Key Partners

Values:

 Providing more destinations worldwide.

https://www.cleverism.com/key-partners-in-business-model-canvas/

KEY PARTNERSHIPS
A business partnership is when two commercial entities form an alliance, which may
either be a really loose relationship where both entities retain their independence
and are at liberty to form more partnerships or an exclusive contract which limits the
two companies to only that one relationship.

The following factors are very important to keep in mind when forming partnerships:

 Right Partnership Agreements: Whether your partnership is with a business

or an individual, it is important for all the relevant parties to have clear partnership
agreements drafted along with legal counsel.

 Defining Expectations: Many times new businesses fail to establish their

expectations from the outset leading to much confusion and conflict later. An
entrepreneur needs to ensure that he has shared his expectations openly with his
partner and vice versa from the beginning.
 Impact on your clients: When forming a partnership, it is important to
evaluate your value proposition and your key resources and make sure your partner
is filling any gaps in either. This can only be done by also evaluating how the
partnership will translate to the customer.
 Win-Win situation: For a partnership to be healthy and sustainable, there
need to be visible gains on both ends.
 Selecting partnerships: Some partnerships may seem lucrative in theory but
fail to get off the ground practically. In addition, changes in the business context may
also make some business partnerships irrelevant. In such cases, it is important to
end these partnerships quickly to avoid further wastage of resources.

This building block refers to the network of suppliers and partners that make the
business model effective. The reasons for a company opting for a partnership are
myriad, but healthy partnerships are instrumental in making a business success or a
failure. A company can optimize its resource utilization, create new resource streams
or mitigate risks behind major business decisions by taking on a partner before
starting a new course of action. It is important to note here that your organization
maybe partnering with a number of organizations for various reasons, but not all their
relationships will be key to your business.
 Partnerships can change over the course of a business’ lifecycle. The types of
partnerships that may be a necessity during year 1 of a start-up will differ
significantly from the nature of the required partnership in year 3.

Key Questions
When evaluating the various key partnerships that your business requires, it is fruitful
to analyze the nature of the partnership based on the following key questions;

1. Which partnerships are critical to our business?

2. Who are our critical suppliers?

3. Which of our suppliers and partners are sourcing our key resources?
4. What type of partnerships would suit our needs?
5. What is the best cluster/ supply chain where I should be located

 Home

 Magazine

 Key Partners in Business Model Canvas

 Save
© Entrepreneurial Insights based on the concept of Alex Osterwalder

In this section, you will learn about the next building block in the Business Model
Canvaswhich is Key Partners (or Key Partnerships) that an entrepreneur needs to
have to perform its key activities and ultimately provide its value proposition to its
customer segment.

We will look at 1) key partnerships, 2) types of partners, 3) motivation behind

partnerships, 4) key partners and value propositions, and 5) case studies.

KEY PARTNERSHIPS
A business partnership is when two commercial entities form an alliance, which may
either be a really loose relationship where both entities retain their independence
and are at liberty to form more partnerships or an exclusive contract which limits the
two companies to only that one relationship.

The following factors are very important to keep in mind when forming partnerships:

 Right Partnership Agreements: Whether your partnership is with a business

or an individual, it is important for all the relevant parties to have clear partnership
agreements drafted along with legal counsel.
 Defining Expectations: Many times new businesses fail to establish their
expectations from the outset leading to much confusion and conflict later. An
entrepreneur needs to ensure that he has shared his expectations openly with his
partner and vice versa from the beginning.
 Impact on your clients: When forming a partnership, it is important to
evaluate your value proposition and your key resources and make sure your partner
is filling any gaps in either. This can only be done by also evaluating how the
partnership will translate to the customer.
 Win-Win situation: For a partnership to be healthy and sustainable, there
need to be visible gains on both ends.
 Selecting partnerships: Some partnerships may seem lucrative in theory but
fail to get off the ground practically. In addition, changes in the business context may
also make some business partnerships irrelevant. In such cases, it is important to
end these partnerships quickly to avoid further wastage of resources.

