The Partnership Canvas

It’s been more than a year since we introduced the Partnership Proposition Canvas as a prototype tool for modelling key business model partnerships. Since its introduction, we’ve been testing the tool and refining it. In this post we share the latest version, which has proven to be simple in use, and more effective in getting the conversation of business model innovation through partnerships going. Allow us to introduce the Partnership Canvas: an essential tool for designing, negotiating, and adapting partnerships. This tool works as an add-on to the business model canvas.

What, another canvas?!
The reason we’ve developed the partnership canvas is that many organisations struggle with their partnerships. One of the main causes is that there is no structured approach available yet to help design strategies for partnerships. Naturally, the partnership discussion itself between organisations is often veiled in mist. As Henry Chesbrough, the figurehead of open innovation, wrote:

“few companies in our experience take the time to articulate their own business model. Fewer have any clear idea about the business models of their external relationships.”

That is not a good basis for creating a collaboration. People leave too many assumptions about their partnerships unaddressed, and that backfires the moment they go live.

What is a partnership?
The first hurdle in the partnership discussion is definition of the term partnership. You won’t be able to define a partnership by only mapping out the two partnering business models. That describes the result of the partnership. It doesn’t explain how the partnership works.

A partnership is more. It is an entity that sits in between the two business models that make up the partnership. This entity enables value to flow between two partnering business models. By combining value inputs from both business models in a partnership, they are able to create new forms of value that they both benefit from. (I’ve written about what can best, and best not be defined as a partnership from a business model perspective in a previous post).

Value exchange between two business models

The partnership canvas was created to demystify the partnership entity by defining its building blocks. The tool can be used to map existing, and design new models for partnerships. The partnership canvas helps to break through the boundary of possibilities for innovating with only your own business model.

The building blocks of a partnership
The first question you need to ask yourself when orienting on a partnership is what will be the purpose of the partnership. The key to defining this purpose is to question yourself on how you can contribute to a better, more complete experience for your customer. This could relate to aspects of availability, convenience, speed, price, performance, etc.

Some things don't change

Visual by Dave Gray

Based on definition of this purpose, you will be able to describe the missing element from your own business model, for which you are seeking a partner. You can use the definition of this element to screen candidate partners on a (set of )value(s) that you desire. This desired value makes for the first building block of your partnership design.

PC Presentation 1 DV

The second question is about your own contribution to the partnership. If you have identified what value you desire in a partner, then you need to develop a matching offer that connects with that value. A value offer is required, which is based on one or more elements from your own business model. An effective offer either complements or enhances the value you would desire from a partner. Only if this connection is made, do you have a basis for creating a relationship.

PC Presentation 2 VO

The third question demands clarification on how you will connect the desired and offered value. Through what collaboration activities or through what form will these values be connected? It is essential that both parties find a way to integrate the value that they are putting to the table. This transfer activity building block is the exchange by which synergy between the partnering business models is created.

PC Presentation 3 TA

With this third building block, an engine is created that enables value to flow between partners. But the partnership discussion doesn’t end there. Essentially what we’ve defined so far is a basis for connecting values. The ultimate question is whether this value engine enables you to create a new form of value that you can utilize to innovate in one of the building blocks of your business model. This question on created value makes up the fourth building block of the partnership.

PC Presentation 4 CV

Using the partnership canvas
Once you have mapped your business model, and desired value from a partner, you can use the partnership canvas to see how you can connect with a partner. The value flow between the both partners is made by linking all the building blocks together through a single line of reasoning. Use post-its to describe the elements of your partnership. If multiple value elements are involved in a partnership, then you can use color coding of post-its to connecting lines of value exchange.

PC w Post its

Another important feature built into the design of the partnership canvas is that it enables communication between a business model and its partnership. The value offer, and created value both have links to the business model of one the partners, and the desired value should relate to an attribute of the other partner.

Screen Shot 2014-10-17 at 22.37.00

Lastly, but perhaps most importantly, the partnership canvas is designed in such a way that it accommodates the comparison of a partnership from both partners’ perspectives. By laying the foundation of the partnership canvas against each other, you will be able to compare whether:

  • Your desired value is what your partner is willing to offer
  • Your offer is the value that a partner desires from you
  • You have a same framing of the transfer activities, required to connect your values.

