Getting Together: The Importance of Business Relationships

Tania Lye To succeed in today's collaborative, client-driven, networked economy, companies must take advantage of the strength of their business relationships to succeed. The business world of the past, in which each company could be managed in isolation, has rapidly changed into one in which decisions made by one business directly impacts the others. A new economy is emerging, one built on a complex network of information, interaction and change. This evolving business landscape, shaken by technological innovation, globalization and downsizing, has led us back to the most fundamental aspect of business: relationships.

Whether they're partners, investors, employees or the community as a whole, enhancing daily business relations can unlock many great opportunities for a company, especially in terms of accelerating growth, building value, entering new markets and pooling expertise.

It's as simple as the saying "Two heads are better than one", and as clichéd as this sounds, it's a strategy applied to business every day- and it works. The strategic alliance is a trend that's here to stay. Many businesses have benefited from successful alliances. They can give companies a major competitive edge, allowing them to provide more for clients and customers than they would have been able to do by themselves. Trying to create what your company lacks is costly, time consuming and usually doomed to failure. Buying through mergers and acquisitions is expensive and complicated. Alliances are the cheap and secure way to go: no dilution, no risky leveraging of the balance sheet. If the partnership doesn't work, disband it. Partnering is becoming popular among some of the biggest and most profitable companies in the world. A study showed more than 20 percent of the revenue generated from the top 2,000 U.S. and European companies comes from alliances: HP/Cannon, Intel/Microsoft, Yahoo!/SBC, PepsiCo/Starbucks, Sony/Ericsson and Cisco/IBM are some well-known successful alliances.

The most enormously successful partnerships are those built from trust, respect, and mutual understanding. Billionaire investor, Warren Buffett is renowned for his stock market prowess, as well as his strategy of betting on the long-term growth of successful companies like American Express and Berkshire Hathaway. Buffett's ingenious ability to understand the stock markets made him a cult figure, but it was also his patience that played a big part in his rise to the top. His unwavering faith in his companies allowed him to see beyond the short-term failures and to the triumph in the long-term. He is famous for the relationships he developed during the course of his life. His companionship and investment with Katharine Graham of the Washington Post is one of the most famous business alliances of all time. He met Graham in the 1970s as an investor in The Washington Post Company, her family's newspaper company, where she became the first female Fortune 500 CEO. The relationship became one of deep personal reverence. Graham considered him her closest friend and relied on him for personal as well as business advice. Buffett made a fortune from his investment in the Post. Today, newspaper publishing, television broadcasting, cable television systems, and magazine publishing have been added to the Washington Post Company's numerous holdings. Buffet's investment company's initial $10 million investment in the media empire is now worth $205 million. Buffett still sits on the Board of Directors at the Washington Post and is also advisor to Graham's successor, her son, Donald E. Graham.

Alliances can be just as valuable to small and mid-sized businesses as it can be to the larger scale corporations. An important part of Mount Real's revenues depend on the success of its strategic alliances. Their business model is ambitious, but one that has proven itself to be both innovative and rewarding for both partners. The concept is strong: directly link your success with the success of your clients. Instead of traditional payment, Mount Real receives billing bonds on a percentage of their clients' revenue, therefore insuring a vigorous effort by both parties. Side by side, both companies work for results. The company was first created in 1993 when CEO Lino P. Matteo saw a pressing need for entrepreneurs and smaller companies to outsource their financial management. He devised the revenue-based model of financial management and the method of maximizing synergies between clients that is still employed today. The relationships they've built over the years are the lifeblood of the company and continue to fuel the company's sustained success.

We've all heard the ill-fated alliance horror stories. We wonder, where did they go wrong? In 1992, Apple and IBM joined forces to create Taligent, an object-oriented operating system reminiscent of Windows. The project was a huge disappointment for the conglomerates, with combined losses said to exceed $150 million. So why did their venture fail? Within a synergy, business partners- whether they're competitors or not- need to establish a mutual trust and respect from the start. When a relationship is built on a shaky foundation, the house is bound to collapse. On the surface, both companies maintained a happy facade, but at the time, both had slapped a number of lawsuits against the other for patent and technology infringement. An alliance needs to be well negotiated and structured; both partners must have a clear understanding of what the other can contribute and what they can expect from the venture in the future. Solid planning is your insurance against an IBM/Apple sized failure. Since the blunder, both IBM and Apple have restructured their strategic methods, and both have engaged in successful alliances. Today, 30% of IBM's $86 billion revenue comes from its numerous alliances with other companies. They learned to delineate priorities, agendas, goals and motives well before the alliance was implemented. Make sure no unexpected surprises lay ahead. If you take the necessary steps beforehand, chances are the only surprises you'll get will be good. A strategic alliance is, after all, a tool for building mutual value and it will only fail to deliver if you do.

Relationships forged within a company's network are just as important as the ones made outside. The importance of a synchronized team can create the kind of efficiency business owners dream of. Networking, sharing ideas and expertise can really iron out the creases in terms of synergy, productivity and intelligence. Mount Real's Senior Financial Advisor program recruits business people from diverse areas of expertise including accounting, investing, e-commerce, banking and marketing. These business professionals advise Mount Real's clients, recruit new clients, broker deals and other transactions between clients and supply special expertise when needed. This system is the ultimate in business networking. The sturdy alliances cultivated by the SFA provide a pool of resources for Mount Real and its advisors to use to their gain. This multifaceted system of professionals is given an automatic set of invaluable contacts, as well as an important point on which to continue building their careers. Joseph Pettinnichio, a manager of the program said: "This program allows us, as professionals, to create a stimulating environment where we can apply our diverse talents to enhance the quality of service at Mount Real. Our network allows us to exchange information, improve our own knowledge and that of our clients'."
Any relationship in life, whether it's your brother, mother, friend or business partner, needs to be built through trust, openness, integrity and respect towards others. Business alliances need to be painstakingly structured, and meticulously planned. The path you build together should have a clear destination otherwise, you'll both end up astray. Warren Buffett once said "In the business world, the rearview mirror is always clearer than the windshield." The road ahead is always unclear, but if you trust the person you're driving with, sit back and enjoy the ride.

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