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Partnerships and Alliances

Partnerships and Alliances

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  • Good Afternoon Guests, Colleagues and Partners DK - Let me introduce Gary Rider. Gary is General Manager of Strategic Accounts at HP. Gary has joined HP 6 years ago from Digital. At HP Gary has lead the Solutions business and now leads the strategic account teams. In his role he has been pivotal in developing a collaborative relationship with HP’s key customers. GR - Thank you Dave, It’s a pleasure to be here. As you may be aware - Dave Keegan is General Manager of Corporate Business Solutions. Dave and his team are responsible for many of the complex solutions that BT develop with and for you and is like me is a keen fan of Arsenal. When Dave asked me to join him on the platform I thought “what !” sometimes one takes for granted what one is already doing that we lose sight of the value of the knowledge we have created by working and sharing together. BT and HP have had many years association in the traditional buyer/supplier relationship. BT and HP have both looked to see how we can evolve our relationship to the advantage of our clients, shareholders and the community at large. You may have read about BT’s proposed alliance with AT&T and HP’s alliance with Intel what you probably don’t hear about much is how we are working smarter together. We’d like to share with you about our experiences in developing a collaborative approach to doing business. Switch from GR to DK DK Today every business is increasingly seen that a large part of their value add comes from sharing information and knowledge within their business’s value chain. We recognize that no one company has a monopoly of good ideas and the wealth of ways that we can add value to each other. (Labour 3rd way!) I’m sure many of your organizations are embarking on similar journeys and will find value from the lessons we have learnt
  • DK introduces Agenda
  • I’m sure if I asked you to think of areas of co-operation and collabaration you could think of 100’s of examples ranging from the Who would have thought of The Middle East Peace Accord Mandela and De Klerk The Good Friday agreement in Northern Ireland Today we now recognize that every market and ecosystem is linked in this global village. Dominance is being replaced by co-operation Rio summit on pollution Proprietary standards such as SNA being replaced by the Internet The Euro replacing 16 different currencies ….. ACTIONS Joanna Could you please get permission for and copies of photos of mandela and The Good Friday Peace Accord and the signing of Euro I’ve picked this theme as Nobel prize announcements are made in Oct
  • In science such as biology the Darwinin model “survival of the fittest” model is being supplemented by a view that takes account of symbiosis and co-operation so to the traditional laissez faireapproach “survival of the fittest and ruthless competition” must now look at a different paradigm Symbiosis and co-optition (that is competition and co-operation) are the new order of the day.
  • Now I’d like to tell you an interesting story British biochemist James Lovelock and Dr Lynn Margulis as creators of a controversial biochemical theory called the Gaia Hypothesis which James Lovelock, formulated while working with NASA's space program, to look for new ways to detect life on Mars. American microbiologist Lynn Margulis has been Lovelock's principal collaborator for twenty-five years. She is an expert on the role that microorganisms play in evolution. Margulis contends that symbiosis, not chance mutation, is the driving force behind evolution and that the cooperation between organisms and the environment are the chief agents of natural selection -- not competition among individuals. She says that "Darwin's grand vision was not wrong, only incomplete and that “evolution is the result of co-operative not competitive forces” http://www.arcade.uiowa.edu/proj/Earth2/lynx/06gaia.html
  • Switch to Dave Keegan Co-operation is good for customers too. Earlier this year in March, Marks and Spencers’ invited their key suppliers/ partners and explained their roadmap and provided contact details of each other to us. After having explained their vision they then asked us to go away and see what we as their partners could come up collaboratively to support them. To do this we all need to share information and create solutions together If we are really customer focused we need to consider what the full range of services a customer needs to meet their needs. If we provide you with a phone you also need a directory with contact details of other people and the “yellow pages” to find suppliers and …. “ The Whole Offer” “ If I want my customer to take maximum advantage of the potential of my products and services, what other capabilities besides those I am directly supplying will be needed by my customer ?” We have a new strategies challenge and that is to identify who we partner with (Best of Breeds) The Business Challenge “ It is the identification of capabilities and relationships and choices on how and when to establish them are central to strategy making in the new economy”
  • And to understand partners value we need to see them in the eyes of our customers - The language of seeing participants in the market place as players rather than competitors helps. This way we can seek A player who is a complementor when our customers’ value our product more when they have the other player’s product than when they have our product alone Just understanding if a partnership makes sense is not enough to make it happen. You need to trust each other and be open and frank about your strengths and weaknesses Only then will you value them as partners Companies that do not have the infrastructure to provide this information either to their own employees or their their partners will have difficulty in engage, developing and sustaining the partnership.
