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PA IN THE MEDIA

Partnerships will be the core capability of the future

Read the article in Danish here.

Competition will intensify in the coming years - and increased market dynamics and complexity will mean that the ability to enter into, exploit, develop and exit from partnerships will be essential and a huge driver of competitive advantage in the near future. The transformation of insurance and pensions has been bubbling away  for a number of years and new customer needs, technologies, regulation and focus on sustainability have respectively pulled and supported an acceleration of new ecosystems, business models, products and services.

A Harvard Business Review article has highlighted more collaborative ecosystems and agile and adaptive organisations as two of six critical success factors for creating transformation across sectors - not least in the financial sector. To quote a well-known slogan from Danske Bank, it is about every financial institution "doing what they do best". The time has come for banks to become financial supermarkets.

Things are moving so fast, so it's about teaming up with those who are leaders in what you want to be able to offer your customers on top of your own services. But that requires a strategic approach. We have come across several organisations who have entered into partnerships based on the mantra, "We should just get on with sorting out some partnerships" and this can have unfortunate results if you have not thought through your own future strategic position in a structured and ‘top-down’ way.

The key questions are
1) What will the future look like in the world in which the company will develop?
2) Where should the company then lay its strategic bets in that world?
3) Which ecosystems should you focus on and what is your role?
4)What ideas and initiatives should you pursue - and with which partners?

This last point underlines that  few major ideas can be realized in the modern world without thinking through the best partnerships.

There are many different kinds of partnerships
The next question is what type of collaboration to go for. Historically, partnerships in the financial sector have been very transactional - "we offer our products through your customer channels". However, there is  huge potential for a company that rethinks the foundation of future partnerships and the culture around them to develop their customer offering and take their commitment to new levels and create new sources of customer value.

In this respect, it’s important to note that classic customer loyalty is under pressure in this kind of future - too often companies will create value for customers through dynamic use of data and white-label services and products but do so incognito. However, transactional partnerships will still be needed - and here awareness of integration levels becomes important.

At one end of the partnership scale, we can see completely independent partnerships, which are usually made for a specific purpose and / or limited time. They typically require little or no change in legal, corporate, or management structures. At the other end of the scale are parent / subsidiary partnerships and mergers, which require a whole new separate legal entity to manage programmes and administrative services across entities and a complete strategic and operational alignment and integration across the organisation.

In the middle are the strategic partnerships, where organisations unite programmes or consolidate administrative functions. One entity typically provides services to the others; more like a salesman. Here you usually have a written agreement or contract, but the organisation runs relatively independently. However, there is also potential to create a more nuanced strategic partnership by jointly supporting a promise to customers, eg "we take care of your pet" or "we are your housing adviser".

But how do you actually work in the partnerships?
We suggest working strategically with four key design principles in a business model that orients itself towards delivering value to the customer with and through others: this requires looking at the organisation's customer focus. It also requires the ability to understand and adjust value propositions for customers. One must look at the organisation's agility, the ability to deliver value incrementally and in an end-to-end perspective. You must also zoom in on scalability, the ability to rapidly scale (up and down) your value chain. And then you have to take a closer look at modularity, the ability to click-and-change new capabilities into your business model like Lego bricks - and not least be able to click them off again. In that way you can constantly change and adapt to customers' needs and expectations. And do so in as easy and economically sensible way as possible.

Talking about Lego bricks, it's important to understand what kind of building blocks and scalability you are looking for. You need to revisit  the field you are playing on and decide for whom and with whom you want to create value - and (re) consider your supply chain and business model to be successful with partnerships.

5 key things to do before choosing partnerships:

- Revisit the value chain and understand how your customers use the latest technology

- Redefine your landscape of commercial relationships

- Think about partner roles and commitment

- See if you can redevelop affiliate programmes

- Reorganise roles and responsibilities across your partner teams

It is important that you take the time to consider the perfect partnership model on a case-by-case basis. A thorough analysis will show the level of integration that is best suited for a specific partnership.

Only when you have control over what value your partner brings, understand what kind of relationship you would like and not least how to best organise your resources together and make use of your common network, will you have the fertile ground for the optimal partnership!

Explore more of our vision for how financial services can reinvent their role in their customers' lives

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Contact the author

PA Consulting in Denmark

Andreas Møller

Andreas Møller

IT transformation and life sciences expert

Camilla Alm

Camilla Alm

Change and transformation expert

Cilla Dyrmose

Cilla Dyrmose

Life sciences and operating model expert

Frank Madsen

Frank Madsen

Transformation and financial services expert

Henrik Ringgaard Pedersen

Henrik Ringgaard Pedersen

Sourcing, IT transformation and financial services expert

Johanne Rønnow Olsen

Johanne Rønnow Olsen

Life sciences and operating model expert

Jon Plate

Jon Plate

Growth strategy, consumer and sustainability expert

Martin Tillisch

Martin Tillisch

Strategy, execution and financial sector expert

Mikkel Pødenphant

Mikkel Pødenphant

Government and public sector expert

Mitzi Geisler

Mitzi Geisler

Agile, IT transformation and life sciences expert

Richard Grint

Richard Grint

Financial crime expert

Ronnie Eriksson

Ronnie Eriksson

Government and public sector expert

Susanne Gildberg

Susanne Gildberg

Financial services, risk management and compliance expert

Søren Lehn

Søren Lehn

Government and public sector expert

Tina Hjort Ejlertsen

Tina Hjort Ejlertsen

Agile transformation and consumer expert

Tommy Wiborg

Tommy Wiborg

Public sector and transportation expert

Troels Gregersen

Troels Gregersen

Business design and public sector expert

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