The number of global partnerships formed by businesses grew by 30% from 2016 to 2017. Businesses across all industries are looking for creative ways to be more responsive to their stakeholders, deepen their capabilities and expand their reach. In many cases, it makes more economic sense to form a relationship with another business to meet their needs. Even giant companies such as Amazon, Berkshire Hathaway and JPMorgan Chase — which have deep pockets and broad reach — are pooling their resources to tackle big-time challenges, such as managing healthcare costs more efficiently. As Strategy + Business noted, “Your next deal may be a partnership.”
The martech industry is not immune to these forces. In May 2018, I wrote about the great location marketing roll-up as technology firms consolidated to build stronger platforms, in order to capitalize on the growth of location marketing. Now those firms will form relationships with large agencies and consulting firms to deliver services together.
Here are three reasons why:
- The Thirst for Customer Data. The large services firms are under pressure to understand how their clients’ customers think and, more importantly, how they think about their clients down to the location level. Having access to sentiment analysis or Net Promoter Scores is no longer sufficient to deliver insight and in real time, as my colleague Lori Maupas argues convincingly. Services companies need a deeper and broader pool of data that they can use to tell their clients what customers think about them, pre- and post-purchase — the kind of insight they can get from Reputation Score. It’s just too time-consuming and difficult to build the data set alone. I know because I talk with these firms all the time. I have seen firsthand what kind of pressure they’re dealing with to provide customer insights that are beyond their reach.
- The Need for Consulting Expertise and C-Level Access. On the other hand, technology firms, many of which I wrote about in my post on the roll-up, are dealing with pressures of their own. Technologists have deepened and broadened their own toolsets, but for the most part, they lack consulting expertise, vertical market know-how and C-level access to achieve the kind of scale they desire. Hiring and developing consulting talent is also costly and time-consuming, not to mention the business model being different for consulting than for a SaaS-based company. So it makes more sense for the technology leaders in the location marketing industry to look for partners.
- Turning Data into Insights. Apple and Google make a business more visible across the digital world. They wield an enormous amount of power and reach. The major services and consulting firms usually have relationships with them from the standpoint of being advertising partners. But they want more than an advertising relationship. They want to better maximize these platforms to deliver customers, not just audiences, to their clients.
Doing so can be very, very hard because you need specialty expertise to understand how to maximize those platforms. Technology businesses — at least the good ones — are literally plugged into Google and Apple through APIs. For example, Reputation.com’s own Google API makes it possible for a business to have its ratings and reviews published quickly and efficiently across the search landscape, which is a boon to any business that depends on ratings and reviews to attract and keep customers (which means just about every business).
To meet these needs, firms will shift their focus from M&A activity to forming partnerships. Especially after the location marketing roll-up, the technology companies are too big and expensive for larger players to buy outright. Creating partnerships makes far more sense. I believe it’s important for both the technology firms and the services and consulting organizations to dedicate resources to evaluate each other for fit. To paraphrase Strategy + Business, your next big deal will be a partnership.