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Partnering with a PurposeA Practical Guide to Using Strategic Alliances to Achieve Your Business Goals
By Dave Koester Charles Hamlin
AuthorHouseCopyright © 2011 Dave Koester
All right reserved.
Chapter OneWhy Partner?
In the Beginning ...
Og just couldn't seem to get it right. No matter how many times he tried, he couldn't get his stone axe to do anything more than make a big noise and a small dent in the bark of a tree. All of the stone axe heads he carved were either too brittle, and broke on impact, or weren't sharp enough to have any effect at all. You see, this whole working with stone thing was pretty new to Og.
Now, the wooden handle for the axe? That was no problem. Og was very used to working with wood, and over time he had become very skilled. He would find broken tree limbs on the ground and rub them against boulders until they took on the desired shape. No one could match Og's wooden spears, digging tools or clubs. So, making a short wooden handle to which he could attach the stone head of his axe was a breeze. Og's axe handle turned out nice and smooth, felt comfortable in his hand, and was strong enough to perform under those brutal Ice Age conditions. Even his buddy Gra from two caves down would stop by, pick up Og's axe handle, and marvel at the fine craftsmanship.
You see, Gra couldn't make a wooden axe handle to save his life. His handles would always splinter upon impact, or they would gouge poor Gra's hands to the point where it hurt too much to drag them around on the ground. It was a shame too because, even though Gra couldn't make anything useful out of wood, he was a wiz when it came to working with stone. Gra had taken to working with stone the way a baby mastodon takes to water. Cranking out stone axe heads that were both strong and sharp was no problem for a caveman of Gra's talents.
So one fateful day, they both became so frustrated trying to cut firewood with their inferior axes (every respectable cave simply had to have fire), that they were ready to quit evolving altogether. It was on that day that they got together, grunted it over, and decided to make a trade. Og would make an extra wooden axe handle and give it to Gra in exchange for the extra stone axe head that Gra would make.
Soon they were both chopping away with the finest axes anyone had ever seen. Well, it didn't take long for some of the others to come by and, amazed at what they were seeing, offer mammoth meat, hides and other bounty in exchange for either Og's or Gra's axe.
The two stopped their chopping and looked at all of the fine merchandise being offered (the cave wall paint set was especially cool). They looked at their axes, scratched their sloping foreheads, and then looked at each other. And so it was that in that moment, Og & Gra, the world's first strategic partnership, was born.
Cheesy I know, but who's to say I'm wrong? The point is, business-to-business strategic partnering has been around for a very long time. It has been, and will continue to be, an effective way for businesses to compete and to grow.
Not just a fad, 'cause it's been goin' on so long
From the song, "Catch a Wave" by the Beach Boys
Surprisingly, Brian Wilson was referring to surfing here, and not strategic partnering. But like surfing, partnering has also been around quite awhile, and in both, the object is to stay afloat, not wipe out, and don't forget to watch out for sharks. Strategic partnering is not, as some have said, only a recent and temporary phenomenon, doomed to suffer the same fate as pet rocks, leg warmers, and three-piece suits (I refuse to give mine up; they shall return!) From Og & Gra to Ben & Jerry', strategic partnerships have always been a vehicle for real business growth.
But strategic partnering, in all its various forms, has seen a significant increase over the last few years. Businesses looking to expand their product lines, access new sales channels, complement their R&D efforts or reduce the overall risk of a new business venture, are turning to strategic partnering in greater and greater numbers as a cost-effective means of meeting their growth objectives. And you don't have to look very far to see why business partnerships are more popular now than ever.
The Climate is Right
Consumerism, a relatively recent addition to the American lexicon, is defined as a preoccupation with and an inclination toward the buying of consumer goods. The rapid spread of this condition in the U.S. in the 1990s and 2000s has led to higher and higher settings for the bar of global competition. From a macroeconomic perspective, consumerism has trumped nationalism as a driver of purchasing behavior. Seeing Made in America on a product is just not as crucial a selling point for U.S. consumers today like it used to be. In short, we don't just want more stuff - we want better stuff faster and less expensive, and we're not too particular about where it comes from.
U.S. businesses, refusing to give up precious market share without a fight, have shifted manufacturing jobs, along with many other functions, to other countries in an effort to compete with new market offerings from abroad.
