Strategic Business Alliance Research Shows Revenue Growth Uplift
Highlights
- Strategic business alliance research findings demonstrated that 92% of the highest growth companies cited active alliances as an integral part of their revenue growth strategy. This group operated these partnerships 41% more frequently than all other lower growth companies.
- The highest growth companies realized almost one-quarter of total revenues from strategic partnerships.
- The highest growth companies reported alliance sourced revenue grew 32% from the prior year.
For companies planning a revenue growth strategy, there are three strategic options to scale revenue: build, buy or partner.
A strategic business alliance takes the later option.
A strategic business alliance is an agreement between two or more companies to share expertise, assets, or resources to achieve a common goal. For the affiliation to be strategic, it must help the partners achieve more together than either could realize alone.
Strategic partnerships have evolved from an interesting opportunity to a widely adopted business growth accelerator.
Strategic alliance research published in Harvard Business Review found that these partnerships are growing about 25 percent annually. The research also found they account for up to one-third of total company revenues for many companies.
And the growth shows no signs of slow down. The 23rd Annual Global CEO survey published by PwC found 49 percent of executives plan a new business alliance or joint venture in the next year to drive corporate growth and profitability. That percentage exceeds planned M&A activity (42 percent), outsourcing (21 percent), or a business sale or market exit (16 percent).
Research performed for the Business Growth Report was designed to identify how the highest growth companies use alliances to fuel their expansion. Below are four findings from the research.
The Highest Growth Companies Grow with Alliances
An initial survey question sought to measure participants that use strategic business alliances as an active part of their company growth strategy. The response data is delineated by performance archetype in the below bar chart.
The Best-in-Class cohort represent the top 15 percent growth companies. 92 percent of this cohort indicated they actively use these agreements as part of their company growth strategy. That's an overwhelming majority and 41 percent higher than the combined average of the Laggards and Medians.
When we segmented the data by respondent industry, we found these combinations were most prevalent in the technology, communication, and healthcare sectors. The top three industries for strategic business alliance adoption included the following:
- Technology (89%)
- Communications, media and entertainment (83%)
- Life sciences and pharmaceuticals (77%)
Most Strategic Alliances are Cross Industry
The survey asked respondents for the number of active alliances. Responses are shown below by performance archetype.
The data found that Medians managed more business affiliations than Laggards and the Best-in-Class. This may suggest the volume of partners does not directly correlate to alliance success factors such as revenue growth.
The data also found that most agreements were not between companies in the same industry. 53 percent of alliance partnerships were formed among companies in different industries.
This was most prevalent in the technology sector whereby tech companies identified partners in virtually every other industry.
Measuring the number of active affiliations becomes more interesting when combined with performance data such as partner sourced revenue and revenue growth rates. These insights are shared below.
Strategic Alliances Deliver Significant New Revenue
As illustrated in the below bar chart, the highest growth companies realized almost one-fifth of total revenues from alliances.
When we correlated alliance sourced revenue with respondent firmographic data, we found a near linear relationship between the percentage of revenue and company size. The larger the company the larger the percentage of alliance sourced revenue.
The data also revealed that larger companies sourced a higher percentage of revenue per partner. The largest companies (over $1B annual revenue) reported 17 percent more revenue per partner than midsize companies ($100M to $1B) and 27 percent more revenue per partner than smaller companies (less than $100M).
One other factor correlated with the percentage of alliance sourced revenue. The Best-in-Class cohort maintained their average partnership 21 percent longer than Medians and 39 percent longer than Laggards. Most strategic partnerships require a ramp up period and deliver progressively more revenue with maturity. The data surfaced a pattern whereby the larger the company the more durable the partnership.
These findings suggest larger companies place greater emphasis, achieve greater yield and operate more mature alliance programs.
Alliance Revenue Growth Exceeds Organic Growth
Measuring and comparing sources of revenue growth allows the company to prioritize and accelerate.
The below chart displays revenue growth rates from strategic alliance programs.
The highest growth companies reported a 23 percent revenue growth rate from their alliances. This cohort outperformed others by 41 percent.
Equally impressive, all cohorts reported higher revenue growth rates from their strategic alliances than their organic growth.
There was no discernable relationship between the number of partnerships and the alliance revenue growth rate.
The data revealed that larger companies sourced a higher percentage of revenue per partner. The largest companies (over $1B annual revenue) reported 17 percent more revenue growth per partner than midsize companies ($100M to $1B) and 27 percent more revenue growth per partner than smaller companies (less than $100M).
The highest performers appear to emphasize more revenue per partner rather than a higher volume of partners.
The data showing these revenue growth rates should be particularly interesting to companies seeking business growth that do not yet have strategic partnerships. Clearly, the data shows alliance programs are a revenue growth accelerator.
See the research that shows strategic alliances scale revenue beyond organic growth rates while at the same time preserve cash and reduce risk.
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