If it ain't broken, should we still fix it? A challenger perspective on partnerships in the age of AI

Strategic partnerships have always played a role in making strategy work. From channel partnerships that help us reach lucrative markets, to supplier networks that help us build unmatched capabilities, partnerships are very much part of the strategy mix. In a recent global CEO survey, over 26% of those interviewed anticipate forming new partnerships in 2024 - in fact, partnering moves were ahead of any other planned by the over 100 CEOs interviewed, ahead of the 18% who indicated they will be reinvigorating innovation efforts in their organizations as a top priority, ahead of the retention of talent as the CEO’s top priority (even though some were at risk of disengaging), and more.

We have come across a number of organizations in our work at Ascent that are partnering masters. Netflix is one of them. In the words of a former executive we interviewed, "At Netflix, Strategy = Partnerships".

As the firm expanded its international reach and seeks to offer additional value to its subscribers in the face of intensifying competition, its partnership web includes Telecoms and pay-TV providers, who include its streaming service in their bouquet. It includes content partnerships that bring local creatives, regional production houses, and studios together, to help Netflix produce culturally rich, original content that resonates with audiences in regions as far away as Africa, the Middle East and Latin America. With its ability to Collaborate and Compete, Netflix is able to sustain its growth, despite doom and gloom predictions by some analysts, proclaiming its defeat to newer streaming players. It grew revenues by 14.8% in the first quarter of 2024, while net earnings nearly doubled to $2.3Bn, in the same period.

This brings me to the following question - If your partnerships currently serve their purpose and performance has not waned yet, should you leave them as is?

Here Netflix offers us a compelling example of the value in being 'counter-intuitive'. In many firms, partnerships are viewed as hard-fought wins. They are often more challenging (and time-consuming) to manage than internal collaborations, yet the prevailing view is that they must be preserved, as they cannot be easily replaced, and unwinding them can be rather complex and costly. Under such paradigm, if partnerships are not showing visible signs of being broken, they should not be challenged and rather left in their current form.

In a stable market environment, the sustained investment made over the years in such partnerships and their underlying model makes much sense, as trust gradually builds, relationships reinforced over many engagements, and healthy habits of collaboration take hold.

Yet, when we operate in industries and markets that are facing a significant transition, the questions that we and our partners solve for change, and an underlying search for the most suitable partnerships can lead us to new answers, when we ask - "Who should we partner with?". This often starts below the surface, invisible to those outside your organization's inner circle. However, 'a partnering fix' under shifting industry dynamics is more involved and requires new capabilities to be present. Here, our adage should shift to "If it ain't broken, look for future breakage points and take proactive action, irrespective of how successful they have been so far.”

An example of this is Netflix's Latin American business. A combination of rich history, expanding populations and a growing middle-class has made it the subject of much analysis in Netflix realizing its growth ambitions. Francisco Ramos, its Vice President of Content in Latin America explains: "Not even many years ago, thinking of making a series of this magnitude in a language other than English wasn't part of the ecosystem, and I think now the language at Netflix [has changed] to It is not a good passport for ambition."

What can we learn from Netflix's experience in partnering? Three lessons come to mind:

1. Create a web of partnerships that extend beyond what linear relationships can offer: We know that a web is stronger than any individual strand in it, and so we find is the case with partnerships. We may never know the limits to what each partnership can bring, if it is well-cultivated, but the more we cultivate, the more we ensure a balance of power between partners, the more discretionary effort becomes the norm, more value is being realized. For Netflix, its Latin American flagship production, One Hundred Years of Solitude, filmed in Colombia is a case in point. The company could have brought in a single crew experienced with Netflix’ operations, yet it chose the opportunity to create a web of partnerships to give life to this ambitious project. From scriptwriters who could keep the content locally rich, not diluted for international audiences, yet touching on challenges we all face, to set designers who tackled the big landscapes that were required in innovative ways, over 400 kilometers away from Bogota, the capital city. Talent had to be sought across Latin America. In fact, Netflix' talent ecosystem was growing as the project was brought to fruition. The upside? Netflix can now scale this local-global model to multiple sets - in Mexico, Argentina Brazil, and sustained revenues soon followed.
2. Experiment in customer value delivery: One of the key lessons we found in assessing organizations that are reaching Zero Distance from their customers, and ultimately their end-users, is that customer value delivery is a creative act. We found multiple innovations, in how customer data is accessed (often, for the first time), to how value propositions are seen through the end-user's eyes (which help grow trust levels and encourages faster adoption). For Netflix, discovering customer value was a call for diversity. We mentioned earlier how Columbian-born, Mexico-based Francisco Ramos, championed their flagship project, to bring an authentic Columbian epic such as One Hundred Years of Solitude to life. Such diversity did not stop there. Bela Bajara is Netflix' Chief Content Officer. A challenger at heart, Bela accelerated the company's international productions through deep learning of end-user experiences. When interviewed, she explained: "When I moved to the US [in 2016], I did not understand American culture. The power of seeing yourself or not seeing yourself [as American] is a powerful thing. In deciding what audiences in over 50 countries would watch, you must listen to what is special. There is no other way to decide than listening to that human story." This calls for intentionally growing an organization’s diversity.
3. Become an alternative data miner: Digital transformation has brought many firms to connect with the data that resides within their organization. Yet the speed at which customer data is created, stored and mined, has far surpassed our ability to manage data within our org. walls. It calls for partnerships, to bring such customer data to light and turn it into actionable insights. Netflix was ahead of its time in achieving the former. It is now learning from others of how to turn alternative data into gold, and there are good examples to learn from out there. To illustrate, this week, the world's two largest partnering platforms have announced they will be merging. US-based Crossbean and France-based Reveal will bring together more than 25,000 companies that leverage their platforms on a regular basis, to map new ecosystems, discover potential partners, share CRM data across their partner ecosystems, and enhance their go-to-market teams with alternative data and partner relationships. When asked what spurred the merger, Bob Moore (CEO of Crossbeam) highlighted how AI tools now use ecosystem data as a critical input for go-to-market work. Leveraging such platforms for mining alternative data has certainly been driven by such AI tools and co-pilots.

How essential are partnerships to your organization's success? Would you be open to a second opinion, as to how further they could grow in the age of AI?

Have a good week ahead.