The case for partnering

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In the globalised world, partnering is becoming more important - but partnering requires an investment in managing change effectively.

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The case for partnering

  1. 1. Partnering RelationshipsThe Case for Investing in the Relationship<br />10 January 2011<br />
  2. 2. Table of Contents<br />Value of Effective Partnering Relationships<br />Framework for Effective Partnering<br />The Partnering Journey<br />References<br />13 January 2011<br />2<br />A case study is available and published as a separate document<br />
  3. 3. The IBM Global CEO Study has been tracking the growing importance of partnering<br />3<br />13 January 2011<br />2006 – Strategic Partnerships as a significant source of business model innovation<br />2010 – Partners help drive speed and dexterity, moving costs from fixed to variable<br /><ul><li>Be “glocal”: Leverage the world through partners, constantly tune your operating model – global where possible, local where necessary.
  4. 4. Simplify whenever possible: Simplify interactions with customers, simplify products and services by masking complexity, simplify for the organization and partners.
  5. 5. Manage systemic complexity: Put complexity to work for your stakeholders, take advantage of the benefits of analytics.
  6. 6. Promote a mindset of speed and flexibility: Act quickly, push execution speed, course-correct as needed.</li></ul>Innovation Priorities<br />(operating margin growth CAGR)<br />Outperformers<br />Underperformers<br />Products<br />Services<br />markets<br />% of respondents by innovation priority<br />Operations<br />Business Model<br /><ul><li>Organization Structure Changes (66%)
  7. 7. Building Strategic Partnerships (53%)</li></li></ul><li>High-performing relationships and governance have a direct financial benefit to IBM, and the client<br />+15%<br /><ul><li>Customer satisfaction
  8. 8. Delivery of value added projects on time and budget
  9. 9. Quick response time to requests
  10. 10. Innovation and thought leadership
  11. 11. Resources freed for more productive work</li></ul>When asked to compare the value at stake between a good and poor outsourcing relationship:<br /><ul><li>Over 80% of private sector buyers
  12. 12. Over 50% of public sector buyers
  13. 13. Over 60% of providers</li></ul>Felt that at least 30% of the annual contract value was at risk<br />Annual Contract Value<br />0%<br /><ul><li>Resource waste due to inability to trust / delegate
  14. 14. Greater need to monitor and audit
  15. 15. Frequent conflict escalation
  16. 16. Low customer satisfaction
  17. 17. Ineffective execution and follow up
  18. 18. Lack of clarity in roles & responsibilities
  19. 19. Decisions based on limited information</li></ul>-15%<br />13 January 2011<br />4<br />Source: Vantage Partners<br />
  20. 20. But, as the Global CEO Study also shows, fundamental change is required to succeed<br />5<br />13 January 2011<br /><ul><li>Less than half have successfully managed fundamental change before
  21. 21. Business model innovation, including building strategic partnerships, matters
  22. 22. External collaboration for innovation is essential
  23. 23. Collaboration is recognised as indispensable to innovation - “Without collaboration, innovation would be impossible.”</li></ul>Extent of Fundamental Change Needed <br />Over the Next Two Years<br />Moderate change<br />22%<br />Fundamental change<br />65%<br />Little or no change<br />13%<br />Source: IBM Global CEO Study 2006<br />
  24. 24. However, the gap between the capability and the challenge ahead is growing<br />The Change Gap* Triples<br />2008<br />2006<br />22<br />8<br />%<br />%<br />CHANGE GAP*<br />CHANGE GAP*<br />6%<br />19%<br />13%<br />12%<br />“We have seen more change in the last ten years than in the previous 90.”<br />Ad J. Scheepbouwer, CEO, KPN Telecom<br />11%<br />31%<br />22%<br />83%<br />20%<br />65%<br />61%<br />57%<br />Change Needed<br />Past Change Success<br />No/limited Change <br />Moderate Change<br />Substantial Change<br />No/limited Success<br />Moderate Success<br />Successful<br />* Difference or ‘gap’ between expected level of change needed and past success in managing change<br />Source: IBM Global CEO Study 2008; n (2006) = 709, n (2008) = 1104<br />6<br />13 January 2011<br />