The figure below shows how a partnership can be compared from the perspective of two partners, each with their own business model. Screen Shot 2014-10-17 at 21.39.34 By comparing two perspectives, prospecting partners can sense each other out early, and also learn from each other on the various opportunities that exist. Also, they can find out early on whether there actually is a partnering perspective in the first place. This might be a painful realisation to make, but it could save a lot of more hurt from a painful divorce in the future.

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Conclusion
The partnership canvas creates empathy between two prospective partners on the strategic importance of the partnership to each. The canvas can be used as a stand-alone tool to quickly identify a partnering opportunity. But for full strategizing value, it’s better to use it in conjunction with the business model canvas.

The partnership canvas has been tested in various workshop settings with students and entrepreneurs. It has demonstrably contributed to better partnership discussions. Parties become clear about each other’s strategic objectives. Also, they learn from each other about the various opportunities there are to partner. It’s not a matter of making one grand master plan for an offer the partner can’t refuse, but more of finding out together what the opportunities are.

Stay tuned for more guidelines on how to use the partnership canvas on this blog. You can freely download, and use the partnership canvas [SlideShare login required, or send me an email: info@partnershipcanvas.com. The tool is published under a creative commons license, so it’s free, but please review back to the source. I hope to hear from your experiences!

Interested in a training on the Partnership Canvas?
If you want to learn more about using the partnership canvas, then check out our Partnership Design training options.


Word of thanks
I couldn’t have developed this tool without the help of some special people. First I would like to thank my colleagues and students at Wageningen University for creating opportunities to test out the canvas. Next, I would like to thank Mike Lachapelle for some really foundational feedback on the design of the canvas, and Salim Virani for some interesting pointers on shapes. Lastly, a huge thanks goes out to Ernst Houdkamp, whose visual thinking skills kept me sharp on finding improvements for the canvas, and who had the patience to stick with me through the many iterations of the tool.

“What if” continued: reflections on business model innovation in agriculture

Since my post last month on a “what if” about farmers being able to participate in brand value creation with the consumer brands, I’ve received some interesting and inspiring responses. They come from people in executive positions at a leading global food brand, and at a commodities trader, as well as from a relatively well-known marketing innovation expert and blogger.

In this post I would love to share some of the insights of this exchange. Because it’s not appropriate to present the reactions with direct attribution to the respondents due to the informal nature of exchange, I have chosen to reform the responses into a fictive conversation. The conversation is between me, as an interviewee, and an “industry journalist” enquiring into next step innovations on sustainability, marketing and supply chain operations in food and agriculture. A little schizophrenic and unintendedly vain maybe, but bear with me…

Q: This idea you have connecting farmers to brand value and marketing is a nice idea, but isn’t this just a classic Michael Porter problem statement: some companies will prefer a strategy of backward integration into their supply chains, some won’t? If consumer brands use their resources for their producer partnerships, they will not be able to utilize them in their relations with customers.

A: The dynamics in agriculture is turning very much to the disadvantage for firms that have been divesting out of production for the last decades. Natural resources are dissipating; farmers are not investing in their holdings, or as less as possible, due to low returns. Both economic returns and the environment suffer. People have been moving out of the farming practice all over the world. That is economic erosion, and it is a compounding risk of food insecurity. We need new propositions to keep farming attractive. People need to actually be moving into the business, rather than moving out, and food companies need to innovate in our food systems to secure their existence as a commercially viable company. That is what motivated my previous post, pointing to the need for new types of entrepreneurial propositions to farmers that are beneficial to food industry at the same time. It was not so much that I wanted to “push” a specific solution.

Q: Ok, for argument’s sake, let’s say you have a point: aren’t you focusing too much on added (brand) value systems? What about the commodities business, would your argument still hold?