  • And there are very good reasons by Alliances are growing. You just have to look at the share price of companies on the day that an announcment is made and subsequently to understand how these deals generate significant shareholder value
  • Switch to Gary Rider And how they they are providing an increasing share of revenue for these companies. While Alliance providing an increasing share of companies revenues (the top 1000 US public companies now have 18% of their revenues) HP itself thru its partnership with Canon virtually created the laser printer market (and are responsible for a large share of our revenues)
  • These activities only happen when companies Build mutual respect for the capabilities of each company Establishing personal relationships Develop solutions that do a superb job of meeting customer needs Marry competitive advantages of each partner in a synergistic way which all depend on superb and rich communication with and between the organisations and on hgh quality up to date information and knowledge. To manage these creative processes you need to consider the knowledge management infrastructure you provide to your companies and how they will work together
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  • And why is KM important? Partnership as a way of working is an information intensive activity - Companies have to share knowledge and share processes to make it happen. It is cross functional - links legal, commercial, R&D, product development, Sales and service and it is requires an intensive amount of effort in co-ordination and in developing trust. Trust can only happen when people have an opportunity to validate and substantiate information Partnerships are Knowledge intensive the information is complex and coded (to the organisation) and people needs to be made explicit - eg the HP way the the fact that HP uses Voice mail a lot as a culture. need “high bandwidth” rich communications You need to share material and see body language which is not by telephone The organisations team are often spread out - BT’s people are based across the UK and HP are European based so we need a way to work Work across space and time and access material from “the shared filing cupboard” As the partnership broadens and more people work on common projects - people need to be brought up to speed quickly - use an extanet “reference library and closed user groups is a quick way” to add new members to the project or the community
  • We started on this path about nine months ago with a joint workshop to really understand that there was a cultural fit between our organisations. And there was. We quickly realised the importance of a quick start to access and assimilate understand the wealth of information about each others capability and position in the market place. Needed information to decide-competencies Needed to share and validate across and between organisations Needed to know where can we make the difference Lots of communication - all the while extending the reach - interworking, building propositions, sharing and selling, having to bring a growing community up to speed quickly . All of this within and between different environments. HP uses Lotus Smartsuite BT uses Microsoft Office Corporate Clients uses Mac HP uses PC HP culture is voicemail intensive How did we manage? The way forward is an extranet ! Without the technology making a partnership happen would be so resource intensive we might not have done it.
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  • 1. Partnerships and Alliances Why, What, Who, When, How The Future is here
  • 2. Agenda
    • Partnerships -
      • A natural evolution
    • Who and Why Partner
    • Types of Partnership
    • How do I Partner
  • 3. Even enemies need to co-exist
  • 4. Business is not just about competition but equally important collaboration
    • "Darwin's grand vision was not wrong, only incomplete”
  • 5. “ symbiosis, not chance mutation, is the driving force behind evolution and that the cooperation between organisms and the environment are the chief agents of natural selection -- not competition among individuals” “ evolution is the result of co-operative not competitive forces” Lovelock, Gaii Hypothesis
  • 6. So what does this mean for our customers?
    • The Age of Business Ecosystems
      • “ The Whole Offer”
        • “ If I want my customer to take maximum advantage of the potential of my products and services, what other capabilities besides those I am directly supplying will be needed by my customer ?”
      • The Business Challenge
        • “ It is the identification of capabilities and relationships and choices on how and when to establish them are central to strategy making in the new economy”
    The Death of Competition . Leadership & Strategy in the Age of Business Ecosystems by James F. Moore
  • 7. So who do I partner with ?
