Partnering with the Frenemy

Corporate partnerships can serve to expand the pie of joint benefits, improve profits, and gain sustainable competition, but successful partnerships don't often last or come easy. Despite the good intentions of both parties, partnerships often don’t pan-out as intended which leaves both sides frustrated and unable to reach their full potential together.

Sandy Jap joins the Goizueta Effect Podcast to discuss frenemies in business, including how you can take your partnerships to the next level. She is a Sarah Beth Brown Professor of Marketing at Emory University's Goizueta Business School. Prior to this, she held faculty positions at MIT's Sloan School of Management and the University of Pennsylvania's, the Wharton School. She has published widely on topics such as strategic partnering and organizational relationships, go-to market strategies, and e-procurement. She is the author of Partnering with a Frenemy, a book on the dark side of business relationships. Her work has been featured in the Wall Street Journal, CFO Magazine, and Harvard Business Review.

This episode of the Goizueta Effect was co-created in partnership with Emory student Scott Masterson. 

A Successful Partnership 

Partnerships are exceedingly important in today’s competitive business environment. A successful partnership often creates a “1 + 1 = 3” scenario: an outcome where both companies are better off collaborating than existing separately.  

Common Partnerships 

Business collaboration comes in many forms. Most simply, you can think of manufacturers working with distributors, distributors with wholesalers, and retailers with suppliers.  

All distribution activity in the US accounts for over $3 trillion or about 30% of our nominal GDP. In essence, the sales activities that happen between firms that are often the basis of partnerships represent a huge amount of money in our nation and our economy. 

If there is such a great incentive for upholding the “1 + 1 = 3” principle, then why are partnerships so difficult to maintain? 

A Not-So Successful Partnership 

“Frenemies” 

Once harmonious partners often become frenemies – organizations that pretend to be friends, but that are also enemies and/or rivals.At the beginning of a partnership, often both parties get a lot out of collaboration, but many times this dynamic turns a corner and starts to unravel. The souring process can be rapid or lengthy. 

For example, Google and Samsung have collaborated for years to maintain a large market share in the cell phone market: Google provides the operating software for the cell phones, while Samsung is the manufacturer of the phone itself. The partnership resulted in beating Apple in market share handily; however, as the partnership became more successful, it bred dependence between the two companies.  

Samsung worried that Google might become too strong and that they, as a partner, might desire a larger share of the pie. At the same time, both partners realized they were heavily dependent on the other. To combat this dependence, firms will often do something called counterbalancing. They will try to push back on the feeling of dependence by doing something that makes them feel like they have power.  

In the case of Samsung and Google, Samsung began developing an operating system known as Tizen and Google purchased Motorola...and thus, the unraveling began.  

Partnership Life Cycles  

When academics discuss life cycles, they are talking about how something unfolds over time. In terms of partnerships, typically, a life cycle will have distinct phases that describe the status of how two firms feel about one another. 

The Awareness Phase 

In this first phase, two firms become aware of each other and might get to know each other by engaging in small-scale collaboration. The awareness phase often goes well, and there is little at stake for both parties if one were to disengage from the other. 

 

The Buildup Phase 

The second phase is all about increasing the connection between the two companies. There may be more monetary transactions taking place between the firms and more sharing of knowledge. 

 

The Mature Phase 

After the buildup phase, companies often get a gauge of optimal interaction and prefer to remain constant at that level. Firms will have stable transactions over a period without one firm encroaching upon the other’s territory. In this phase, both firms are reaping the greatest rewards from collaboration, and fluidly interacting for mutual benefit. 

 

The Dissolutio