Marc Vahanian, the 7 Keys Coach, shares how association executives can get their members to refer colleagues for membership and how to more effectively work with volunteer leaders through authentic confidence. Marc shares how to apply his 7 Keys: Purpose, Passion, Preparation, Partnering, Practice, Poise & Presentation. Marc@marcvahanian.com – marcvahanian.com – 818-203-7002
Five Areas of Partnering
Time for a Pentad. Are you tired of adversarial business relationships draining your energy?
It is time for you to look at a new way of conducting business–one that empowers all to be more productive and profitable.
If the pain of where you are is greater than the perceived pain of the unknown, you might be ready for partnering. Partnering is an idea that is loosely used to describe anything from teamwork to alliances to contractual partnerships. Partnering, as I define it, is the process of two or more entities coming together for the purpose of creating synergistic solutions to their mutual challenges. I recommend you adopt partnering as your overall business strategy. The benefits are numerous yet the partnering path is not without land mines.
Partnering is not meant to be a flavor-of-the-month management strategy to be hastily adopted and then as quickly abandoned, rather a long term paradigm for success. Partnering is not instant gratification! To adopt partnering as your overall management strategy, you’ll need to understand the Partnering Pentad. A pentad is simply the name given to a group of five, the Partnering Pentad represents the five key areas of every business, the areas in which to begin developing your partnering belief and activities. Once in place, you’ll have Total Organizational Partnering.
This is the area of your business where you develop alliances with outside entities for activities where you have core weaknesses you desire to shore up and to cut costs. These could include: purchasing, R&D, manufacturing, employee sharing, distribution, marketing, advertising and the list continues. By sharing your core strengths with others and theirs with you, both can create an environment of synergy yielding each more than the some total of their collective contributions. Land mines to watch out for are core values of alliance members being too different, circles of interest overlap being too little, and continual management change of one or more alliance partners.
This is an area where much is being talked about. For companies desiring just-in-time manufacturing (JIT) and electronic data interchange (EDI) ordering and inventory control, partnering is an absolute prerequisite.What I here so often from suppliers about their customers is, “They’re talking marriage but acting one night stand.” Whether you be a retailer, distributor, or manufacturer–to succeed and prosper, you had better start developing long-term relationships with those whom you do your purchasing. The biggest land mine in this area is to talk about quality, delivery, and reliability while only buying based on price. Remember, there is today’s price but there is also the overall cost–the overall cost is usually lower through long-term partnering relationships.
This is the area of your business where you must be outward driven. Your customers will buy from you as long as they feel they’re receiving good value for the dollars they give you. Value-added is a term which much is being written about. You must be customer/market driven rather than product driven to understand what your customers want and perceive as value being added to your products and services. It costs about 10 times as much to get a new customer as to keep a loyal customer coming back for more. The important land mine to watch out for is short-term thinking on your part when making customer satisfaction decisions.
To many businesses is a “non-issue,” meaning that they don’t. What motivated the WWII generation is different from what motivates baby boomers and is different from what motivates the youth of today. Just because something motivates you, it doesn’t necessarily mean it will motivate those of a different generation than yours. If you want your employees to have an ownership in your business–even though they don’t have a legal ownership and to hold sacred the business as you do–you must empower your employees. Empowering means giving them the authority and encouraging them to accept the responsibility to do the job. Then acknowledge their successes and failures in an environment of safety–one where you encourage and reward risk taking. The major land mine to watch out for is the Ego Trap, yours of course. To give power, you must be a powerful person, one who possesses personal power rather than power simply acquired from your position.
This is the final and in many ways the most important part of the pentad. Not the most important from the perspective that all revolves around you, but that of having a culture of true partnering. The belief must start at the top, you must lead the charge and show by words and actions that the paradigm of partnering is truly your preferred and accepted business strategy. The critical land mine here is when top brass arrogantly believes that they are at the center of the pentad and that all should revolve around them. The coveted center is reserved for the relationships that bind the partnering pentad and your organization as a viable entity serving society and receiving profits as the result.