  25. 25. Research confirms relationship issues as the prime reason for partnering failure – a failure to manage change<br />A cross industry study conducted with over 120 companies revealed the strong need to manage relationships professionally and systematically<br />Signs of critical working relations:<br />Foremost Causes of Partnership Failure<br /><ul><li>Poor Communication
  26. 26. Breakdown in trust
  27. 27. Negative partisan perceptions
  28. 28. Festering conflicts
  29. 29. “Fingerpointing”
  30. 30. Disrespect/coercion
  31. 31. Stress …</li></ul>Poor or Damaged Relationships Between Firms<br />Poor Strategyand Business Planning<br />52%<br />30%<br />37%<br />64%<br />11%<br />6%<br />Bad Legal and Financial Terms and Conditions<br />* Source: Ertel, Danny, Jeff Weiss, and Laura Judy Visioni. Managing Alliance Relationships - Ten Key Corporate Capabilities:A Cross-Industry Study of How to Build and Manage Successful Alliances. Cambridge, MA: Vantage Partners, 2001.<br />13 January 2011<br />7<br />
  32. 32. Relationship Quality Impacts Operational Performance <br />Relationship Attributes <br />Operational Attributes <br /><ul><li>Service delivery … Managing SLA’s
  33. 33. Technology Management
  34. 34. Processing new service requests
  35. 35. Reporting and billing
  36. 36. Prices, fees, rates
  37. 37. Management, Operation, Security of IT assets ….
  38. 38. Trust and mutual respect
  39. 39. Ease of working together
  40. 40. Bridging cultural diversity
  41. 41. Openness and quality of communication
  42. 42. Collaborative decision making
  43. 43. Fairness… </li></ul>Operational Performance Impacts Relationship Characteristics <br />Issues are often seen as performance related, but root causes are more often relationship related<br />13 January 2011<br />8<br />
  44. 44. Table of Contents<br />Value of Effective Partnering Relationships<br />Framework for Effective Partnering<br />The Partnering Journey<br />References<br />13 January 2011<br />9<br />A case study is available and published as a separate document<br />
  45. 45. Effective partnering depends on alignment of long-term and every-day relationship aspects<br />Partnering Framework<br />Communication<br />Roles & Responsibilities<br />Culture-in-action<br />Financial<br />Risk Sharing<br />Innovation<br />SharedKnowledge<br />Mutual<br />Benefits<br />Skills<br />Decision-making<br />Problem-solving<br />DistinctiveCompetencies<br />Commitment<br />Shared Goals<br />Motivation<br />Measurements<br />Linkage<br />Pre-disposition<br />Trust<br />Attitudes<br />Assumptions<br />Process<br />Governance<br />Social<br />Relationship in Action<br />Operational Day-to-Day<br />Relationship over Time<br />Strategic Long-Term<br />13 January 2011<br />10<br />
  46. 46. Partnering relationships exist to go beyond transactional relationships, but to what extent?<br />Transactional Value Add Special Unique<br />(market exchange) (performance contract)<br />T V/A S U<br /><ul><li>Commodity goods and services
  47. 47. Value derived from low price and convenience
  48. 48. Relationship not really a differentiator
  49. 49. Eg. Utilities, fast food
  50. 50. Customized goods and services
  51. 51. Value derived from stability and economies of scale
  52. 52. Some customer-supplier intimacy and knowledge
  53. 53. Expertise will overcome unexpected contingencies
  54. 54. Eg. Tax Consultant, Doctor
  55. 55. Complex or innovative goods and services
  56. 56. Value derived from optimization across organizations
  57. 57. High degree of customer-supplier intimacy and knowledge
  58. 58. Eg. Auto value chain
  59. 59. High complexity or one of a kind goods and services
  60. 60. Value derived from creating a new organization
  61. 61. One Team – conscience seamless integration of capabilities
  62. 62. Eg. Formula 1 team</li></ul>Source: Prof. Henderson, Vantage Partners<br />13 January 2011<br />11<br />
  63. 63. Think of relationships as a continuum, with a series of steps required to achieve the ‘ideal’ state<br />We are one organisation, value is totally derived from our inter-dependence<br />5<br />Unique<br />Value is enhanced for both of us through innovation and continuous improvement<br />4<br />Special<br />We share risks and rewards and our key people have relationship-oriented incentives<br />3<br />Cross-company teams are formed to enhance value<br />2<br />Value Add<br />IBM is able to leverage its expertise to drive value and resolve contingencies<br />1<br />Transactional<br />Self interest is predominant<br />0<br />13 January 2011<br />12<br />