    • Co-optetion model
      • A player is a complementor if our customers’ value our product more when they have the other player’s product than when they have our product alone
    Customers Complementors Suppliers Competitors Company
  • 8. Successful Alliance Companies Depend More on Alliances for Growth ALLIANCES CONTRIBUTION TO REVENUE 0 5 10 15 20 25 30 35 40% % of Sales Now High Success Alliance Companies Low Success Alliance Companies Anticipated % of Sales in Five Years 21% 14% 35% 24% Source: BA&H 1997 Survey on Institutionalizing Alliance Capabilities Source: BOOZ·ALLEN & HAMILTON INC
  • 9. Alliances Growing as a Source of Revenue 0 4 8 12 16% 1980 1985 1990 1995 Source: Columbia University, European Trade Commission, Studies by BA&H 1983-1987, 1988-1992, 1994/95 ALLIANCES AS PERCENT OF REVENUE Source: BOOZ·ALLEN & HAMILTON INC Top 1000 U.S. Public Corporations
  • 10. Alliances Result in Higher ROE ALLIANCE INTENSITY EFFECT ON ROE 0 2 4 6 8 10 12 14 16 18% 25 Companies Most Active in Alliances 17.2% 12.2% 10.1% TOTAL COMPANY RETURN ON EQUITY 25 Companies Least Active in Alliances Fortune 500 Average Top 25 Bottom 25 Sources: Alliance Analyst; BA&H Analysis Source: BOOZ·ALLEN & HAMILTON INC
  • 11. Alliance ROI Outperforms U.S. Alliances Sources: 1988 to 1992/3 survey of 2500 alliances; 1994-1996 and 1997 alliance studies of non-US alliances 0 6 12 18% U.S. Industry European/Asian Alliances Electronics & Computers Source: BOOZ·ALLEN & HAMILTON INC
  • 12. So is this good for shareholders ? Share Price December, 1996 AMEX/National West Announcement Share Price Movement 1990- 1996 Harvard/Yale Study of 1000 Alliances Showed Statistical Evidence of Positive Share Price Movement SAMPLE - VALUE CREATION ON DAY OF ANNOUNCEMENT
    • Mobil/BP $5.7
    • Merck/RPR $5.3
    • HP/Microsoft/
    • Oracle/Netscape $3.8
    • GE/Pratt & Whitney $1.9
    • Millennium/AHP $1.0
    Alliance $Billions Sources: WSJ & Booz Allen & Hamilton $ 4 8 $ 5 0 $ 5 2 $ 5 4 $ 5 6 $ 5 8 $ 6 0 Alliance Announcement Source: BOOZ·ALLEN & HAMILTON INC
  • 13. Alliances : A growing source of revenue HP/Cannon partnership
  • 14. Key elements
    • Build mutual respect for the capabilities of each company
    • Establish personal relationships
    • Develop solutions to meet customer needs
    • Marry the competitive advantages of each partner
  • 15.
    • Porsche &China
    • First Automobile
    • Kaiser permanente &
    • Becto Dickinson
    • RPR creates Gencell
    • CBS, HBO & Columbia
    • Delta & Varig
    • Rockwell & 3M
    • Walmart & Citra
    • Motorola, apple & IBM
    • Kodak, Minolta, Pentex
    • Canon & Fuji
    • Fuji Xerox
    • MS & NBC
    • J & J and Merck
    • Hypothesis testing
    • Share customer and
    • product knowledge
    • No linkage to core
    • capabilities
    • Managed at functional
    • level - little funding
    • No linkage to partner’s
    • strategy
    • Enhancing/Leveraging
    • Process oriented with
    • heavy data flow
    • Involves redesign &
    • integration
    • Managed at operations
    • level - some funding
    • Greater dependence
    • between partners
    • Pilot or R & D
    • Core sharing to extend
    • capabilities
    • New controls &
    • measurement tools
    • Semiautonomous entity
    • (major funding)
    • Have semiautonomous
    • decision making process
    • Leapfrog Competition
    • Change dynamics &
    • value perceptions
    • Strategy is separate
    • from parents
    • Needs to be free
    • standing entity
    • Complex management
    • & governance process
  • 16. VERTICAL RELATIONSHIP STRUCTURES As Relationships Evolve, They Involve More Commitment, Co operation, And Control Commitment / Cooperation Ownership / Control Stronger Weaker FUTURE POSITIONS Co-own Assets With Full Ownership Risk Permanent Long-term Transactional Influence Assets Without Full Ownership ENHANCED RELATIONSHIPS CURRENT POSITION NON EQUITY POSITION Strategic Alliances No Linkage Shared Information Shared Resources Shared Funding Cross Equity Shared Equity