For today’s cutting-edge business leaders, partnering is the prevailing answer. The Partnering Pentad will enable businesses of any size to access the benefits generated by pooling the knowledge and experience, crucial to compete in the global marketplace. Partnering is the answer if you are willing to adopt the paradigm of collaboration for mutual success! Challenge yourself to put into action the paradigm of partnering as your management and marketing strategy. Nicholas Copernicus, the father of modern astronomy, in the first decade of the sixteenth century A.D. wrote a paper stating, contrary to conventional wisdom, that the earth was not the center of the universe, but rather that it rotated around the Sun. For this he was rewarded with a 500 year excommunication by the church, what price are you willing to pay for progress?
Alliance Pitfalls
Alliance pitfalls, as with any collaborative activity, have its unexpected challenges. Actually, this is probably more so than in traditional adversary relationships. In adversary relationships you must always watch your back. In relationships based on trust or what is perceived as trust, one can be lulled into a false sense of security. While you need to protect yourself from these dangerous situations, you do not want to create them by exhibiting the wrong attitude.
To keep your alliances healthy and free from pitfalls, conflict should be dealt with immediately. This is your best chance for moving forward in any relationship. But, improperly challenged, conflict can be the death sentence to an alliance.
Alliance pitfalls emanate from five core areas:
Conflict doesn’t have to be a roadblock to a successful alliance if you and your partnering alliance members are willing to resolve the conflict at the core level, in a timely manner. In fact, the resolved conflict can lead to a stronger relationship through improved communication. Unfortunately, conflict that is left unresolved will lead to fatal flaws that will erode the relationship.
Some of the more common areas of conflict in alliance relationships are accessibility, culture clashes, hidden agendas, management tenure, poor communications and unrealistic expectations. Many advocates and consultants for alliances believe that the alliance mortality rate is around 50 percent.
If you wait to build partnering relationships until all the potential pitfalls are unearthed, your industry will pass you by. Others, who you might have considered as possible members for strategic alliances, might be aligned with your competition. Be realistic though, as with a spouse, partnering alliance members don’t change with time. They do not become, who and what, you want them to be. But rather, evolve to whom and what they desire. If you suspect core problems, you probably are accurate in your assessment and the chances for a successful alliance is greatly diminished. Partnering, like marriage, will not change people. What it does do, is to remove the facades, and exposes the good and bad.
Trust in others and the belief that alliance Partnering starts at the top are crucial elements to your success. These two topics are frequent causes for failed Partnering agreements when they’re not followed. Also, in alliance agreements, be cautious of things you can’t see now but may experience later. Little things like the small print in a detailed alliance contract. Don’t let your enthusiasm cloud your judgment.
Just because you’re working with a company of integrity, it doesn’t mean they will look out for you. Even in a Partnering relationship, you are still accountable for your own success and well-being. Make sure your bottom-line expectations take into account that servicing the partnering agreement is going to require extra resources. Be certain of everybody’s alliance partnering goals. Here are examples of potential Partnering pitfalls. Be aware of them before you enter an agreement. Your chances for success will increase.
Unanticipated alliance pitfalls for example, caused Timex forfeited $60 million in lost revenue and learned about the challenges of Partnering overseas. You could say it took a licking and kept on ticking. After 18 months of frustration, Timex wanted out of the partnership it created in India. It all started a decade ago when it was illegal to export watches into India. Timex wanted into the market and proceeded to select a local watchmaker as its partner. Unfortunately Timex should have spent more time on due diligence and asked around a bit more about the partner to be. Timex assumed it could dominate the relationship and have the Indian manufacturer carry out its manufacturing needs on cue.
Was Timex surprised? The head of Timex’s joint venture in India, Robert Werner was quoted in a Los Angeles Times article as stating, “Until its Indian joint venture, Timex had been accustomed to owning companies outright, and its problems in India were a learning experience for many at Timex.” He said It took Timex six months of negotiations and an undisclosed settlement before the company could rid itself of the partner.
Today, Timex is happily partnered with Indian watchmaker Titan Industries, which is a subsidiary of Tata Group, one of the largest corporations in India. The Timex-Tata joint venture went to market in late 1992 and in its first year sold 400,000 watches. Two years later annual sales leaped to 1.9 million watches.
