The rise of digital partnerships

Digital partnerships are increasingly becoming commonplace, where non-technology organisations are joining forces with the hottest digital start-ups to bring something new to the market. Looking back over the past year, companies like IBM and Box, Apple and IBM, and Blackberry and Samsung have all formed strategic partnerships or alliances to harness innovation, bring new capabilities to market quicker, increase profits and importantly, block the competition. And these are just the tech companies. Beyond that, we’ve witnessed the Amazon Dash button partnerships and the Starbucks and Lyft alliance.

Here, Narry Singh, Managing Director of Digital Strategy at Accenture Strategy, discusses whether digital partnerships are the best way to get ahead and succeed in a digital era, and what companies need to consider before moving in this direction.

1. Is this digital partnerships trend set to continue, or is it just a fad?

Digital partnerships are key for organisations looking to get ahead and make an impact in the digital era. In the last few weeks alone we’ve seen the likes of the NHS join forces with Tinder to raise public awareness of organ donation. We’ve also seen Fossil Group and its latest acquisition, Misfit, announce plans to incorporate wearable technology into the company’s watch and accessory division. By joining forces, particularly with digital start-ups, organisations can draw upon each other’s expertise to create innovative or complementary products and services, and extend these offerings to reach broader audiences and markets, which can be extremely lucrative.

Accenture’s report on Harnessing the Power of Entrepreneurs to Open Innovation found that 78 per cent of large organisations believe that working with entrepreneurs is important or critical to their own growth and innovation. Large businesses also expect the proportion of their revenues generated by collaboration with entrepreneurs to rise from an average of 9 per cent today to 20 per cent in five years. Partnerships of this kind allow businesses to orient themselves around the customer and deliver excellent experiences and new value. Given the fast changing needs of today’s consumers, thinking creatively can mean jumping ahead of the competition and taking more market share.

2. Looking ahead to 2016, how will strategic digital partnerships drive growth and success?

You’ve heard the saying that “every business is a digital business.” This varies significantly from business to business, but the essence remains; technology’s tectonic shifts can have a dramatic impact on business performance and customer satisfaction if leveraged correctly. Partnering with another company has the potential to make your digital offering stronger and enhance growth, but it can also block the competition. Technology companies have been building robust partner ecosystems for decades to do exactly that. It’s also a great way for businesses to differentiate themselves and stay one step ahead of their customers by anticipating how their needs and expectations may change in the future. Our research suggests that the majority of business leaders (78 per cent) believe they will be increasing their partnerships and alliances as they attempt to boost digital growth in the next three years, highlighting appetite for digital partnerships as we enter 2016.

3. What impact can digital partnerships have on business and the economy?

According to Accenture’s Digital Collaboration Index, greater digital collaboration between G20 large companies and entrepreneurs could result in an additional $1.5 trillion in global economic output, which is equivalent to a 2.2 per cent uplift to global GDP. The Index suggests that the top fifth of companies committed to collaboration achieved higher levels of revenue growth, and that if all entrepreneurs and large companies in the UK were to achieve the degree of collaboration of the top 20 per cent, the UK economy could generate an extra $59 billion in GDP. Revenue growth rates in the UK could rise up to 18 per cent for entrepreneurs, and up to 16 per cent for large companies.

4. How do companies identify the right partnership opportunity?

Always lead with the customer experience. Innovation isn’t defined in Silicon Valley as ‘innovating for innovation’s sake’. Disruptive startups think about solving a particular customer challenge or frustration, and bringing something new to market in order to fix it. Just consider Uber, Airbnb and Netflix, for instance. Focus on what your customers want and need, and how you can improve their experience. Then determine who the best partners are to help you reach your goal. Perhaps you lack certain capabilities that you could acquire elsewhere which could help you take the business in a new direction. It is also important to think about the type of brand you might want to partner with, and ensuring it would be a ‘natural fit’ with your own.

5. How can digital partnerships spark innovation?

In the digital economy, organisations have the opportunity to disrupt their markets by working more effectively with innovative startups to jointly create new products and services. That means organisations should not just fund startup innovation, but actively participate in it by pooling ideas, assets and intellectual property. It will also require them to take new approaches to sharing risks and rewards more equitably. The journey to innovation requires large companies to recognise that collaboration cannot continue to be done on their terms, on their premises or just for their benefit.

6. Are there any particular ‘watch outs’ for organisations looking to partner with another business, potentially a start-up, for the first time?

Before entering any form of partnership, organisations must ensure they do the necessary due diligence. Research the business you’re looking to partner with carefully. Key factors to be aware of include: Do they have pre-existing partnerships or strong alliance with your competitors? How could they impact what you’re taking to market? What other partnerships have they launched? How successful have they been? Take your time to weigh-up the opportunity, ensure that the partnership will be mutually beneficial and don’t feel rushed into making a decision.

7. Being a digital business means adopting new ways of operating. What do companies need to consider?

Cultivating a digital culture starts at the top. For new competitive entrants, unencumbered by traditional practices, building a greenfield digital business is relatively easy. It’s when you’re tackling entrenched practices and behaviours that things become more challenging. Managing digital disruption involves adopting certain characteristics. For instance, leaders can encourage the workforce to innovate and take risks – which is what digital partnerships are all about. A focus on the bigger picture, and the outcomes and metrics that support it can also help to ease the impact of disruption. One of the more profound characteristics of being a digital business (especially those that operate in the B2C space) is that there are a new set of metrics that measure value creation. Financial metrics are important, but it is imperative to measure new “traction metrics” – assessing the momentum that leads to monetisation. For example, for most mobile app businesses, measuring session or daily active users, number of active users and retention rates are far more important in the early stages of the business. Prioritising people is also essential as good collaboration across the business can help to inspire progress.

8. How can businesses make sure they are prepared for digital disruption?

Looking beyond your own back yard to determine which trends will matter and making a judgment on when they will impact the business is critical. Digital winners have a disruption-seeking radar and antennae to capture early warning signs to foresee the next big thing. They may create an ecosystem of relationships within their industry, with the venture community and start-ups, and with technology providers and business schools. In addition, they must develop a team that is consciously mining and analysing the information provided by this ecosystem to guide their decision-making.

9. Why is it so important for businesses to adapt to digital change?

Organisations need to adapt and embrace digital change, or they will get left behind. Just look at businesses like Woolworths and Blockbuster as prime examples. As a species, human survival depends on our ability to sense and respond to changes in our environment, and organisations are no different. But the trick is to interpret what these changes mean to the market and customers, and more importantly, when they will have an impact and how it can be absorbed or capitalised upon. If business leaders are unable to interpret these change signals, they are no better placed than those who did not see change coming. Don’t be complacent. Stay paranoid.

10. What would your advice be to businesses that are looking to become more ‘digital’ and are considering partnerships of this kind?

Be open-minded, get creative, think about your customers and where you want to position yourself in the market. New partnerships, especially unorthodox ones, require an open mind-set, which is critical for success. To make a success of digital disruption will require new forms of innovation in which multiple partners collaborate to create, fail and try again in more experimental and entrepreneurial settings. That can only happen if more participants come together through digitally enabled networks to create innovations together.

Narry Singh, Managing Director, Digital Business Strategy, Accenture Strategy

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