Collaborations in business are long-term commitments between organisations – just like a marriage. However, just like marriage, there is a growing rate of failure in these types of arrangements. Often these fail because not enough time has been taken in the courting stage to ensure the most positive conditions for the marriage. So here, Sukhvinder Dhat asks what a successful collaboration looks like, and most importantly what are the questions that need to be asked before entering into the marriage?

Global competition has forced corporations to seek new markets, both at home and abroad, and to speed up the cycle of product development. Costs of entry into these new markets can be formidable, and the days of large corporations working by themselves seem to be numbered. Few firms can afford to be sophisticated in all areas of technology or to develop distribution channels and new markets in numerous countries. Rapid technological change and newly emerging patterns and locations of international specialisation place continual pressure on the cost base of the modern corporation. Thus, many firms realise that they need to find partners to meet these challenges. Collaboration has become the order of the day. However, this raises infinite choices for modern management: how and with whom to collaborate; which areas to keep as core competencies, and which to develop with others?

Once we have decided to collaborate, and with whom, what does this look like? How do we approach our potential partners? After all, this will hopefully be a marriage of some duration: whilst press coverage of new joint working deals is extensive, there is far less coverage of the many failures. How can we avoid the early divorce?

First, let’s have a look at the different types of collaboration that can take place. We are often rather casual in the way in which we talk about collaborative ventures : terms such as ‘outsourcing partnerships’, ‘joint ventures’, ‘strategic alliances’, or just plain ‘partnership’ are often used interchangeably. However, there are some very real legal differences between these terms, and it is important to have clarity about these so we know what we are entering into. What links all three is the notion of a long-term relationship (more than one year) and the concept of relationship management.

Joint venture and strategic alliances

A long-term business relationship between two or more organisations, formed through formal contracts or informal agreements, in order to achieve mutual benefits. The relationships are often cemented by an exchange of Directors, purchase of shares, and sharing of resources.

Successful joint ventures and strategic alliances, are characterised by mutual dependence, through the sharing of complementary capabilities such as access to markets, technology and leading edge production techniques.

Partnerships

A long-term business relationship between independent organisations, formed through formal contracts or informal agreements, in order to achieve mutual benefits

In the public sector there are numerous partnerships in the field of economic
regeneration. These bring together private and public sector organisations to pursue a common strategy for business development, inward investment and job creation.

Outsourcing

A long-term business relationship between two or more organisations, in which the supplier contracts to manage or provide services, processes or products on behalf of the purchaser (customer)

Outsourcing differs from strategic alliances and partnerships, in that the relationship is between suppliers and purchasers. However, the stakes can be high for both the purchaser and supplier when the contract is over a prolonged period of time, and the requirements are changing rapidly.

What does successful collaboration look like?

There are no easy answers to the question of how to establish and maintain a collaboration. Each will differ, in terms of the form that it takes, the nature, intensity, and duration of the tasks, and the number of participant organisations involved. One of the key elements of success in collaboration is culturally compatibility between collaborating organisations, and robust processes to manage the relationships. However, before even courting a potential partner, it is perhaps important to recollect the following:

• Time is necessary for courting
• Extended courtship is often required if a joint venture or alliance is to be successful; Corning Incorporated of the USA formed its joint venture with CIBA-Geigy after 2 years courtship. Being too hurried can destroy a venture, as AT&T and Olivetti of Italy discovered when they failed because of an incompatibility in management styles and corporate culture as well as in objectives.
• Understand that collaboration is a distinct form of competition
• Competitors as partners must remember that joint ventures are sometimes designed as ways of ‘de-skilling’ the opposition. Partners must learn from each others’ strengths while preserving their own source of competitive advantage. Many firms enter into joint ventures in the mistaken belief that the other partner is the student rather than the teacher.
• Learn from partners while limiting unintended information flows
• Companies must carefully design joint ventures so that they do not become ‘windows’ through which one partner can learn about the others’ competencies
• Give managers sufficient autonomy

Decentralisation of decision-making should give managers sufficient autonomy to run the joint venture successfully. Two of the most successful global value-adding joint ventures are those between Fuji-Xerox and Nippon-Otis which are also among those giving management the greatest autonomy (adapted from Wall and Rees 2001 ) So let’s say we’ve been attracted by a certain organisation, across a crowded room. What then are the key questions that we need to ask, before we even think about the long-term commitment? It’s useful to break these into three areas: business criteria; relationship matters; and operational matters.

