Tag Archive for: Relationship Value Updates

Keeping Alliance alive and healthy

Keeping Your Alliance Alive & Healthy (892 words)

Ed Rigsbee, top speaker on strategic alliance successIf every fool wore a crown, we should all be kings. -Welsh Proverb

Let the sword decide after stratagem has failed. -Arabic Proverb

I have heard it said that in an ideal marriage one partner is blind and the other deaf. There may be some wisdom in this old saying. To keep your strategic alliance alive and healthy, each must overlook some of their partner’s misgivings. This chapter, if you heed the advice, will help you to avoid many of the relationship challenges. It will help you keep your alliance relationships on the smooth road to success.

Regardless of how you view the world, (the glass is half-full or half-empty), if you enter into a strategic alliance relationship you must focus on survival of the alliance in good times as well as bad. It can be mutually expensive, in costs, time and emotions to break up an alliance. Your goal is to build Outrageously Successful Relationships (OSRs) with your alliance partners.  If you build relationships that are so successful, neither would ever consider breaking them up.

Your Total Value Package (TVP) that you offer your partner, and your partner offers you, is crucial to the alliance success. When you understand what, your partner needs, and then give it to them, you in return can also ask for extra value.  The best way to do this is through regular Relationship Value Updates (RVUs).  Quarterly RVUs are preferred, but semiannually are acceptable if you are serious about building OSRs.

The idea here is to limit the negative conversations you, or your partner, have about one another when expectations are not met. Unfortunately, unrealistic expectations are common in alliance relationships. Think for just a minute, would you, about the worst boss you’ve ever had. See him or her having one of their famous temper tantrums. You know what I’m talking about, when their face turned bright red and the veins in their neck popped out. See them in your mind’s eye. Now! Here’s the question, is there a chance that boss could have been a decent human being? Your answer, is the conversation you are having with yourself about them. Who knows?  Maybe they were just taught old X Theory management (where one treats their employees like mindless idiots) when they were young and it stayed with them. Your alliance partner and their organization have regular conversations with themselves about you and your organization. You can limit the damage and take care of things early with RVUs.

The most effective way to administer RVUs is for you, and your partner, to (hopefully quarterly) complete the RVU and send it to the other. For alliances of larger organizations and/or with several departments involved, each department should do the same. This will help both sides to understand the conversations that their partners are having with themselves about them. Additionally, when you realize that some of the things you are doing for your partner create high-level value for them and it costs you little, you may be inclined to do more of that. Conversely, when you realize that some of the things you are doing for your partner creates little value for them and costs you a bundle, you’ll quickly cut back in that area.

Relationship Value Update (short form)

1.  The value I believe my company has received from our strategic alliance:

2.  The value I believe you have received from our strategic alliance:

3.  Improvement action steps we plan to take to improve our performance in our alliance relationship.

4.  Improvement action steps we would like to see you take to improve our alliance relationship.

Relationship Value Update (long form)

  1. The value I believe my company has received from our strategic alliance:
  2. Have helped my company’s core competency.
  3. Have created valuable synergies for my company.
  4. Have helped us reduce costs.
  5. Have helped us in reducing duplication of effort.
  6. Innovations discovered with your help.
  7. New markets you have helped us to access.
  8. Competitive situations (both established and emerging competitors) you have helped us to overcome.
  9. Other valuable benefits we have received.
  10. The value I believe you have received from our strategic alliance:
  11. How we have helped your company’s core competency.
  12. How we have created valuable synergies for your company.
  13. How we have helped you reduce your costs.
  14. How we have helped you in reducing duplication of effort.
  15. Innovations we have discovered for you and/or helped you with.
  16. New markets we have helped you to access.
  17. Competitive situations (established and emerging competitors) we have helped you to overcome.
  18. Other valuable benefits we have delivered.
  19. Improvement action steps we plan to take to improve our performance in our alliance relationship.
  1. Improvement action steps we would like to see you take to improve our alliance relationship.

 

In addition to sharing regular value updates with your alliance partner(s), each adhering to a Partnering Code of Conduct will lessen the need for conflict resolution strategies.

 Partnering Code of Conduct

  1. Be the kind of partner with whom, you’d like to partner.
  2. Ethics and morals are important.
  3. Respect others, their beliefs, customs and policies.
  4. Think as a member of both your alliance and your industry.
  5. When in doubt, don’t!

Rigsbee Steps to Successful Alliance Development

Strategic Alliance Development Process (1199 words)

Ed Rigsbee, top speaker on Strategic Alliance Development

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:

  1. Monitor

  2. Educate

  3. Select Alliance Type

  4. Organize

  5. Agreement

  6. Implementation

  7. Maintenance

Alliance Development Process: Monitor

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?