A: Right now there is so much decline of environmental and social capital going on as well as a mounting risk of food insecurity all impacted by developments at the level of the primary farming activity. It is aggravating to such an extent that preventing that decline or taking action to invert that trend is actually the fastest growing value creating opportunity in agriculture at the moment. This type of value is not concerned with company-to-consumer value per se, it concerns the whole agri-food system, thus commodities and branded products alike. I think there is great innovation potential for the whole sector in linking back the value capturing capacity of down stream to the up stream area in the value chain where all the problems are stemming from.

Q: Sharing value across the chain, isn’t that another form of wealth distribution, and shouldn’t we have learned over the years not to use that type of socio-financial engineering?

A: What we have learnt about that, I think, is that you can’t centralize the redistribution function, like through government and taxation. And personally I would say that banks and derivatives alchemy actually belong on that same list (hahaha). What I propose with my idea, rather, is to unlock the potential of market based valuation of solutions to environmental and social problems. We’re already spending money through redistribution mechanisms in developing countries for instance; it’s called aid, and it’s really not working that well because it is spent regardless of any result.

Contrary to aid, market based valuation is contingent on performance, on achieving a superior allocation of resources. Rewarding that type of performance is the ultimate entrepreneurial proposition you can make, and it spurs innovation. Just look at what’s going on in Silicon Valley. The opportunity of creating and capturing value in the tech market generates unparalleled entrepreneurial pull that makes people from all over drop everything and move to Palo Alto. I know things are a bit crazy there, but if we could only unleash, or distribute, that type of spirit to agriculture in some way.

Q: Just stepping aside from theory for the moment: It just seems so impossible to make this work from an operational point of view. How will you reach these farmers, and what if the stock price goes down?

A: I agree that the idea would be a laborious undertaking. You would need to get thousands of farmers organized under a vehicle that could hold the derivatives and distribute returns. But then again, we have been investing in the setting up of large numbers of, oftentimes sizable, farmers’ organizations, in both developed and developing countries for years. We’re already building such infrastructure to facilitate product flow through the supply chain. New value systems could be used to strengthen the economic foundations of such collective organizations.

Secondly there is indeed and important issue of valuation an attribution of value changes. I know that brand valuation is not an exact science, but is valuation ever?  But I think the need for valuation techniques could become so important in future that we should encourage more study, rather than put it on the back burner in solving the world’s food problems. Numerous companies have been developing metrics to track performance of their marketing departments using esoteric valuation methods. Also top-line ad-agencies use contingent contracting forms to determine their reward for advising their clients on advertising and creating brand value. Why not take it from there, and look at your producer partnerships?

Regarding the point of fluctuations in stock prices, I would say that if attribution can be correctly constructed, it then wouldn’t really matter if value drops. It would mean that performance has gone down accordingly. Remember, that the idea is intended to be an entrepreneurial proposition; no performance, no reward, and each partner carries the risks of the joint value creation endeavor accordingly.

Q: If the example you provide is not actually a real solution as you say yourself, or at best too complicated, what would you then propose to do? What can companies practically work with to start on the agenda of new value systems in food and agriculture?

A: Propositions to farmers in developing countries like access to finance, fertilizer, and roads is part of the needed support and often already provided. But it is not sufficient a proposition to create new entrepreneurial zest. Such propositions merely reinforce the current contracting positions of farmers, and we all agree that this is not a very attractive position.

There are also calls for structural reforms in agriculture, like disowning small and uneconomic holdings, thereby providing room for large scale investment.  But we then get back into the old redistribution dilemma, and consequent problems.

I think that relations in agriculture will become more dependent and thus more specific, given the business environment we’re in now. It is high time we re-imagineer producers as suppliers, to producers as customers. My suggestion would be to start designing partnerships as you would a design a business model for your actual customers. This would create the much needed relations for joint value creation, and the sharing of returns. It would catalyze the innovation we need to create a sustainable foundation for food and agriculture.

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I would like to thank Joost Guijt in directing some interesting contacts to my post, and inviting their response. Joost is a member of the Value Chain Generation, and developing the Cotton Coversations startup.

Although this post has been a sort of conversation with myself, I hope to invite more discussion in the commentary string below. I look forward to receiving your thoughts and responding!