Two business teams sitting around a table working

Why should companies collaborate with other companies?

Collaboration between businesses can be a great way to achieve growth and success. Combining the expertise and resources of one or more companies to achieve a common goal can provide a powerful stimulus to each party.

The benefits can be financial, through boosted sales or reduced costs such as sharing facilities or materials. They can help boost your human capital by introducing new skills and processes to your team, helping team morale, motivation, and job security. Other benefits include greater intellectual capital, as the combined knowledge and expertise add value to all parties.

It can be challenging, however. There are a variety of issues that can derail the project. They include cultural differences, where one party may have a completely different approach and rationale for the collaboration. It could be an unequal amount of input, whether financial or effort. It could also be a fear of increased competition, as sharing knowledge and expertise may only benefit some.

All this suggests that structuring the collaboration agreement carefully at the outset is vitally important to ensure that all parties have clarity about the purpose and desired outcome.

So what are the key elements you need to consider before you agree to collaborate?

Identify the objectives of the collaboration.

Before entering a business collaboration, it’s essential to clarify the objectives. Why do you want to collaborate in the first place? What do you hope to achieve? Different types of collaboration will have other goals. For example, suppose you want to create a strategic alliance and maintain each party’s independence. In that case, the objective might be to increase revenue, expand geographical reach, or accelerate the development of new product lines.

Suppose you want to create a joint venture and a new legal entity. In that case, the objectives might be establishing or entering a new market, creating a new distribution channel, or providing product variety to customers. If you want to create a strategic partnership, the objectives might be to share resources, reduce costs, or create new product offerings. Collaboration is not a one-size-fits-all activity, and it’s essential to clarify the specific objectives before commencing.

Identify the key players who will be involved.

As you begin to identify the key players involved in the collaboration, it’s vital to clarify who the primary participants will be. In general, there will be one lead partner and one or more partners who bring something different to the table.

Other key players who will be involved may include suppliers, vendors, or other stakeholders. It’s crucial to accurately identify the key players as this will help you determine who needs to be involved in the decision-making process and who needs access to information.

Identifying the key players will also help you determine whose input you’ll need to keep the collaboration on track. Remember, the more people who are involved, the more difficult it will be to keep everyone on the same page, and you’re not just working with them on a project; you’re also working with them on developing trust, communication, and collaboration skills. This makes it vital that you allocate the most suitable members of your team to the project.

Establish clear communication channels

As the collaboration gets underway, it’s essential to establish clear communication channels. This process of building effective communication can be taken for granted, but it is critical to the success of the collaboration. You want to be able to share information between parties, but you don’t want the information to get distorted. You don’t want one party to interpret information differently from the other party.

You can establish several communication channels, including in-person meetings, phone calls, emails, texts, and video calls. You can also create a collaboration platform that allows all parties to interact with each other in one virtual location, especially as you may well be in collaboration with a partner in a different country.

Whichever channels you choose, it’s essential to ensure everyone uses the same communication channels. It’s also important to have a system in place for documenting what is communicated so that you can refer back to it later. This can help to avoid confusion and miscommunication between parties.

Create a system for tracking progress

Now that you’ve successfully created a collaboration framework, you need to track progress toward the goals of the collaboration. You also want to know if any barriers are slowing things down and if additional resources are required to keep the business collaboration moving forward. To track progress, you can create a system to assess the progress at regular intervals.

Collaboration often involves working on multiple projects, and sometimes the projects may overlap. You also may have multiple teams involved in the business alliance, each with its own projects. It’s essential to have a system in place to track each project's progress and the whole project. An easy way to do this is to create a collaboration spreadsheet that tracks each project. The spreadsheet should include columns for the project name, a description of the project, the project status, the expected completion date, and the person responsible for the project. This will help you identify any areas of concern, determine what is causing the problem, and determine what needs to be done to resolve it and ensure that it stays on track.

Create a plan for resolving conflicts

Finally, it is crucial to create a plan for resolving conflicts that may arise. A business partnership can be complex, and sometimes things don’t go according to plan. There will be challenges. There will be disagreements. It’s important to anticipate these and have a process to resolve them to keep the collaboration on track. It will help prevent any challenges or disputes from derailing the process and allow all parties to feel confident in the outcome. That way, everyone can move forward from the outset with a sense of purpose and clarity about how the collaboration will develop.

Key takeaways

The benefits of joining forces with one or more other companies can be considerable, but there are also risks. Like all business projects, careful planning is required. Ensuring that the objectives and the methods used to get there are agreed upon is vital.

Devoting sufficient resources to allow the collaboration to be carefully monitored and assessed will give your company the greatest chance of a successful outcome.