This building block refers to the network of suppliers and partners that make the
business model effective. The reasons for a company opting for a partnership are
myriad, but healthy partnerships are instrumental in making a business success or a
failure. A company can optimize its resource utilization, create new resource streams
or mitigate risks behind major business decisions by taking on a partner before
starting a new course of action. It is important to note here that your organization
maybe partnering with a number of organizations for various reasons, but not all their
relationships will be key to your business.

Partnerships can change over the course of a business’ lifecycle. The types of
partnerships that may be a necessity during year 1 of a start-up will differ
significantly from the nature of the required partnership in year 3.

Key Questions
When evaluating the various key partnerships that your business requires, it is fruitful
to analyze the nature of the partnership based on the following key questions;

1. Which partnerships are critical to our business?

2. Who are our critical suppliers?

3. Which of our suppliers and partners are sourcing our key resources?
4. What type of partnerships would suit our needs?
5. What is the best cluster/ supply chain where I should be located?
 TYPES OF
PARTNERS
Partners and partnerships can be categorized into four different types;

1. Strategic alliances: These types of alliances are between non-competitors.

So if you are working through different channels, like a news agency can supply
news to both online and offline channels.

2. Co-opetition: There can also be strategic partnerships between partners.

Such a partnership will help spread the risk both companies may take. It may also
help when both partners are trying to do something new; additionally it could mean a
confirmed supply stream. For example, there is a need for earth metals in mobile
phones. So securing the supply of rare earth metals could be the reason for
competitors to form a strategic partnership.
3. Joint-Ventures: Another thing could be to develop a joint venture in a new
business. Both partners could have a mutual interest in developing new business,
possibly due to the emergence of a new market or access to a new geographic area.
Both organizations will only opt for such an option if they both provide some inputs
into the business. Hence, a Dutch company that specializes in producing cheese
might choose to go into a joint venture with milk producing local company to start
making cheese in the new region.
4. Buyer-Supplier Relationships: These are the most common type of
partnerships which assures that you have a reliable source of supplies coming in and
for your supplier this means they have a steady confirmed buyer for their product.

MOTIVATIONS
BEHIND
PARTNERSHIPS
Partnerships are a tricky business involving a lot of negotiation and an element of
trust. There can be a number of reasons why organizations would make the decision
to take on a key partner rather than doing things themselves or taking on a partner
but not considering them as key to the success or failure of their business. Primarily,
one of the three kinds of motivations can be attributed when a business chooses to
enter a partnership.
Optimization and economy of scale
Most organizations are heavily focused on the bottom-line. And many focus on cost-
cutting or smart spending through optimizing the allocation of either their resources
or activities. This is the most common motivation for people to enter into partnerships
of different types.

When you are looking for efficiency in your company or optimizing your productions
chains, key partners can help you achieve this goal. It is unrealistic to think, as an
entrepreneur that you have the resources in place to conduct all your key activities
in-house. Most partnerships give organizations the ability to share their
infrastructures or outsource some activities to more cost-effective options.

Citroen, Peugeot and Toyota joined hands to create a small, cheap car for the
masses that they tried to sell for 5000-6000 euros. These cars looked almost the
same except for the chassis and a few internal and external details.

Reduction of risk and uncertainty

If you have a good relationship with a key partner, you reduce the inherent risk that
comes with doing your own business. You also guarantee supply to your business
rather than being dependent on suppliers who aren’t key partners and would
therefore not give precedence to your business over others.

Many competitors may form strategic partnerships to share the risk of bringing
something new into the market while still competing in various aspects in the
industry. A classic example of this is the advent of blu-ray technology which was
developed in collaboration by some of the world’s premier consumer electronics and
computer technology firms. The development of this technology was expensive and
several competitors had to get together and decide that they would all be selling their
products based on blu-ray technology; hence they needed to collaborate to make
blu-ray technology more mainstream. The group joined hands to bring the
technology to the mass market but still competes on the basis of their various blu-ray
based gadgets in the consumer market.

