Quick-connect capability in alliances


Published on

The principle of Quick-Connect Capabilities applied to alliances: many practical ways to start and stop collaborations in a short time.

Published in: Business, Technology
  • Be the first to comment

Quick-connect capability in alliances

  1. 1. Alliance experts  Quick-Connect Capability in AlliancesAlfred GriffioenIntroductionIn the last decades, the intensity of competition hasincreased rapidly. The greater availability ofinformation is making it easier for customers tocompare products and prices, for competitors tocopy new technology and for shareholders to findmore lucrative investment projects. Entrepreneursand companies will need even more competencies tosurvive and it is hard to develop these all on yourown. That is why collaboration is the key word today.However, collaborations imply negotiating about prices, specifications andresponsibilities, and safeguarding prompt delivery. Companies will strive to havelow transaction costs by for example drafting framework contracts and automatingtheir interfaces with their business partners. But these actions usually result in highswitching costs: it becomes harder to end a relationship and start a new one.In order to achieve both low transaction costs and low switching costs, companieswill have to develop a capability in establishing, managing and ending businessrelationships. This quick-connect capability can be based on learning from previousrelationships, best practices and process standardisation. Its all about the question:how can companies perform better in strategic alliances and networks?How Network Ready is your organisation?The ability to perform as an organisation in networks and strategic alliances is yourNetwork Readiness. In my view, Network Readiness has three aspects1 (Figure 1): • The strategic intent of the organisation: are management and shareholders convinced of the importance of collaboration? Are they willing to sacrifice short-term goals for the benefit of the relationship and long-term goals? If the top of the organisation is convinced that no other company can deliver the right quality and that full control of partners is imperative, then the chances of establishing an effective eco-system around your organisation are close to zero. • The capacity in terms of number of individuals trained and skilled in working with collaborations. The Association of Strategic Figure 1, Three aspects of Network Readiness Alliance Professionals does excellent work here in defining skill sets and certification. • The availability of processes and tools that help to structure the process of initiating, starting, scaling and ending an alliance and the extent to which these are implemented. This last aspect will be elaborated in this article.Alfred Griffioen - Quick-Connect Capability in Alliances 1
  2. 2. Alliance experts  History of the Quick-Connect CapabilityRon Sanchez first introduced the concept of a quick-connect capability in 1995 as‘quick connect’ electronic interfaces, to describe a situation where three or morebusinesses engaged in joint product development. Van Liere and others elaboratedthe concept further in 2004 in an article in the Journal of Information Technology.In their 2008 book "The Network Experience, New Value from Smart BusinessNetworks", Otto Koppius and Arnoud van de Laak published their research on howthe adaption of communication standards and business process standards affectsthe ease with which graphical industry companies interact with each other. Theyalso introduced four components of the Quick-Connect Capability, which wereslightly renamed by Otto Koppius and myself in 2011. Quick Linking Negotiation phase a tie with another organisation has to be established quickly Quick Start Transition phase internal processes have to be adapted to the other organisation quickly in order to facilitate execution Quick Scaling Execution phase the tie should be able to quickly handle an exchange Quick Unlinking Dissolution phase the tie should also be dissolved quickly if need beThese four components describe the generic life cycle of any business relationship.(see Figure 2).Quick-Connect Capability in alliancesUntil now, the term Quick-Connect Dissolution Negotiation phase phaseCapability has mainly been used in relationto the exchange of information, specifically Quick Quickthrough electronic systems. However, the Unlinking Linkingconcept can be applied in a much broadersense. Linking also implies partner orsupplier selection, target setting and Quick Quickcontracting. Start can also be joint product Scaling Startdevelopment or making a joint offeringtowards a third party. The execution phase Execution Transitionis more than just data exchange, and quick phase phaseunlinking for example requires anarrangement to ensure service continuity orthe proper splitting of intellectual property Figure 2, Four components of Quick Connect Capabilityrights.In this article, the components of the Quick-Connect Capability are elaborated forthe formation, management and dissolution of alliances. I do not aim to provide acomplete and extensive list of all steps and aspects; for this purpose please consultthe new BS11000 standard and or the ASAP Best Practices Guidebook. My intentionis to show a number of easy-to-implement working methods that any company canuse in their strategic collaborations.Alfred Griffioen - Quick-Connect Capability in Alliances 2