I know. You're not here for an economics lesson. But when we connect the dots, we see businesses today focused on product quality and cost control as never before. Stories in the news about companies downsizing ... excuse me, "rightsizing" (how come no one ever right-sizes upward?) are so commonplace that they've stopped raising eyebrows. And instead of being taken as a sign that a business may be struggling, news of all this payroll slashing is usually followed by an upsurge in the company's share price and bonuses for all the executives (Hey, this is great! Let's do it again!)
But businesses are like plants - they both need to grow in order to survive (insert your own fertilizer joke here.) So with all this dieting to cut corporate fat going on, how are we going to grow our business and still control costs? From a resource standpoint, how can we leverage growth opportunities when we uncover them without taking on too much risk? We're all asked to "do more with less" these days, but how far can that really take us?
A Look in the Mirror
In response to these many challenges, business leaders today are looking at more creative ways to meet the needs of both customers and shareholders. CRM initiatives, streamlined logistics, asset refinancing, employee empowerment and quality control programs are just some examples.
Add to this list outsourcing, which began with back-office functions such as facilities management, real estate, HR and supply chain management. But now outsourcing is reaching into more core functions like engineering, customer service, and even manufacturing. Companies are looking at themselves in the mirror and asking questions such as, "If our core strength is our superior product design and engineering, why are we spending so much maintaining such a large customer service group? Could this function be performed better by someone else?"
A shift in traditional business thinking, to be sure. For the most part, senior managers no longer see an inherent advantage in directly controlling every aspect of their product's journey through production and into the hands of their customers. Rather, they're taking a hard look at all functions and asking themselves how they could be done better. And that's what's key here. Outsourcing is being driven not only from cost-cutting measures and the desire to squeeze every ounce of water out of that rock as possible. It also offers a way to significantly improve the overall product or service by utilizing another company's experience and expertise.
Advancements in technology are also fueling the outsourcing machine. Information and communications technologies have developed around sharing information and creating more efficient workflows, enabling a more mobile and more productive workforce. Technology that allowed people to start working from their homes in the 1990s is now more advanced and is enabling people from all over the world to work together on the same project simultaneously. So now your boss can tick you off from halfway around the world the same as if he or she were just down the hall. That's progress!
It's Still About the Benjamin's
But despite enhancing a business' overall capabilities, enabling technologies and streamlining processes, outsourcing still would not be so popular if it weren't for the significant cost-saving opportunities it can offer. Let's face it - it's difficult for a division VP in the U.S. to justify an in-house engineering staff at an average salary + benefits cost well in the six-figures when the same skill set could be provided from elsewhere for less than half the cost. Savings like these are awfully hard to ignore, especially when they can help free up capital necessary to invest in new product innovations.
I'm writing this at the end of 2009, and the outsourcing engine is running on all cylinders (with imported parts, of course.) The U.S. economy, after experiencing four consecutive quarters of negative growth in GDP, has slooooooowly started to grow again. The result? A net loss of 3.6 million jobs over the last 13 months. Many economists are calling the return to modest growth a jobless recovery, meaning that even though the economy is showing signs of life again, the job growth has not followed.
Much of this can be explained by increases in worker productivity. We're all learning to do more with less (except for us consultants, who never did anything to begin with.) Even as business levels start to pick up, managers are using technology and squeezing their existing staff for all they're worth before going to the well to ask for additional people. Makes total sense, but it still begs the question: How can we make the quantum leaps necessary to stay competitive into the future when we've got the pedal matted now just keeping the place running?
Weapon of Choice
When looking at strategic alternatives for growing their companies, many business leaders are turning to partnerships. Partnerships are more popular today than ever because they offer significant advantages over other growth alternatives such as acquisitions or developing new capabilities completely internally.
Here are just some of the advantages of strategic partnering:
* Reduced risk
* Compensate for weak areas within your company
* Speed to market for new products
* Expanded product line
* Cost savings versus developing the new capability internally
* Access to new technology
* Offer a more comprehensive solution and value proposition
* Access to new sales channels
* Streamlined R&D effort
* Allows you to focus on your core competencies
So by looking at the state of the business world today and the many advantages offered by strategic partnerships, it's easy to see why so many business leaders believe that partnerships and strategic alliances are the greatest things since stock options (Yes, even sliced bread is finding it hard to compete these days.)