Acquisition of particular resources

and activities
If there are certain things that you don’t have in-house and which would require a
heavy investment of time, money or both, a key partner who already has these
processes and the infrastructure developed would come in extremely handy.

Business models can be extensive maps of the myriad activities that a business
needs to perform or the endless resources required to perform these activities
successfully. However, it is rare for a new company to have the resources or
capabilities in place to fulfill the mandate set down by the business model. Hence,
many new companies are beginning their journeys by forming partnerships that give
them access to the required resources or processes that they require, but are unable
to own yet. Hence, many mobile operators partner with IT companies to develop the
operating system their handsets require rather than bearing the heavy investment
such an endeavor would require if done in-house. This also gives the IT company a
steady source of revenue as well as the advantage of publicity if the mobile
manufacturer’s brand is well recognized. Bicycle companies do not manufacture their
bicycle accessories. Instead, they get into selective partnerships with bicycle parts
manufacturers who customize the parts like the color or size of the bicycle seat
according to the preferences of the manufacturer.

Heineken is one of the most popular producers and suppliers of beers in the world,
and it is especially well-known in the Netherlands, where they have created very
strong relationships with bar owners. In fact, Heineken frequently invests in new bars
by providing not only equipment for free but also investing in the décor of the bar. In
return, the bar provides Heineken beer exclusively. Hence, Heineken gets a repeat
customer for their beer while the bar owner can minimize the cost of setting up the
business. Conversely, however, the bar owner is limited to selling just Heineken,
which means that if Heineken increases the prices of its beers, the bar owner has no
choice but to abide by the new prices.

KEY PARTNERS AND

VALUE
PROPOSITIONS
For fast moving consumer goods, availability is key to the success of the company
and a major value proposition. For supermarkets and retail chains, distribution
partners are key if you want to provide your fast moving consumer goods to the
market. Your advantage is that your products will be available to everyone, but the
supermarket will drive down your price and resultantly your margins significantly.

Technologies are advancing at a very high rate that increases their risk factor is well.
However, if the technology forms a significant value proposition for your business,
then you can take on a partner to share the risk and cost associated with the
technology in question.

Focus on where you are creating value but consider that the rest can be outsourced
if needed. The activities that are adding value to your value proposition must be
outsourced very carefully because they are the ones that are key partnerships for
your business.

CASE STUDY
Starbucks
Starbucks has established several key partnerships worldwide such as with coffee
growers worldwide to grow eco and farmer friendly coffee beans. This key
partnership is a typical buyer-supplier relationship, motivated by a need to acquire
key resources. Another key partnership is with specialized coffee machine makers
who make specialized coffee makers for Starbucks. Again this helps Starbucks
mitigate cost because it does not have to invest in infrastructure, R&D, and
manpower to create these coffee machines in-house. Instead, it is much more cost
effective to partner with an organization that already holds expertise in this area and
has the infrastructure in place already to cater to Starbucks’ needs. Conversely,
Starbucks provides them with a steady buyer for their product as well as the added
boost that the Starbucks brand holds for the coffee machine manufacturer.

A Comparative Analysis of
Facebook’s and Google’s Partner
Networks
Though Facebook has a number of partners in its network, it isn’t entirely dependent
on any of these partners. Most of Facebook’s partners provide valuable content for
its users so Facebook partners with content providers such as Netflix, Washington
Post, Hulu, etc. to provide movies, articles, music and other forms of content to its
subscriber base.

Conversely, Google has Google Network members who are content companies that
partner with Google to provide content on for its search engine. It provides
Advertisers access to these content companies web pages through the Google
AdSense program and in return shares revenues from the said program with the
relevant companies, leading to a mutually beneficial partnership. Additionally Google
also partners with Distribution companies to attract traffic to its websites. However,
these are a group of Distributors and Google does not leave itself dependent on any
one distributor.