  64. 64. By looking at each dimension we can build up a matrix, serving as both Shared Intent (Vision) and Roadmap<br />Mutual Benefits<br />Commitment<br />Pre-Disposition<br />Shared Knowledge<br />Distinctive Competencies<br />Linkage<br />Horizontal consistency<br />Level 5 - Unique<br />Vertical Progression<br />Level 4 – Mutual Value Creation<br />Level 3 - Special<br />Level 2 – Value Add<br />Level 1 – Building Capability<br />Level 0 - Transactional <br />13 January 2011<br />13<br />
  65. 65. Example of a Roadmap / Maturity Model<br />13 January 2011<br />14<br />
  66. 66. The Roadmap can also be used to measure progress or relationship ‘maturity’<br />13 January 2011<br />15<br />
  67. 67. 16<br />13/01/2011<br />A Relationship Alignment Survey measures the health of the relationships over time<br />Purpose and Objectives<br /><ul><li>Monitor whether the relationship is developing in the right direction
  68. 68. Identify emerging weaknesses / pain points
  69. 69. Measure relationship progress over time</li></ul>Deliverables<br /><ul><li>Graphs and statements showing the relationship health and in particular the degree of alignment
  70. 70. Average, median and mode scores with standard deviations and gaps
  71. 71. Conclusions and Recommendations</li></ul>Logistics<br /><ul><li>Web based multiple Choice questionnaire
  72. 72. Participants selected by IBM and partner
  73. 73. Takes 15-20 minutes to fill in
  74. 74. Repeat approximately every 6 - 12 months, ideally linked to an Annual Planning cycle</li></li></ul><li>Table of Contents<br />Value of Effective Partnering Relationships<br />Framework for Effective Partnering<br />The Partnering Journey<br />References<br />13 January 2011<br />17<br />A case study is available and published as a separate document<br />
  75. 75. Strategic partner / outsourcing deals almost always involve a handover from deal makers to implementers<br />Strategic Partner / Outsourcing Program Lifecycle<br />Opportunity<br />Development<br />Deal<br />Signing<br />Solution Design<br />Transition<br />Continuous<br />Improvement<br />Growth<br />The Artefact<br />IBM Focus of Activity<br />Contract<br />Stabilise Operations<br />Continuous Improvement of Operations<br />Partner ‘Expected’ Activity<br />The Intent<br />Relationship Goals and Governance<br />Innovation<br />Value Add<br />Relationship Charter<br />13 January 2011<br />18<br />
  76. 76. Relationship alignment is important throughout the lifecycle, but so much easier if started with ‘the intent’<br />19<br />13 January 2011<br />Ideal to start at ‘Solution Design and Deal Negotiation’ stage<br /><ul><li>Captures intent at source
  77. 77. Provides effective handover to implementation teams
  78. 78. Creates momentum during ‘honeymoon’</li></ul>Define the Relationship Intent<br />Relationship Alignment Workshop<br />Relationship Alignment Survey<br />Joint teams drive priority initiatives<br />Joint Planning & Governance<br />Monitor Relationship Health & Maturity<br />Start point for ‘troubled’ relationships<br /><ul><li>Identify what is wrong
  79. 79. Usually after a number of failed initiatives to improve
  80. 80. Usually after high turnover of leadership of both partners</li></ul>Start point for operational issues<br /><ul><li>Intractable performance issues
  81. 81. Usually address symptoms
  82. 82. Initiatives burn out quickly</li></ul>Execute Plan<br />& Measure Outcomes<br />
  83. 83. Each company brings their own set of business practices, many of which will be in conflict with those of the other company<br /> Partner A: “client” <br />Partner B: “outsourcer” <br />“adherence to process produces consistent results, decreases risk”<br />“we are a family”<br />“achieving schedule is most important”<br />“minimizing and reducing costs is high priority”<br />“achieving results is more important than following consistent procedures”<br />“we identify and present the best option for achieving desired results”<br />?<br />“broad involvement in decision making”<br />“business controls, policies and measures are important management tools”<br />“customer service orientation, even to point of heroics”<br />“a single approach is most efficient and effective”<br />20<br />People will respond to business scenarios with what is “right” in the culture of their company<br />
