Business and Marketing

Companies in fast-changing industries need to form all types of relationships. As I have already discussed, they need relationships with venture capitalists, with dealers, with industry luminaries. But just as important, if not more so, are relationships with other companies in the same industry.

In fast-changing industries, these relationships are becoming more important than ever before. As technologies advance and become intertwined with one another, no single company has the full range of skills and expertise needed to bring products to market in a timely and cost-effective way. To produce a personal computer, for instance, a company needs expertise in semiconductor technology, display technology, disk-drive technology, networking technology, keyboard technology, and several others. No company can keep pace in all of these areas by itself.

As a result, collaborative efforts are proliferating. Fast-growing companies, once fiercely independent, are now forming all sorts of alliances, even with former competitors. Every small company, it seems, is looking for “sponsors,” while large companies are trying to link up with as many innovative startups as they can. As Business Week magazine wrote in a 1984 special report on the computer industry: “For companies large and small, collaboration is the key to survival.” These collaborations can take many forms: joint ventures, technology exchanges, manufacturing agreements, and equity positions, among others. Although some of the agreements seem aimed at R & D or fi¬nance, these relationships can play a critical role in a company’s marketing strategy.

Companies in fast-changing industries need to form strategic relationships for a variety of reasons:
-    To compete in today’s markets, companies need a diverse set of technologies. Fields like computers and communications are merging, and customers want complete solutions. No company can develop all of the necessary technologies by itself.
-   The costs of developing new technologies are rising rapidly. Companies must share the costs if they are to survive.
-    U.S. companies are facing increasing competition from Japan. The Japanese government has led and helped finance cooperative development efforts in fields such as integrated circuits and robotics. U.S. companies must team up to keep pace.
-    Technologies are changing more quickly than ever before. At one time, a company could stay at the forefront of many different technologies. Now it is much more difficult.
-    Small companies need to gain management expertise, distribution muscle, and capital in order to compete. Strategic relationships can provide these.
-    Less tangible, but just as important, strategic relationships can bring added credibility to the companies involved. By choosing the right strategic partner, a company can gain credibility by association.

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