Here’s why PARTNERSHIPS can make or break your entire business… [Tuesdays: Return Driven Strategy]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
Have you heard about Return Driven Strategy (RDS)?
This pyramid-shaped framework has 11 tenets and 3 foundations. When applied properly, these principles help businesses effectively implement their branding and marketing strategies.
Professor Joel Litman and Dr. Mark L. Frigo explain RDS in detail in their book, “Driven.” We encourage you to read this book too during your spare time as it will teach you lots of helpful concepts in business management, branding, advertising, etc.
For today, let’s continue on with our topic about partnering deliberately.
Keep reading to understand what it means to partner “in the right part of the spectrum.”
Miles Everson
CEO, MBO Partners
Chairman of the Advisory Board, The I Institute
Return Driven Strategy
In a past “Return Driven Strategy” article, we talked about the seventh tenet or the first of five “Supporting Tenets” of the Return Driven Strategy (RDS) framework: Partner deliberately.
There, we highlighted that this tenet is a necessary contributor to a business’ high performance, and that the RIGHT partnerships will allow enterprises to focus on their strengths AND rely on others to do things they ought not bother.
That’s not all!
The strongest partnerships will also bring unique assets together to allow firms to innovate, brand, and deliver truly distinct offerings—Tenets 4, 5, and 6 of RDS.
Today, we’ll continue on with this topic with a focus on what it means to partner “in the right part of the spectrum.”
Forming PURPOSEFUL Partnerships
There are different kinds of partnerships, namely:
- Open partnerships (includes basic arm’s length transactional relationships)
- Exclusive partnerships (includes legal joint ventures between two firms)
According to Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven,” deliberately choosing the best type of partnership for your business should be based on:
- The ability to enhance activities designed for achieving the higher tenets of RDS
- The need for exclusivity in the partnership given its importance to the genuine assets of the partner
Take note of the phrases, “higher tenets of RDS” and “genuine assets of a partner”…
These imply firms should NOT make partnerships or acquisitions simply because their competitors are doing so or because another business has extolled the benefits of this strategy.
In other words, TRUE wealth-creating firms choose their partner/s wisely as the first 6 tenets of RDS dictate.
When the Wrong Level of Partnering or the Wrong Kind of Partnership is Chosen
Professor Litman and Dr. Frigo state there are times when industries go through periods of believing that vertical integration is key to business success.
[Vertical Integration: A business arrangement in which a single company controls all the different stages of the entire supply chain.]
While there is nothing wrong with implementing this strategy, management teams must also be aware that this is not applicable to all types of businesses.
Where do firms usually go wrong in terms of using a vertical integration strategy?
It’s when they feel that to survive and succeed, they need to actually own all of the inputs and all of the distribution channels of a particular offering—from sourcing of raw materials all the way down to product distribution.
Let’s take a look at these business examples…
In the 1980s, The Coors Company, one of the makers of popular beer lines in the U.S., felt that vertical integration was important. Because of that, the firm acquired several canning companies and aluminum manufacturing businesses because hey, cans are made of aluminum, right?
Photo from Coors Brewery Tours
To justify whether or not The Coors’ vertical integration strategy was successful, you need to ask these questions:
- Can aluminum containers be manufactured so uniquely that they would cause a customer to purchase a can of Coors beer and pass up all other brands?
- Could the aluminum itself that is in the can be made with such singular precision that people would buy Coors beer because of that particular aluminum quality?
If your answer to both of these questions is “no,” you have the explanation for the poor returns The Coors experienced for decades.
Meanwhile, in that same period, beverage manufacturer The Coca-Cola Company did the exact opposite of The Coors’ vertical integration strategy.
Photo from Investopedia
What did Coca-Cola do instead?
It made great strides in divesting itself of bottling operations! In short, it never became a glass or aluminum manufacturer.
Unlike The Coors, Coca-Cola simply retained equity interests in businesses to retain control over bottling operations. Then, it focused on marketing and branding its offerings, as well as monopolizing control over key distribution assets.
The result of that?
Coca-Cola’s returns rose year after year for decades!
See? These examples show how partnerships or acquisitions can make or break a company’s overall business strategy and performance. That’s why it’s important that executives and management teams know how to partner with other businesses deliberately so they can:
- Innovate, deliver, and brand their offerings
- Target the RIGHT customer groups
- Fulfill otherwise unmet customer needs
- Ethically maximize wealth
… all of which are the higher tenets of Professor Litman and Dr. Frigo’s RDS framework.
Take note of this crucial aspect of RDS’ Tenet 7!
If you’re looking to gain a better understanding of Return Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo.
Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm.
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Tuesdays: Return Driven Strategy”
In the book, “Driven,” authors Professor Joel Litman and Dr. Mark L. Frigo said that the goal of every long-term successful business strategy should incorporate the combined necessity of “making the world a better place” and “getting wealthy.”
That is why they created Return Driven Strategy and Career Driven Strategy—frameworks that were built to help leaders and professionals plan and evaluate businesses so they can also help others achieve their organizational goals and career goals.
The frameworks describe the plans and actions that drive returns for anyone in an organization such as independent contractors, marketers, brand managers, communicators, and other people in any field. These actions lead to the creation of wealth and value for customers, employees, shareholders, and the society.
Every Tuesday, we’ll highlight case studies, business strategies, tips, and insights related to Return Driven Strategy and Career Driven Strategy.
In planning, building, or managing brands and businesses, these strategies, case studies, and guidelines will help you choose what specific actions to take and when to take them.
Hope you found this week’s insights interesting and helpful.
Stay tuned for next Tuesday’s “Return Driven Strategy!”
Cheers,
Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
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