  84. 84. Situation: A leader from Partner A has requested a due date on a project that a leader from Partner B believes it significantly aggressive and is likely to be missed. How is each leader viewing the situation? <br />Partner A should be open to an alternative date or be willing to change the requirements<br />Partner A should understand that processes cannot be compromised since it will increase cost and risk<br />It is vital that we follow “tried and true” approaches since this environment is complex <br />Due date is vital due to its impact on customers so Partner B should do whatever it takes<br />Partner B should be willing to forgo certain steps of its processes to make this happen<br />To change this decision, we need to involve a broad group of stakeholders and run the risk of unacceptable further delays<br />?<br /> Partner A: “client” <br />Partner B: “outsourcer”<br />21<br />Reconciling “right Vs right” responses is critical so people know how to respond to business scenarios<br />
  85. 85. Business practices are the unwritten rules that drive expectations and actions within organizations<br />Business Practices:<br /><ul><li>Are customary, habitual or consistent way that work is performed and adhered to by members of the same organisation
  86. 86. Include intangible, subtle and difficult to define aspects of how the work is undertaken that may be driven by underlying mindsets, assumptions, beliefs, norms, styles, and customs
  87. 87. Are more often “caught” than “taught”
  88. 88. Are often not well documented so they are learned through mentoring, coaching, and watching others be successful – and unsuccessful</li></ul>Right Vs Right<br /><ul><li>Identify business scenarios to which the response may be ambiguous or not well defined
  89. 89. Map out the response that both partners agree should be the standard business practice
  90. 90. Describe the business scenario and business practice response in narrative form
  91. 91. Describe how the business practice is different to a partners normal culture and why the changed business practice is important
  92. 92. Communicate to people and create an easy to access reference point, e.g. Intranet</li></ul>22<br />
  93. 93. 23<br />13/01/2011<br />Initially the change program will focus on enablement as a series of phases - align, enable and perform<br />Enable Organisational Frameworks<br />Align Strategic Intent<br />Perform Culture<br /><ul><li>Align KPIs
  94. 94. Joint Planning
  95. 95. Reconcile right Vs right business practices
  96. 96. Document & Improve Processes
  97. 97. Measurement
  98. 98. Communications Strategy
  99. 99. Reporting</li></ul>Relationship Alignment Workshop<br /><ul><li>Communications
  100. 100. Deploy joint plans
  101. 101. Leadership
  102. 102. Roll out business scenarios
  103. 103. Integrate into BAU
  104. 104. Feedback cycles</li></ul>Get the Basics Right<br /><ul><li>‘Table stakes’ - consistently achieve contracted outcomes
  105. 105. Relationship intent & Vision
  106. 106. Joint Objectives
  107. 107. Define culture
  108. 108. Governance</li></li></ul><li>Subsequent cycles are more driven by Roadmap priorities and relationship health requirements<br />24<br />13 January 2011<br />The Roadmap<br /><ul><li>Sets out agreed priorities and business outcomes
  109. 109. Takes into account that there needs to be ‘horizontal consistency’ along with ‘vertical progression’
  110. 110. Establishes a multi-year program, to be refined as required</li></ul>Relationship Health<br /><ul><li>Focuses on the organisational and cultural enablers
  111. 111. Measures current health and identifies issues requiring attention
  112. 112. Monitors evolving expectations of the relationship</li></li></ul><li>25<br />A Partnering program must be actively led by the joint leadership team – with specialist support as required<br />Develop ICAP, specialist skills, facilitator, coach<br />Lead change, transition to BaU, sustain culture<br />IBM and Partner Leadership Team<br /><ul><li>Participate as a ‘joint IBM/Client team member
  113. 113. Participate in planning
  114. 114. Support RM&G consultants
  115. 115. Contribute to workshop planning and preparation
  116. 116. Support relationship alignment surveys
  117. 117. Deploy relationship processes
  118. 118. Establish and maintain governance regime
  119. 119. Implement and monitor plan
  120. 120. Conduct joint relationship management & governance planning with partner</li></ul>Relationship Alignment Consultant<br /><ul><li>Conduct in-depth data gathering, analysis and report
  121. 121. Design program of work
  122. 122. Provide consulting support for IBM / partner teams
  123. 123. Facilitate workshops or joint IBM / partner meetings