Now the Bad News
Before you start signing up partners and writing those press releases, consider this: studies of strategic partnerships have shown that over the first 2-3 years of the partnership, 9 out of 10 fail to meet their objectives. When I first read that, I thought, That just can't be right. And yet, in studying profiles of past partnerships and talking to colleagues engaged in partnering, I became convinced that this failure rate was pretty accurate. It's sad but true - an overwhelming majority of partnerships do not live up to expectations.
Reasons for this are many – lack of commitment from management, the partnership was poorly structured, no clear communications protocols,nodefinedconflictresolutionprocessandlackofaccountability to name a few. In studying past partnerships I noticed that in many instances, management felt the new partnership was such a good fit, and the newly created value proposition would be so compelling to customers, that the partnership would just succeed on its own without too much "meddling" from them.
But what they viewed as meddling, I would characterize as commitment and involvement. We'll cover this in more detail a little later, but it bears mentioning up front: Without strong, on-going commitment from senior management, partnerships, no matter how well formed, are doomed to fail. You'll notice this as a recurring theme in this book.
Not to be overly dramatic about it, but the road to a successful partnership is strewn with many potholes – not to mention broken glass, confusing traffic signs and speed traps. And if you're not very careful, you'll end up broken down by the side of the road, or even worse, as road kill. Aren't you glad I didn't get too dramatic?
Do Not Walk Softly
Partnering with a Purpose takes commitment, understanding, a willingness to look in the mirror and perhaps most significantly, the ability to embrace new business development opportunities in a non-traditional fashion. Sound difficult? Well it is, and it will challenge the very core, history, culture and methodology of even the best-managed organizations. The results of an effective, well-structured strategic partnering model can translate into significant gains for both organizations, but it doesn't come without recognizing that both companies must be willing to embrace change and trust one another with no hidden agendas.
So take heart – partnering may not be as easy as you thought, but the rewards from doing it the right way will probably go beyond even your best expectations. Even by reading this book you're demonstrating an elevated level of commitment to partnering the right way – in other words, commitment to Partnering with a Purpose. This commitment needs to be the very first ingredient into our partnership bouillabaisse. The next step will be a hard look in the mirror through something I call: The Strategic Readiness Exam.
Chapter TwoAre You Really Ready For This?
So now we know that strategic partnerships, successful ones anyway, take a serious amount of effort and commitment. It stands to reason that organizations considering using partnerships as a means to grow would want to maximize their chances of success. And the first step towards success is taking a hard look within your own organization to determine your readiness level to enter into a strategic partnership.
Please Don't Make Me Look
Nobody likes to look at himself or herself in the mirror too closely because when you do, that's when all the flaws, imperfections and scars become all too visible. As I got older I found myself standing further and further away from my bathroom mirror. When I finally hit the back wall of my bathroom and could get no further away, fortunately that's when my eyesight started going. It's funny how the worse my eyes get, the better looking I become.
But look closely in the mirror we must, for Partnering with a Purpose requires, at least for most organizations, a severe paradigm shift. It demands that we look at many aspects of our business: products, employees, competitors, suppliers and yes, even customers, in an entirely new light. These changes need to occur before any type of partnership, or potential partner candidates, are even considered. And don't think that just because you've got the words "willingness to embrace change" somewhere in your mission statement that you're good to go. The type of change we're talking about starts at the top and permeates throughout the entire organization.
The Strategic Readiness Exam
If you're like me, the word "exam" or "test" brings on its own special kind of anxiety attack, complete with cold sweats and visions of the Four Horsemen of the Apocalypse pulling into your driveway. But before you start preparing your cheat sheet (I was amazed at how many chemical formulas I could fit on a 3x5 index card), consider this: The only way you can truly fail this exam is by not being totally honest. Any spin you try to put on your answers will only reduce your chances at ultimate partnering success. Be as honest with yourself as you can as you go through the exam. This will allow you to clearly identify what changes need to be made within your organization to optimize the chances of achieving a successful partnership.
So remove the rose-colored glasses, and let's take out a Number 2 pencil and get started.
QUESTION 1–Does your senior management team embrace a common understanding of the definition of strategic partnering and its expected results and, more importantly, are they willing to get involved in the process?
Excerpted from Partnering with a Purpose by Dave Koester Charles Hamlin Copyright © 2011 by Dave Koester. Excerpted by permission of AuthorHouse. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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