Business criteria

The amount of due diligence work that is undertaken is to an extent dictated by the depth of the relationship being formed. Failure to screen at this stage could prove to be costly later:

• Are they able to meet your current and future needs?
• Will they be in business in three years?
• Do you have safeguards (contractual and otherwise) in place to protect intellectual and commercial rights?
• Do you have clearly agreed get-out clauses? (Regardless of the degree of risk assessment undertaken, some collaborations will inevitably end sooner than originally envisaged.)

For potential outsourcing projects each side has to be comfortable with the other:

Will the supplier be able to maintain and protect your brand image if you are planning to outsource customer facing services?

And from the supplier’s point of view:

• Has the purchaser dealt with other suppliers fairly and professionally?
• Does it have well established contract/relationship management skills?
• Is it in good financial health?

Relationship matters: establishing trust

• Up-front agreement and understanding of the purpose of the relationship
• Have all the prospective collaborating organisations clearly understood and mutually agreed objectives?
• Does the contract include a sharing of both the risks and rewards?
• For alliances and partnerships, has each organisation got something unique to offer?
• If not what is its role?
• Will each organisation making a fair contribution towards resourcing and sustaining the collaboration?
• In an outsourcing partnership, have the requirements been agreed and clearly understood by all parties?
• What will be the procedure by which the specification be varied?
• What level of resources will the suppliers be expected to provides?

High level of senior management commitment and involvement in the establishment and maintenance of the relationship

• Have senior managers demonstrated their commitment by allocating time to getting to know each other?
• Have senior managers agreed a review and performance management process?
• Will senior managers be accessible to operation managers and others responsible for the day-to-day management and delivery of agreed objectives?

High level of trust amongst partners

The establishment and maintenance of trust is essential, particularly in collaborations where the stakes are high or the outcomes uncertain. This applies in all forms of collaboration.

• Has trust been established at the outset?
• How will it be maintained during the collaboration?
• Will operational people be given the time to get to know their counterparts and also be able to make some mistakes without fear of punishment?

Operational matters

Effective management

• Are there effective processes for joint planning and co-ordination of tasks, as well as suitable arrangements for monitoring and review of progress and performance management?
• In the outsourcing relationship, who is charged with the authority to vary the contracts?
• In joint ventures and strategic alliances is there a performance management process that meets the needs of the collaboration?

Mechanisms for both resolving conflicts and disputes, contract re negotiation, and exit procedures

• Are there clearly defined dispute resolution processes?
• Are there processes in place for contract re-negotiation and exit procedures should circumstances change?

Selection of operational managers

• Can operational managers work across organisational boundaries?
• Can they ‘get things done’ using their powers of influence, negotiating and networking skills, and ability to handle ambiguous situations? (Managers who have climbed the career in a tightly managed and hierarchical organisation may not be suited to a co-ordinating role within a collaboration.)

Excellent communications

Is there an integrated internal and external communication process across the collaborating organisations?

Whilst there is no simple prescription to establishing and sustaining a successful collaboration, there are a number of features which mark out those that succeed from those that fail. However, up-front agreement and understanding of the purpose of the relationship, with a sharing of both the risks and rewards, equitable allocation of resources to sustain it and trust amongst collaborators are key ingredients in successful collaboration.

For further information, please contact Sukhvinder Dhat:
T 44(0) 1223 31594
E sukhvinder.dhat@erconsultants.co.uk