  3. 3. Alliance experts  Quick LinkingOften, a lot of time in the linking process is spent on selecting the right partner.Two aspects cause this delay. The first one is the lack of environmental awareness.Who are the potential partners in the market, what are their strengths and howstrong is their willingness to partner? Standard market research only answers thisquestion partly. Your only choices are to spend more time on this aspect yourself, toappoint a business development or alliance manager, or to hire a consultant.The second aspect is inexperience in using structured selection methods. Partnerselection is often conducted on a gut feeling and through existing contacts. Anapproach with a longlist, shortlist and a number of checks and balances canobjectify the choice for a preferred partner. Having a thorough selection processavoids having to reverse decisions later on.Once a preferred partner has been selected, negotiations should lead to a businessmodel that benefits both parties. In my book Creating Profit Through Alliances Ishow that the range of potential alliance forms is limited, certainly when taking intoaccount a company’s strategy. Each individual alliance type has only limitedvariables, and more complex alliances can be built up by combining several types.This way, the business model structure can be designed easily and negotiations canbe narrowed down swiftly to numbers and percentages.One other advantage of working with standard alliance types is that contracts canbe drafted more easily. With our team we recently worked out a joint offeringagreement for an installation company. This company frequently uses partners withcomplementary competencies to bid on large projects, and is sometimes the maincontractor and sometimes the subcontractor. We therefore drafted a reciprocal - andthus easily acceptable - framework agreement that the company concludes with allits partners. This agreement arranges processes, responsibilities and liabilities insuch a way that, for specific projects, only a non-legal template and the scope ofwork of each partner needs to be filled out.Working with such standard agreements that have already been pre-checked by eachparty’s lawyers speeds up the Connect process enormously. We therefore intend towork out contract modules for all alliance types, so that drafting a contract can bereduced to picking the right modules, filling out the details and making one finalcheck on consistency and applicable law.Quick StartThe transitioning phase begins at the point where it really comes down to starting aproject or new activity together. It can involve setting up a distribution channel,making a bid, the formation of a research team or aligning work processes toachieve cost advantages.Where in the linking phase only management and lawyers were involved, nowoperational people have to be introduced to the alliance. Although relatively brieftime-wise, the transitioning phase is crucial to creating the right framework andatmosphere for the collaboration.Alfred Griffioen - Quick-Connect Capability in Alliances 3
  4. 4. Alliance experts  The first step is to decide who will be involved in the collaboration, and at whichlevel. The number of people, the skills required and their tools will depend upon theactual job. In any case a meeting structure has to be created, with operational,tactical and perhaps even strategic meetings.Training of (middle) management is a second important point. If you have noexperience in the formation and management of alliances, how would you knowwhere to start? Training doesn’t necessarily need to be extensive, but concepts suchas the difference between an alliance and a transactional relationship, thepartnership life cycle and handling intellectual property and confidentiality need tobe explained beforehand.A useful tool is Organisational mapping. In one organisation the title of Marketingmanager may entail a completely different status and range of responsibilities thanin another company, if indeed it exists at all. Organisational mapping means thatfirst the responsibilities are described, and then the appropriate people on bothsides are assigned.A good way to start any collaboration is to organise a kick-off event. Over thecourse of a whole or half day, affected employees from both sides are broughttogether to get acquainted and to learn about the collaboration. Through questionsand other workshop methods any organisational and cultural differences will bemade apparent, so as to foster mutual understanding and avoid misunderstandingslater on. Work processes can be presented and discussed. A kick-off event is mainlyan investment of time that will certainly pay off.One of the activities that can be done during the kick-off, or shortly afterwards witha smaller group, is a joint risk analysis. Risk on the commercial side, operationalside, supplier side or human resources side can be classified in terms of probabilityand possible impact. As risk is the product of probability and impact, the biggestrisks can be elaborated and mitigation plans can be drafted. Apart from its inherentvalue, doing the risk analysis with representatives from both sides will most likelylead to new insights and a stronger group spirit.In all cases it is recommended to adhere to commonly known project managementand business process standards like Prince2, ISO standards or industry standards.This will not only facilitate quick transitioning, but it also means lower training costsand makes it easier to hire temporary personnel.If we recall the framework contact for the installation company: in such a jointoffering, the Prince2 process of Directing a project could be an addendum to theframework agreement. It would be useful if both partners would include theStarting phase and Initiation phase in their respective scope of work, and that theywould work out the detailed Project Planning together once the project is awarded.Quick ScalingAfter the start the next challenge is to scale the collaboration, overcoming thecomplexities that might arise. What matters is that the (project) organisations thatare working together are facilitated as much as possible to quickly handle anychallenge.Alfred Griffioen - Quick-Connect Capability in Alliances 4