Founded in 1905, Donnelly Corporation started as a glass mirror manufacturer and supplier for the turn-of-the-century (1900) furniture industry. Today, through joint ventures and strategic alliances, they have operations in 12 countries. With net sales in 1998 of over $763 million (13.7% increase over 1997), they are successfully Partnering around the globe.
Dwane Baumgardner, chairman & CEO at Donnelly feels strongly about what it takes for Partnering to work. When we visited at their Holland, Michigan headquarters he said to me about Unanticipated alliance pitfalls, “If you have management that is not operating on the basic believe, that it has to start at the top, those beliefs have to be held and permeated throughout the organization. For example, with employees (approximately 5,500 in 1999), if you have to believe your people can be trusted, that they want to work together in a supportive and cooperative fashion. The same must be true with another company; you have to believe when you form a strategic alliance that they will operate with the same motive that you operate. If you don’t have those beliefs, I think you’re going to run into problems.”
In looking at the alliance pitfalls issue of values, frequently partners of an alliance will have core values that are conflicting. This is especially a problem with issues like trust and integrity. Corporate culture clashes; employee turf protection, and resistance of certain employees to new ideas can wreak havoc on your efforts to maintain a prosperous alliance.
When one of the alliances partners does not completely embrace the principles of Partnering, big challenges occur. This can include top-level executives or even supervisory and functional employees in departments, divisions or regions within a Partnering organization. As an example, DuPont believes that if a contractor is looking just to maximize his profits, on just one job, then Partnering with that contractor is not for DuPont because they know there will be problems in the relationship.
Because the dynamics of alliance relationships are constantly changing, inflexibility of partners can kill an alliance quickly. Each member must be willing to give a little, especially in times of change for a Partnering agreement to work. Just as devastating is a partner making a Partnering commitment, and having a hidden agenda that would be destructive to the alliance. Not quite as bad is a partner deciding they don’t want to follow through, or one that does not have the capability to fulfill their commitment.
Supplier relationships can become challenging, especially when business is great. Suppliers can make the relationship mistake of conveniently forgetting about the loyalty of smaller long-term customers, and snubbing them for the larger orders. This is short-term profitability and long-term disaster. When those large order companies go out of business or are consolidated, the supplier could be left without any customers.
Complacency of either partner is an insidious relationship-killer. Continuously ask your alliance partner questions in a way that encourages them to relate performance problems and shortcomings. Ask, “What haven’t we done lately?” And ask, “What is it you really need from us?”
Dependency on your alliance partner can put your business at a similar risk. If you become the weak link in the alliance and your alliance relationship no longer delivers value to your partner, more than not, they will discontinue the alliance.
If you or your alliance partner is not relationship oriented little problems can easily escalate. Then anger comes and the blaming others for your current situation. The not invented here, mentality often exhibited by senior management is a result of low relationship tolerance. Also the lack of commitment to the alliance or innovations developed by alliance partners can easily slay your relationship.
There is the situation where you might lose control of a technology or best practice to an alliance partner who later becomes a competitor. Staples and Office Depot were going to merge but it did not work out. A problem for Office Depot was that Staples learned of an Office Depot best practice during the merger talks. Office Depot was delivering COD to small businesses in the northeast and getting most of the business. After the failed merger, Stapled duplicated Office Depot’s practice and took away Office Depot’s competitive advantage in the area.
In situations where a customer is the driving force behind a Partnering arrangement, an alliance pitfall is that you can be left holding the bag. Be sure to examine each Partnering proposal in the context of your company’s overall business strategy. This challenge was recently apparent to IBM and it discontinued its alliance with Somerset PowerPC and Motorola, in producing microprocessors for Apple.
When sitting down at the Partnering table a partner might find the relationship seat uncomfortable. It could be that your partner has a different level of emotional and physical comfort, or sometimes it is simply a change in corporate strategy or a restructuring which leads away from a partner’s product and/or technology causing the partners distress. It is important that you know the short and long-term goals of your alliance partner.
