU report says, this can mean being open to making multiple bets on big technologies, playing the field and being prepared to potentially exit quickly if things aren’t working".

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Not all partnerships are 100% successful, but an overwhelming majority prove to be at least somewhat effective according to research by Vadim Kotilnikov. Source: Building Partnerships, Vadim Kotelnikov

"Interestingly, the research reveals some regional disparities. The majority of respondents in fast growth economies like India, China and Indonesia say their partnerships are driven by the desire to either expand into new markets".

"In contrast, European and North American respondents are more interested in developing new capabilities in products and services and showing differentiation to existing segments, of course both approaches open the door for some fantastic collaboration opportunities," he added.

The research surveyed more than 1,000 respondents from Asia, Europe, Middle East, Africa, North America and Australia across 20 industries and is available for download here.

Growing Role of Partnerships in the New Economy

In the new knowledge economy, the principles of business strategy are being transformed. Instead of a focus on physical assets and economies of scale, the drivers of success reside in connectivity and intangibles. Businesses increasingly need to develop and manage complex ecologies or organizations around themselves so as to succeed. The selection of strategic partners with whom to collaborate is now becoming a life or death issue for most firms.7

Barriers between companies, which used to be solid and absolute, are now permeable. "Iconoclasm and creativity are now the keys to success", writes Mark Stevens. "For generations companies built moats between themselves and their competitors. Today the most successful companies build bridges. And that's only the beginning".

Strategic partnerships

Wikipedia defines a strategic partnership as a formal alliance between two commercial enterprises, usually formalized by one or more business contracts. Such a partnership falls short of forming a legal partnership or, agency, or corporate affiliate relationship.

Typically two companies form a strategic partnership when each possesses one or more business assets that will help the other, but that each respective other does not wish to develop internally.

One common strategic partnership involves one company providing engineering, manufacturing or product development services, partnering with a smaller, entrepreneurial firm or inventor to create a specialized new product. Typically, the larger firm supplies capital, and the necessary product development, marketing, manufacturing, and distribution capabilities, while the smaller firm supplies specialized technical or creative expertise.

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Robert M Grant has published a series of books reviewing strategic partnerships. He suggests ways partnerships can benefit more than one partner.

Strategic partnerships may offer many benefits. Robert M. Grant says in his book Contemporary Strategy Analysis, "For complete strategies, as opposed to individual projects, creating option value means positioning the firm such that a wide array of opportunities become available". Firms taking advantage of strategic partnerships can utilize other company's strengths to make both firms stronger in the long run.

Strategic partnerships raise questions concerning co-inventorship and other intellectual property ownership, technology transfer, exclusivity, competition, hiring away of employees, rights to business opportunities created in the course of the partnership, splitting of profits and expenses, duration and termination of the relationship, and many other business issues. The relationships are often complex as a result, and can be subject to extensive negotiation.

What do these changing relationships mean to broadcast and media companies?The adage “It’s not what you know, but who you know”, seems to apply.

Let us know what you think…

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