  • 17. Roadmap to Alliance Success ALLIANCE FORMULATION METHODOLOGY Evaluate Identify Implement Negotiate Strategy & Objectives Screening For Partners Stakeholder Assessment Opportunity Definition Tradeables & Leverage Assessment Bargaining Power Assessment Integration Planning Implementation
  • 18. Strategic Alliances More Complex to Negotiate THRUST OF ANALYSIS AND NEGOTIATION PRIOR TO DEAL Business/Deal Fit - Agreed purpose & objective - Goal congruency - Due diligence - Transaction price - Contract writing Implementation issues - Relative level of contributions - Ownership & Control - Managerial structure & team - Financial objectives - Contingency plans - Conflicts of interest - Cultural Differences - Breaches & Dreadlocks - Divorce clauses 0 25 50 75 100% Business/ Deal Fit Implementation Issues Acquisitions Strategic Alliances
  • 19. Relevance of Checklists Elements to Different Alliance Types No Linkage High Moderate Low Strategic Sourcing SPECIFIC CHECKLIST ELEMENTS Shared Resource Shared Funding Shared Equity Wholly Owned Acquisition
    • Rights and obligations
    • Opportunity definition
    • Value creation assessment
    • Risk assessment
    • Valuation of partner assessment
    • Ownership structure
    • Business plan development
    • Review procedures
    • Divorce clauses
    Shared Info Alliance Continuum
    • Legal & regulatory issues
    • Governance structure
  • 20. Important To Partner A Important To Partner B Drivers and Rationale-- Understanding from Both Partners’ Perspectives ALLIANCE DRIVER ASSESSMENT Regulatory Freedom Management Skills Marketing Skills Geographic Access Market Segment Access Operational Skills Supply (e.g. content) Access Scale Economies Product/Service/Extension Technology Access Innovation Skills Funding Availability Risk Sharing
  • 21. Evolution of Alliance Capabilities Oral Tradition
    • Resources pooled
    • for one-time shot
    • No knowledge
    • Capture
    • No best practices
    • In-house “guru”
    • Little knowledge
    • sharing takes place
    • Limited resources
    • Best practices
    • individually based
    • Formalisation of
    • procedures
    • Dedicated staff
    • Establishment of
    • knowledge repository
    • or future use
    • Activity becomes part
    • of corporate culture
    • Implementation less of
    • an issue as operational
    • units become more
    • experienced
    • High degree of informal
    • sharing
    Worst-Practice U.S. Firms Best-Practice U.S. Firms Typical European/Asian Firms Ad Hoc Gunslinger Institutional
  • 22. How do I partner ?
    • High Trust
    • Knowledge intensive
    • need “high bandwidth” rich communications
    • Working across space and time
    • growing the community
  • 23.  
  • 24. Supplier Investor
    • Load platform
    • ie sweat assets
    • Maintain Quality
    • Predictable demand
    • Low unit cost
    • Low cost producer
    • Sell via many channels
    • Find as many customers
    • Segment to allow best yield
    • Keep customer happy
    • Maximise profit
    • Differentiated solutions
    • Unique offering
    Constructor Developer Seller OTHER PLAYERS Cost focus Product Functionality Customer Intimacy THE NEW VALUE CHAIN Goals/Motives End user
    • Maximise Benefit
    • Maximise Value
    • High Functionality
    • Ease of use/learn
    • Financial structured
      • P&L/BS presentation
      • Cashflow
      • Accountability
      • Control/Predictable
    • Low Risk
    • Flexibility
    • Low Cost
    • Easy to buy - eg location, timing etc/manage
    • Image/Prestige
    • Increase competitive-ness
    End customer/user Eg finance/forex Example for real estate Constructor Developer Agent