Establishing Strategic Collaborations with US Business Partners Marc D. Coles Ohio-Israel Agricultural Initiative Presented at Agro. Mashov January 13, 2010
Shrinking Core, Expanding Periphery* To reduce costs, companies must focus on what they do best and push other activities outside of their core business processes Companies access capabilities through their strategic relationships with other firms – this network is greater than the sum of its parts *Prof. Ranjay Gulati, Kellogg School of Management
Core Business Process A process that generates a competitive advantage n Core process ≠ critical process n By definition, core process is critical, but a critical process is not necessarily core to the business n Increased outsourcing of critical functions n
Know Your Sandbox. . . In order to determine your core business and strategy, you must know your sandbox n To do so, companies need to clearly define: n – Target customers – Value Proposition – Place in the market
Relationship Focus n Companies are increasingly relying on building and maintaining their network of strategic relationships: – Employees – “partners”, health care benefits, stock options – Customers – in the “people” business – Suppliers – long-term relationships with carefully selected suppliers who are not always the least expensive – Alliance Partners – licensing, joint ventures, M&A “An alliance is a marriage, not a one-night stand. ” Vincent Lo, Chairman & CEO, Shui On Group
Strategic Collaborations Relationships between firms that involve significant amounts of shared information and decision making n May involve equity ownership (economic integration( n Organizational coordination mechanisms n
Motivation for Strategic Collaborations Risk-reward sharing n Market entry or extension n Sharing technological and innovative activities n Response to regulatory constraints n Most valuable when synergies exist between partner firms
Synergy “ 1+1 = 3” n “Whole is greater than sum of the parts” n Synergy between companies exists if something can make their joint inputs cheaper (cost synergies) or their joint outputs more valuable (revenue synergies) n
A Key Element: Trust n Initially based on: – Reputation – Interactions during negotiations – CEOs relationship
A Key Element: Trust n Subsequently: – Tested in repeated interactions – Matched with performance outcomes
A Key Element: Trust n When things get rough: – Inter-company trust goes first – Interpersonal trust keeps relationship alive “You never build a relationship between your organization and a company. . . You build it between individuals. ” John Browne, CEO of BP
Why Collaborations Fail n Environment – Failure to anticipate the changing conditions in tastes, technology, economy – Failure to consider differences in national culture, institutions, government regulations – Changes in legal and economic environment
Why Collaborations Fail n Strategy – Poor partner selection – Changed partner goals and strategy – Achievement of partner’s strategic goals
Why Collaborations Fail n Structure – Form of collaboration does not match purpose – Unbalanced control – Lack of flexibility in contract – Unclear goals
Why Collaborations Fail n Behavior – Organizational or national cultures mismatched – Failure to adapt and adjust to changing circumstances – Poor implementation – Lack of top visible management commitment – Poor systems for information sharing – Lack of trust between companies
Cultural Differences n n n Generally accepted that there are differences in US and Israeli business practices Neither US nor Israel are uniform – differences between East and West coasts Business practices in Israel are generally less formal than US – political, ethnic and male/female jokes are not appropriate
Cultural Differences n n n In a “David and Goliath” relationship, you may want to adapt to other party’s culture Israelis may view Americans as overly polite, hypocritical, or unduly diplomatic Americans may see Israelis as too aggressive, confrontational and annoyingly persistent
Marketing to US n Technological advantages do not mean a better product – Focus on solutions to real problems – Improved technology is not a value proposition – Consumers do not care about the underlying technology of a product
Marketing to US n Product development teams need clear and highly defined problems to solve – Product developers should not assume customer demand based on their own limited experience – Products should be engineered for a carefully identified group of customers
Marketing to US n The clearer your marketing strategy, the more effective will be your collaborative partner selection and interaction
Thank You marc. coles@gmail. com
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