The Impact of Digital Partnerships on Innovation and Sustainable Growth

It’s not long ago because a company would need a new product, they would just make it. It went out and hired engineers, rented out a lab and waited. That still works in some situations, but has some flaws. Technologies are evolving rapidly and customers don’t wait 3 years for the feature.

Thus, companies started emulating other people’s strength: cloud providers, start-ups, payment platforms, universities. These connections are digital relationships and the influence of digital partnership is felt in practically all industries that run digital screens.

What a Digital Partnership Looks Like

Eliminate the jargon and the idea is clear. Two (or more) organizations share their tools, data or audiences via technology to achieve a goal that they could not achieve on their own. If a bank is connected by an API to a budgeting application, it counts. So does a manufacturer with a shared research platform with a university lab.

The magnitude of this change cannot be overstated. According to a KPMG survey of 258 US leaders at companies with revenue of more than a billion dollars, 83% intended to increase their partner ecosystem, while 75% said that partnerships would be key to business growth.

Core Impacts on Innovation

Three elements are at the heart of the impacts on innovation: speed, reach, and shared risk. Start with speed. A team can connect the things that work, instead of constructing anything. According to Nasscom and Avasant, open innovation can reduce time to market by up to 70% for startups and can triple the likelihood of a company introducing an “innovative product”. 

Reach follows. A small team has a direct touch with other firm’s customers, data and skills. And risk? It gets split. If an experiment fails, no one pays the price.

When Ideas Collide

Faster is good. Different is better. In the margins of various fields, unconventional ideas emerge—a phenomenon observable across many sectors. Some business leaders enjoy websites to read novels and find answers in such literature. Inspiration can be drawn from sources far removed from the corporate world—like the stories found on platforms such as FictionMe—just as it can be found in niches closer to one’s own business.

Imagine a logistics company partnering with a weather-data provider: suddenly, trucks can be rerouted before a storm even hits. Neither company would have conceived of such a solution on its own.

When it comes to the greatest potential offered by business ecosystems, 63% of companies point to innovation—a finding highlighted in a widely cited dataset from Accenture.

Startups and Big Players

Money, customers and trust come from large firms. Startups are fast and full of adrenaline. Place them next to each other and you both win. In a study, conducted by the company Sopra Steria with Ipsos and INSEAD, it was found that 72% of European corporations already have collaboration projects with startups and 67% consider that as mission critical or important work. 

The acquisition brings credibility and access to large markets for the startup. For the corporate it is thinking outside the box, but not having to establish a new lab from the ground up.

Universities Deserve a Seat

Academia should be at the table as well. The same Nasscom report indicates that startups with university ties can grow approximately 50% faster, and corporates can accelerate the development of their products by approximately 20%. 

This is made easier than ever by the use of digital tools! Shared cloud platforms enable a researcher in one country and an engineer in another to use the same dataset in the same afternoon.

Data Is the Shared Fuel

Most digital partnerships are driven by data. A shop assistant learns about sales from a customer and relays this information to a supplier, who then adjusts production before stock runs out. A reading app—available for installation from the Store—analyzes a user’s search queries to understand their preferences and suggest the best book options. A health app integrates with a clinic’s booking system, ensuring that patients do not miss their appointments.

The flow is only possible when there is trust. As important as the code is, so are the rules when it comes to privacy, access and ownership. Eliminate them and the best-constructed connection will fail the first time an awkward question is asked.

What the Numbers Say About Growth

Growth is the driver, innovation is the excitement. In 2019, MIT researchers polled 1,311 executives from 15 industries on their growth and profitability, and determined that companies with digital ecosystems grew revenue 27 percentage points faster than their average industries, and profit margins 20 percentage points higher. 

An independent MIT study revealed that companies that achieve above-average reach and range via digital partners experienced an almost 10 percentage point higher growth rate than other companies. Of course, correlation isn’t magic. Good companies will just draw in more partners. However, the trend always comes back.

Digital Partnerships and Sustainable Growth

Sustainable growth is growth which does not exhaust the business, its employees or the environment. Partnerships assist in a stealth manner. Shared infrastructure translates to reduced number of duplicated servers, fewer factories and trips. Sustainability is one of the Top 3 topics that European corporations would like to discuss with startups, together with AI and cybersecurity. 

Growth is more regular too. The research by Ecosystem Compass revealed that the majority of organisations with financial partnerships generate between 30 and 60 per cent of their revenue from these collaborations, and that the partnerships help to de-risk growth. When one way of sale goes dry, another way goes along.

Where Partnerships Go Wrong

There are many that do not pull off. According to industry surveys, as much as 60-65% of strategic partnerships fail. The motivating factors are typically not spectacular, such as: unclear objectives, different cultures, no one taking responsibility for the relationship. 

A second problem is that of measurement. KPMG discovered just over a third continue to measure their partner ecosystem’s performance on a regular basis. What you can’t measure you can’t fix.

Few Companies Do It Well

Adoption is common, skill is not. According to Mind the Bridge, 42% of Fortune Global 500 companies use multiple tools in their approach of open innovation, while 95% of companies are engaging in open innovation practices as a whole. 

In other words, lots of companies have opted for the agreement and bypassed the strategy.

How to Build One That Lasts

Start small. Choose one partner, one goal and one number to track. Determine up front who has ownership and the final say of data. Get together frequently, even if there are no problems.

Think of the partner as a team member, not a supplier. Be sure to check your results quarterly and discard what doesn’t work and retain what does. Trust takes time to build, but can last a lifetime of return.

Final Thoughts

The impact of digital partnership is no longer a side story in business. It speeds up ideas, spreads risk and gives growth a sturdier base. The core impacts on innovation are real, but they only appear when companies pick partners with care and watch the results.

Go alone if you must. Just know that most of your competitors no longer do.