When you try to partner with a potential or current customer and have them renege on the promise of purchasing from you, the disloyalty challenges that can occur can be wasteful. Be cautious, as there is also the possibility of your partner being unethical and attempting to capture your technology or trade secrets. This is a difficult area from which to protect yourself, but if you do your due diligence, your chances for success increase.
Relinquishing some control with the expectation of greater shared returns can be a difficult waiting game and disastrous alliance pitfalls if not managed correctly. Additionally, your resources can get pulled in too many directions based on collective alliance decisions. Be certain you can spare the resources you devote to your alliance. Otherwise you may put the success of your entire operation in harm’s way.
The lack of third-party cooperation can be a true relationship problem. All the primary members of a Partnering agreement will have to give a little for your agreement to work. Worse yet is your partner receiving unfavorable or harmful media coverage. This is because you are usually pulled into the picture and believed guilty by association. Real or perceived, image and reputation are critical to any company’s success.
Be careful in global alliances. Contracts with an overseas market, for instance, often take a long time to finalize. By the time you get going, in the technology industries, your competition may have already gotten started. If you are already behind and you have developed an alliance with a partner organization that is weak and bleeding, they will only bring you down faster and harder.
Another alliance pitfall is to underestimate how much time, energy and resources will be necessary to commit to your new alliance. Then not having access to your alliance partner’s employees is an important issue. The closer the planned relationship between the two companies, the greater the importance of the linkages between them. You might find yourself in a situation of a small company Partnering with a large company. A challenge in working together will be that of the representatives, usually top executives of the small can make decisions on the spot. Unfortunately, the employees of the giant must take a proposal up the chain of command. This sometimes slows progress to a snail’s pace.
Culture clash is a frequent Partnering challenge. The failed alliance of IBM and Apple is a typical example. The heralded fall 1991 announcement promising cooperation eventually spawned Taligent Technology and Kaleida Labs. Unfortunately the two could not coexist so the alliances eventually gave way to a quiet winter 1995-1996 breakup.
Putting all your alliance relationship eggs in the basket of only one executive or manager is not a smart idea. The management tenure of your alliance contact can signal success or failure. If you have a one-person relationship, what happens if they get promoted out of the area, fired or even die? You are out of luck. Build relationships with several key contacts in the organization of your alliance partner.
What if your partner’s internal or external rewards structure interferes with the success of the alliance? This could apply to employees, customers or suppliers. If you are a supply partner and your partner has traditional rewards for their buyers, the buyers will only be interested in concessions and cost reductions. On the flip side, sellers usually offer rewards for sales performance and this also can be challenging in making a relationship work.
There certainly is a difficulty in communicating across various time zones. Solving problems quickly when your Partnering factory is located halfway around the world is hard enough, but when also speak a different language, that just makes it more of a formidable task.
Inertia, not having the emotional ownership in getting started is a true pitfall. Add this to chaos, seeing too many alliance choices and ways to create an alliance, some never do get started. The two sides of the sword are, if you wait for everything to be perfect, they never will. And if you do not put enough energy into an intelligent choice, your alliance could be doomed from its inception.
You could easily be guilty of underestimating the complexity of coordinating and integrating corporate resources, and overestimating your partner’s abilities to achieve the end result. The alliance pitfall of self-doubt and not believing you have the skills and tools to create an alliance can crop up here.
Eventually, alliance success depends on management’s abilities, skills, commitment, aspirations and passions in assembling the pieces of the puzzle. When unequal dependence in a relationship occurs, the partner with the least dependence could be less likely to compromise and put energy into the relationship.
Meanings assigned to words by different cultures can cause serious alliance success pitfalls. In one culture quick delivery could mean one day and in another it could mean one month. This opens the can of worms often referred to as unrealistic expectations of a partner’s capabilities. The areas commonly include technology, research, production skills, marketing might, and financial backing.
We also have the unexpected inefficiencies or poor management practices of a partner that can be the demise of a well-intended alliance plan. Also at risk is the area of developing an alliance with multiple partners, who later become rivals to one another. This puts a serious strain on the integrity of the remaining alliance.