Alliance Development Process: Educate

  • Identify other industries that have embraced Partnering. Study the individual companies that have been successful in building alliances. Study what worked and what did not. If Partnering was not successful, learn and understand why not.
  • What will it take to change your organization?
  • What are the potential obstacles? Is your culture open or closed? Changing a closed culture organization will be much more difficult than one that is open.
  • Has collaboration worked in the past?
  • What competencies do you desire in an alliance partner?
  • What kinds of (or reasons for) strategic alliances would best work with your culture and/or fulfill your growth needs?
  • What criteria will you use to select alliance partners?
  • What new training programs will be necessary to help you with your shift to Partnering?

Alliance Development Process: Select Alliance Type

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.

Alliance Development Process: Organize

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.

Alliance Development Process: Agreement

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.

Alliance Development Process: Implementation

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.

Alliance Development Process: Maintenance

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.

What Suppliers Say About Buyers (850 words)

What Suppliers Say About Buyers

What are they saying about your company?

I recently delivered a “What Suppliers Say About Buyers” partnering presentation to the National Association of Chemical Distributors at their annual meeting. A couple months before the meeting, I visited the convention chair, Pat Marantette, at his Southern California business, E.T. Horn Company, to learn more about the industry. One of the things he told me was that he was more concerned with the relationships with his suppliers than the relationships with his customers. He went on to explain to me that without his suppliers, he was out of business.

In thinking back on the visit, asking how important are suppliers to your business success is an important question. The following is excerpted from my latest book, PartnerShiftHow To Profit from the Partnering Trend. I believe you’ll be asking yourself questions in reference to the relationships you enjoy, or do not enjoy, with your suppliers.

At the Building Service Contractors Association International’s 1997 Chief Executive Officer Seminar in Los Cabos, Mexico, one of the suppliers to the industry was assigned to present a presentation based on what the suppliers in general said they did not like about the contractors, their customers, actions. While Rob Kohlhagen, senior market development manager at SC Johnson Professional delivered an exceptional presentation, I’m not sure he ever forgave me for assigning him the task. Admitting the comments came from only one industry, I believe they are universal, as they have applied to most of the industries that I have counseled or studied.

Power manifests through knowledge. It is important to know what your suppliers have to say about you. Completing Relationship Value Updates are important, as they will help you to avoid some of the following problems and open a conduit for communication. Remember, you can learn from another industry’s problems. Below are listed the three general areas of complaint from the contractors’ suppliers. Also there are some of the specific comments offered about the contractors. Their comments point out universal issues that suppliers have with their buyers. Most will apply to your industry. If you explore issues you might have with your own customers, there is a good chance your suppliers could have similar issues with you.

       Fear of commitment

“They are not willing to single source but still want our total bundle of value-added resources at no additional cost.”

“They focus on reducing price rather than reducing cost.”

“They like to shop around regularly to satisfy curiosity . . . they are afraid that we will abuse the relationship.”

         “They want direct prices but local service.”

         Operations level support

“We get commitment from top management but the program gets derailed at the operations level.”

“Top management is reluctant to mandate changes to operations . . . they try to build consensus but it doesn’t happen.”

        “Operations people have their ‘personal favorites’, old recipes they swear by that they will do anything
to hold onto (including sabotaging the partnership initiative).”

“The partnership is conceived at the executive level but the lower level departments are never convinced that it is in their best interests too.”

        Communication breakdown

“Everyone is so busy we only communicate when there is a need for fire fighting . . . hence the relationship takes on a negative tone over time.”

“We never discuss mutual opportunities . . . it’s always, “How do we fix what isn’t working?’”

“We talked about the importance of communicating at all levels: executive, operations, purchasing, training, risk management and quality assurance but there is no structure established to make it happen . . . so it doesn’t.”

“The chemical supplier cannot partner independently with the building service contractor. There is an interdependence between the chemical and equipment and supply manufacturers but there is no communication link established between us.”

Interdependence is an idea that carries much power. From the Harvard Business Review, July/August 1994, “Active collaboration takes place when companies develop mechanisms, structures, processes, and skills for bridging organizational and interpersonal differences and achieving real value from the partnership. Multiple ties at multiple levels ensure communication, coordination, and control . . . more communication than anyone anticipated is necessary.”

Thomas Gale, editor at Modern Distribution Management, has his opinion about the integrity of some customers. From the November 10, 1994 issue, “And while many customers are talking about integrated supply partnerships, there are (and will always be) customers that are ultimately seeking price reductions, playing one distributor off another, without a willingness to explore how a true partnership can save money for the customer while providing a fair profit for the distributor.”

Developing a conduit for communication is not difficult but frequently overlooked in many industries. The Internet makes this even easier. Some industry associations are providing this service through members’ only sections on their web site. More trade and professional associations are helping to create this type of multi-function participant forum, but not enough. This area is a tremendous opportunity for associations to add a very high-level of value for their members. Continue the dialogue with all stakeholders in your business.