How to Build Effective Collaborative Business Relationships

What is quality management? I have a simple, straightforward answer to this question. Quality management means meeting the requirements of all parties who have an interest in your business — stakeholders who have invested in your business, your customers, business partners and regulators.

ISO standards are the result of best practices that ISO member states bring together in one place to help others learn from their experience and avoid reinventing the wheel. It’s not dedicated to quality management in the manufacturing sector, as many assume. ISO’s role is managing knowledge through the flow of best practices already undertaken by its member states. These best practices are available in all sectors, including what I am going to discuss in this article: collaborative business relationships, or ISO 44001.

Related: How to Harness the Strategic Power of Collaboration in Your Business

What is ISO 44001?

ISO 44001 is based on best practices that serve as a baseline for forming collaborative business relationships, whether you are an entrepreneur, an SME or a public sector and governmental agency. However, as I said, you need to see it as a baseline, and there is no doubt it should be tailored to the context of your business.

ISO 44001 is a management system. The word “system” needs to be emphasized here. What is a management system or a systematic approach in management? I have another simple, straightforward answer: A systematic approach in management means operating according to predefined processes. In other words, when you have a system implemented in your business, it doesn’t matter who, what or when — everyone must follow the predefined processes at all times. You may ask, “What about specific situations?” Even in specific situations, people will follow the predefined processes designed for those particular scenarios.

The result of implementing the ISO 44001 requirements standards is a series of processes that need to be followed in forming a collaborative relationship, such as a joint venture — from determining which operations are better done jointly with other businesses to a controlled exit from the partnership.

How to initiate a collaborative business relationship

Now, I want to provide insight into initiating collaborative business relationships in accordance with the ISO 44001 requirements standard, but in a completely simplified manner. Of course, fully understanding the standard would require several books, let alone an article.

Determine and define value-added opportunities

In the first step, you need to determine and define value-added opportunities that can be achieved through collaborative working. Collaborative working means determining capacities and capabilities that can complement each other. Sometimes, you have capacities that need to be enabled by a collaborative partner who can utilize their capabilities by leveraging your capacities. In another scenario, you may have capabilities that require additional capacities beyond your own to be fully utilized. When you determine your unused capacity or capabilities, you will be able to define the scope of work that may add value if executed in a collaborative relationship. This defines the boundaries of your collaborative work.

Why do you need to determine boundaries for the work that will be done collaboratively? The point is that you enter into collaborative work when you have a goal that is beyond your own capacities and capabilities. It is critical to first utilize your own capabilities based on your own capacities to maintain your sustainability. Then, if you find unused capacities or capabilities that need to be complemented by others to create value, you can determine the scope of collaborative work outside of your own sustained operations. Be careful that collaborative work does not interfere with your sustained operations. Your sustained operations must not be impacted by the possible failure of your collaborative efforts.

Related: Most Business Partnerships Fail — 5 Hacks to Make Sure Yours Stays Intact

Define your objectives and how you plan to achieve them

Next, what are the objectives of the determined work that could be executed in a collaborative relationship, and what is your plan to achieve them? You are focusing on a specific product (goods or services) that is beyond your current capabilities or capacities and requires complementary relationships to realize. The objective of your collaborative work is this product. You need to plan for a business that delivers your determined product as its result. This plan demonstrates all the requirements of the business and clearly shows your contribution and commitment based on your unused capacities or capabilities. It also outlines what needs to be contributed by others through a collaborative business relationship to complement yours and create value.

When it becomes clear what you want to achieve and what capacities or capabilities you have that will enable your business case, you will then be able to identify the criteria your collaborative partner needs to meet to complement you.

Prepare for negotiation

Then, you will enter into negotiations with potential collaborative partners who match your determined criteria. The business leaders you are negotiating with need to have the same level of understanding as you about what will happen. You’ve been driven by your own ideas to enter into a new business venture because your ideas reflect your decision-making drivers. Being well-prepared for negotiation means understanding the decision-making drivers of your potential partners.

A good relationship is one that creates value for all interested parties based on what “value” means to them. So, do enough homework to understand what “value” means for your potential partners.

Define the ownership of risk

While determining what each party will contribute and take away from the relationship, you need to clearly define the ownership of risk. Risk should be distributed among collaborative partners based on their responsibilities, which are mapped to the capacities or capabilities they contribute to the relationship.

Related: A Successful Partnership Hinges on Careful Planning and Execution. Here Are 7 Things You Need to Ensure Partnership Success.

Exit strategy

Finally, you need a clear exit strategy for the disengagement phase. Collaborative relationships should have a predetermined termination time based on the objectives that the collaborative work will achieve. More importantly, there should be a predetermined series of exit triggers in case of an unsuccessful working experience or unfulfilled expectations of the collaborative parties. In any case, whether termination is due to successful completion or failure, all parties need to know clearly who owns what. Everything, from tangible or intangible assets to debts, should have a predetermined owner based on the business case and risk ownership in place.