Now that you’ve had a view of Partnering from the downside, don’t let these hurdles stop you. Be clear on what alliance partnering is not. It is not instant gratification, nor a quick fix. It is not a flavor of the month management strategy. Strategic alliances are separate entities that have come together to solve their individual problems in a way that serves the whole mutually. It is sharing core competencies that overlap and create synergies. The struggle is a necessary part of any relationship that is valuable and lasting.
To reduce the effects of Partnering pitfalls, David Elliott, senior vice president and chief administrative officer at Technicolor in Hollywood, CA shared his thoughts with me. “If a partner fails to meet their responsibilities, a clear agenda is necessary that both sides are operating from. When the agendas are different or conflicted—that’s a problem.” He went on to say, “We don’t have partnering horror stories because we include an exit strategy, before going into the relationship.”
Elliott’s advice for others entering into partnering relationships is to do your homework, know the agenda of all partners in the relationship and measure against it. If after doing your homework you’re still not completely sold on partnering with a company, start small. Begin your alliance by partnering with another for a simple or small promotion and get your feet wet. If you do stumble, then having the ability to regenerate after a fall is crucial, especially if you or a partner simply make a mistake.
Having knowledge of the alliance unknown should keep you from becoming immobilized and waiting for opportunities that could easily pass you by. Sure, there are some risks, but to lessen the effects, do your homework, know the agenda of all partners in the relationship and measure against it. If after doing your homework you’re still not completely sold on an alliance relationship with a company, start small. Begin your alliance by Partnering with another for a simple or small promotion and get your feet wet.
If you do stumble, having the ability to regenerate after a fall is crucial, especially if you or a partner simply makes a mistake. Be careful when events and circumstances are not what you hoped or planned for. You might go to a place of apathy. If you remain in a toxic mind-set, you’ll wait and wait for things to get better before you move into action. The trouble is that things rarely get better until you propel yourself into a state of activity.
To be successful at partnering you must commit to functioning at a higher level. A level that will allow you to stretch your comfort zone and then commit to moving into action. Without these two issues in concert, you might not get started or restart when necessary.
Once you get back in the action, you can go after small wins to reestablish your confidence to take risks in pursuit of an even larger prize. The key to overcoming alliance pitfalls is to not wait for all to be perfect before you commence. It’s okay to subscribe to the idea of: ready, shoot, aim. Do though; take the time to adjust your aim after you begin. Be like a commercial airline pilot and course correct regularly. Keep your future focus on the partnering journey. Keep it improving. Be decisive, and show the qualities of a leader in your industry. You will be rewarded.
Rigsbee Alliance Development Process
A solid alliance development process will minimize alliance failure. While successful alliances require work and process, the benefits justify the effort. To improve your organization’s performance, production and profitability you must do more than just fix a problem. You must burrow deeper and change the system (culture). The following steps will help you to evaluate your system before you embark on your strategic alliance journey:
Study organizational needs through self-analysis. Observe, and identify your areas for desired improvement. Develop an organizational evaluation method to be completed by your customers, suppliers, employees and management. This will help you to inventory your core strengths and weaknesses. Which strengths might be valuable to a potential alliance partner? What weaknesses do you want to shore-up?
This is the critical step in the alliance development process—all your future efforts will be built on this foundation. Learn about those companies you consider as Partnering candidates. Ask yourself and your management teams these questions: What are their strengths and weaknesses? What affect would they have on our business? Be sure that the company cultures and core strengths are complementary. Can the people who will make the alliance work get along? What is the growth opportunity, short and long-term? Select alliance partners, with knowledge, understanding and commitment. You can only partner with a person or organization that wants to partner. It would be a serious mistake to think otherwise.
Search for the strongest material for your Partnering foundation, the best possible partner. Customer-oriented culture is critical to the success of the partnering alliance. The greater the sophistication of a company and its officers, the more likely the company will enter into. Embrace long-term thinking. Strategic alliances are rarely a quick fix, but rather a sound long-term business strategy. Target companies, large or small, that can aid you in rapidly and efficiently, reaching the goals of research, technology, production and marketing.