  5. 5. Alliance experts  The first supportive condition is that people are able to meet and see each other.Telephone and email are perfect means to communicate at a content level, but ifworking procedures and relationships between people are not crystal clear, thesecan easily lead to escalations. Collaborations between two companies with theirhead offices at less than one hours drive from each other are more likely to succeedthan others. A joint location, or at least video-conferencing, helps resolve problemsquickly.Koppius and Van der Laak studied the use of communication standards andbusiness process standards. Digitisation of information and the use of the samestandard for all collaborations were shown to have a positive effect on quick-connect capability, both for the customer and the supplier. Adhering to businessprocess standards showed a more ambiguous outcome: on the customer side thishad a positive effect, on the supplier side a somewhat negative effect. Thisdifference can be explained through the wide choice in business process standardsand the power of customers to decide for a standard that might not suit thesupplier.In my experience, the electronic exchange of data is nowadays a common good, andthe next step are joint data storages like Google docs or Sharepoint. Instantmessaging functions like MSN and Jammer, accessible for all parties involved, arealso a good way of sharing more informal and operational information. Videoconferencing is advisable when locations are more remote. The ability to implementthese kinds of tools within a few days, and in such a way that these are also fullyaccessible for the partner, is very useful for a company pursuing Quick-ComplexityHandling.Business process standards were already mentioned with respect to Quick Start.Also for Quick Scaling, such standards can be useful and can lead to bettercollaboration, as both sides share the same framework for their processes. Thatdoesn’t necessarily put an end to all differences and misunderstandings, but thechances of chaos erupting will reduce strongly.One of the reasons that collaborations do not scale up is that people have differentpersonal interests. Some simple HR approaches can prove effective here. First, onecan (temporarily) change the reporting lines to the management of thecollaboration, for example to the project manager or the joint venture manager.Second, one can create a reward structure that depends primarily on the outcomesof the collaboration rather than on the outcomes for the individual companies.The final means of enhancing Quick Scaling in the execution phase is to holdperiodic evaluations on the success of the collaboration. It is important to not onlymeasure lagging indicators such as the number of patents or the profits, but alsoleading indicators like the mutual trust, the attendance rate at meetings, and thebelief that the partnership will bring the own organisation enough benefits.Negative or deteriorating outcomes can be discussed jointly to avoid biggerproblems later on.Alfred Griffioen - Quick-Connect Capability in Alliances 5
  6. 6. Alliance experts  Quick UnlinkingEnding a collaboration may sound easy, but in many cases there are a lot of pendingobligations and assets that must be split. In case of a separate legal entity, thismust be dissolved or sold to one of the partners. Service delivery, archiving andintellectual property rights are aspects that should be considered.First, whether one has a contractual relationship or has formed a new legal entitysuch as a joint venture makes a lot of difference when it comes to unwinding. Incase of a contract, partners are more or less forced to arrange for the potentialdissolution of the partnership beforehand. With a joint venture it is easier to rely onthe decision-making structure of that entity, and to leave the dissolution scenariounmentioned. However, also in this case it would be wise to already agree uponsome guidelines in the negotiation phase.One of these aspects that can easily be arranged when drafting the contract is theperpetuation of service obligations, for example in collaborations for a jointoffering. Service aspects are often limited, can be described properly, and theexecution can be performed by each party independently. These can therefore bearranged as transactional relationships, with a main contractor and subcontractorstructure.Already while setting up a joint information sharing structure, one should thinkabout the dissolution of the partnership. Each party should retain access to alldocumentation, and should be able to integrate this with their own archive tocomply with legal standards. Having a suitable and repeatable solution for thisproblem is truly a Quick Unlinking capability.Finally, the intellectual property rights of the alliance should be assigned to therespective parties. It is most important that both parties remain entitled to usethose rights that are essential to the delivery of their products and services,including rights that can be characterised as background knowledge. On the basisof principles defined by Slowinsky and Sagal, we have developed two concisearrangements, one for joint ventures and one for contractual partnerships, whichfacilitate this aspect of quick unlinking. These are available on our website.Checklists that are used by M&A consultants for the sale a company or business unitcan also help cover the more practical aspects.ConclusionThe Quick-Connect Capability as described above is very much connected to alliancelifecycle management in general. It stands out for its practical approach, focus onspeed and the aim of creating new standards. Businesses and governments willincreasingly benefit from successful collaboration with new partners. Thoseorganisations that have the capability to quickly connect en disconnect will certainlyhave a competitive advantage.For more articles of Alfred Griffioen search on Slideshare or go to www.allianceexperts.com                                                                                                                1 Adapted from Janice Twombly and Jeffrey Shuman, Designing the Enterprise Capability for ManagingCollaborative Relationships, The Rhythm of Business, Inc., 2011Alfred Griffioen - Quick-Connect Capability in Alliances 6