Business Model Canvas - Building Blocks - 08 - Key Partnerships

Key Partnerships = network of suppliers and partners that make the business model work.

Companies create alliances to:

• optimize their business models
• reduce risk
• acquire resources

We can distinguish between four different types of partnerships:

1. Strategic alliances between non-competitors 
2. Competition: strategic partnerships between competitors 
3. Joint ventures to develop new businesses
4. Buyer-supplier relationships to assure reliable supplies

Questions to ask ourselves while thinking about Key Relationships:

• Who are our Key Partners?
• Who are our Key Suppliers?
• Which Key Resources are we acquiring from partners?
• Which Key Activities do partners perform?

It can be useful to distinguish between three motivations for creating partnerships:

1. Optimization and Economies of Scale:
• The most basic form of partnership or buyer-seller relationship is designed to optimize the allocation of resources and activities.
• It is illogical for a company to own all resources or perform every activity by itself.
• Optimization and economy of scale partnerships are usually formed to reduce costs, and often involve outsourcing or sharing infrastructure.
2. Reduction of Risk and Uncertainity:
• Partnerships can help reduce risk in a competitive environment characterized by uncertainity.
• It is not unusual for competitors to form a strategic alliance in one area while competing in another.
• Blu-ray for example, is an optical disk format jointly developed by a group of the world's leading consumer electronics, personal computer and media manufacturers. The group cooperated to bring Blu-ray technology to market, yet individual members compete in selling their own Blu-ray products.
3. Acquisition of particular resources and activities:
• Few companies own all the resources or perform all the activities described by their business models. Rather, they extend their own capabilities by relying on other firms to furnish particular resources or perform certain activities.
  
• Such partnerships can be motivated by needs to acquire knowledge, licenses or access to customers.
  
• A mobile phone manufacturer, for example, may license an operating system for its handsets rather than developing one in-house.
  
• An insurer may choose to rely on independent brokers to sell its policies rather than develop its own sales force.