  124. 124. Conduct surveys, analyse and report results
  125. 125. Review plans and materials
  126. 126. Education
  127. 127. Training
  128. 128. Coaching / mentoring</li></ul>Level of involvement<br />
  129. 129. Table of Contents<br />Value of Effective Partnering Relationships<br />Framework for Effective Partnering<br />The Partnering Journey<br />References<br />13 January 2011<br />26<br />A case study is available and published as a separate document<br />
  130. 130. IBM’s Relationship Alignment Approach and Method itself evolved from a collaboration<br />27<br />13 January 2011<br />The IBM Institute for Business Value is the business research arm of IBM Global Business Services. It focuses on managerial and economic issues faced by companies and governments around the world, publishing between 35 and 50 major studies each year.<br />http://www-935.ibm.com/services/us/gbs/thoughtleadership/<br />Vantage Partners is a global management consulting firm that specialise in helping companies achieve breakthrough business results by transforming the way they negotiate with, and manage relationships with, key business partners.<br />http://vantagepartners.com/<br />
  131. 131. 28<br />The Global CEO Study 2010 is the fourth biennial CEO study, building on our insights and findings over the last 6 years <br />2010<br />2008<br />2006<br />2004<br />Capitalizing on Complexity<br />Enterprise of the Future<br />Innovation<br />Your turn!<br />Key Findings<br />Key Findings<br />Key Findings<br />Key Findings<br /><ul><li>Rapid escalation of complexity creates need to:
  132. 132. Embody creative leadership
  133. 133. Reinvent customer relationships
  134. 134. Build operating dexterity
  135. 135. Hungry for change
  136. 136. Demanding customers as opportunity to differentiate
  137. 137. Extensive business model innovations
  138. 138. Moving towards global business designs
  139. 139. Business model innovation matters
  140. 140. External collaboration is indispensable
  141. 141. Innovation must be orchestrated from the top
  142. 142. Revenue growth is the number one priority
  143. 143. Responsiveness is a new key competence
  144. 144. Improving internal capabilities is a first step toward growth</li></ul>1,541 CEO interviews<br />1,130 CEO interviews<br />765 CEO interviews<br />456 CEO interviews<br />13 January 2011<br />The Global CEO Study 2010 can be downloaded at:<br />http://www-935.ibm.com/services/c-suite/ceo/leadership_and_innovation.html<br />
  145. 145. 29<br />IBM’s book on this new approach has just been published, and it contains a chapter devoted to outsourcing<br />"This is an excellent book that provides a pragmatic approach to identifying and alleviating cultural issues created when two groups of people must work together. Effectively blending business cultures is a key requirement for successful outsourcing, and most companies lack the tools necessary to do this. Companies looking to reduce outsourcing risk should follow IBM's Tangible Culture approach.“<br />-Lance Travis, vice president, Outsourcing Strategies, AMR Research<br />For more information about the book:<br />http://www.tangibleculture.com/<br />For more information on Right vs. Right:<br />http://www.research.ibm.com/thinkresearch/pages/2004/20040604_brain.shtml<br />
  146. 146. About the author...<br />Alan Williamson<br />Alan Williamson is a Senior Managing Consultant in the Strategy and Transformation practice of IBM Global Business Services. Alan has 15 years experience in partnering relationships, business transformation and organisation change across a range of industries and Government in Australia, Asia and Europe.<br />Alan is IBM’s lead in partnering relationships and Relationship Alignment for Australia, New Zealand and Asia Pacific<br />Alan authored a number of papers on inter-company relationships and was a speaker at an international conference on business collaboration.<br />Alan has also facilitated a post-graduate program for RMIT University and has acted as a mentor and coach, both within IBM and his wider professional network.<br />Alan has a Masters of Applied Science in Innovation and Service Management. His thesis, titled “Unlocking the Potential of Inter-Company Relationships” draws from hands on experience in helping companies establishing productive and healthy partnering relationships.<br />Alan’s partnering clients include:<br />Alan can be contacted at: alanwill@au1.ibm.com<br />13 January 2011<br />30<br />

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