Another element to consider is the focus of the individuals involved. Be certain their focus of the Partnering relationship is strategic to the individuals’ goals. Be clear about your and your partner’s critical driving forces that pull each into an alliance arrangement. Can the two organizations work together at the daily operation level? Even though there might be an exceptional strategic fit, the two organizations must compatible on an ongoing operational level.
Outrageously successful alliance relationships take time to develop. Over the last decade too many alliance relationships have failed due to the quickness of selection. Research and due diligence must come first. Selecting your alliance partner well reduces the chance you’ll need to exercise your exit agreement.
Once you’ve selected your potential alliance partner short list, you can establish mutual goals. You can agree to who gives and gets what, when, where, and how. Mutual performance measuring instruments can be developed. It is time for identifying, understanding, and putting together the possibilities for an alliance. Internal and external personnel should be involved in developing not only your alliance structure, but also your road map as well.
The success of the blending of cultures is pivotal to a successful alliance development process, take great pains to ensure this achievement. Access is crucial—emphasize the importance of understanding and access to each alliance members’ staff. Create a convenient communication system for all partners especially decision-makers. Plan procedures to keep relationships between key people of partnering companies open and constantly alive.
Make sure that all levels of both organizations share the partnering attitude. Stress strong information systems and share information constantly. Agree on pricing with your partners and delete income accounts (accounting practices) that have nothing to do with your business or the real price of your goods and services—things that only make a singular department look successful.
Look into the future, plan for the long-term relationship and encourage strategies that will sustain the relationship through to its conclusion. Phasing in the partnering relationship could be a preferred strategy, as this method will allow partners to have a get acquainted time. This can assist in the identification of reaching milestones, successfully or identify the need to reassess before moving on to a higher level in the relationship. Maybe even institute a pilot program at this point.
This is the agreement, handshake or contract. Most who have been down this path would strongly urge that your strategic alliance agreement be committed to paper. For the safety of all concerned, the agreement will be so much clearer six months or two years later. Sometimes people forget what they agreed to or, even worse, they have been transferred to a completely different division thousands of miles away.
The agreement should spell out conflict, dispute resolution, exit strategies, and steps to facilitate the alliance development process. Be ready for it and the conflict can be resolved timely and amiably. Have an agreed-upon set of procedures in place that will help resolve the issues that arise. Inevitably, there will be a need for a mechanism to handle things like price increase discussions, inability to ship and dispute resolutions.
Develop a clear agreement on what your goals are and make sure they are measurable. Have a formal mechanism for alliance members to identify the goals, milestones, and turning points crucial to the success of the relationship. Devise an evaluation that will measure both implementation and performance. The Partnering agreement should establish the terms and conditions under which partners will resolve questions of opportunity, accountability and risk. The final agreement should be reviewed and agreed upon by all parties involved or affected. Check with your national trade or professional association, they may have already developed a standard agreement for you. Alternatively, to reduce development costs, pick up a copy of Developing Strategic Alliances which has an extensive general issues checklist to review before you meet with the lawyers.
This is the kick-off of the alliance and kick-off parties are common. Generally, most of the persons from both or all companies that are involved in the alliance will attend. This humanizes the organizations and the people working on the alliance. The difficult work of merging hardware, software, systems, policies and all the elements that differ among the alliance partners from development to production to distribution. This is a deal-maker, or breaker, step in the alliance development process.
Regularly review your mutual goals and performance. Regularly meet with alliance partners to evaluate the status of your relationship. Should the alliance be upgraded, maintained, or downgraded? Should new goals (short and long-term) and performance expectations be established? Are new measurement systems available?
It has been said that in an ideal marriage one partner is blind and the other deaf. To keep your strategic alliance alive and healthy, each partner must overlook some of their partner’s misgivings. At the same time, each must keep an open line of communication to minimize conflict and relationship meltdown. The best way to do this is through regular Relationship Value Updates (RVUs). Quarterly RVUs are preferred, but semiannually can be acceptable.