Partnering and Partnerships (Business India Aug 2014)

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August 4 -17, 2014

Busi n e ss i n di A u the m AgA zi n e of the cor por Ate wor ld Guest Column

partnering and partnershipsThis is the fourth competency in the six required competencies for a global leader

Businesses grow organically, by acquisition or mergers for the common good of all stakeholders. in the knowledge economy

based complex and competitive world of busi-ness, partnering or partnership is becoming an increasingly favoured option. this growth strat-egy enables an organisation to retain focus on its core competence and concurrently leverage strengths of the ‘partner’ to expand the cus-tomer base for its products and services lead-ing to mutual rapid growth for both partners in sales volume and profitability. this trend is emerging because no corporation however large and cash rich can possibly capitalise on all avail-able growth opportunities. new technologies incorporated in the smartphone and the increas-ing impact of social networks in promoting busi-nesses are also driving partnering.

leaders of globalised corporations need the knowhow of when to partner, whom to partner with and the rules of engagement to mutually prosper in the ‘partnership’. this column dis-cusses the tangibles and intangibles from the ceo’s perspective, and attempts to define the critical requirements of creating a successful business ‘partnership’. At the outset, it is impor-tant to understand the differences between ‘strategic Alliance’, ‘Joint Ventures’ and ‘partner-ships’. simply stated, strategic alliance is a col-laboration between ‘sovereign’ interests, joint ventures normally is the creation of a new com-pany with joint equity ownership and partner-ship is a merger of interests. the former two are generally more long term and substantial in scope whereas partnerships enable rapid pool-ing of interests with the possibility of also being mutually beneficial in the long term.

for instance, computer manufacturer dell has a strategic alliance with chip maker intel for long-term opportunities of scale and cost effec-tiveness, quality and mutual substantial growth. gm formed a new company in a joint venture with toyota some years back providing gm the opportunity of learning the Japanese automo-tive expertise and toyota the experience of how to succeed in a new large market place.

partnership is a merger of interests for example between the iconic company Apple and myriad ‘App developers’ located worldwide. the software developers designed applications compatible with the iphone to meet a large assortment of customer needs. Apple can sell these Apps for shared profit

from the itunes store, creating an expanded cus-tomer base for iphones and at the same time rapid growth for the developers. implied in all instances is cost effectiveness and inherent growth oppor-tunity of both organisations.

let us consider partnerships in some more detail. the organic essential for a successful partnership is “trust” between the key members of the partnering organisations. if this prereq-uisite is missing, creating a partnership is futile. translated to working relationship parameters, mutual trust implies complete, honest and open discussion on the proposed partnership between the top leaders with no room for one-upman-ship. this trust then should percolate down to the respective top management teams involved in implementing the decisions taken to meet common goals and time lines. the intangible ‘trust’ is based on a ‘win-win’ philosophy where both partners are equally satisfied with the for-mal goals for their respective organisations and clearly supersedes all other considerations for a successful partnership.

our network partner, stewart levine, who has authored several books on partnering suggests the following elements for a trusting partnership.Intent and vision: A written statement clearly outlining the Vision and the end states at speci-fied times and jointly developed by the partner-ing teams goes a long way in establishing trust.Roles: roles for each partners must be clearly specified at all levels as to who is responsible, accountable, information only etc.Promises: All the promises verbal or otherwise must be documented. this is the area that causes conflicts due to misunderstanding at a later date, if not clearly written and understood.Time/value: it is entirely possible that each partner will evaluate the success of the partner-ship in both value and time based on other oppor-tunities available. this must be made known and reviewed provided agreement is reached. Measurement of satisfaction: needs def-inition. how will each partner measure their satisfaction periodically and feedback used to improve the relationship.Concerns and fears: transparency regarding the concerns and fears will enable an open dia-logue and will work to prevent conflicts.Renegotiation/dissolution: what happens if the partners disagree and they have to renegoti-ate or dissolve the partnership. the process and

Dinesh Chandra,

Avish Dahiya are

co-founders and

Vibhay Sinha

is the Senior

Consulting Partner

of DNA Global

Network (www.

dnaglobalnetwork.

com), a

Management

Consulting Firm

specialising in

globalisation

based in San Jose,

CA, USA

di n e sh ch A n dr A

V i B h A y s i n h A

A V i s h d A h i y A

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August 4 -17, 2014

Busi n e ss i n di A u the m AgA zi n e of the cor por Ate wor ldGuest Column

for example a Japanese company with focus on punctuality, partnering with an indian company and the substantial cultural differences that will need to be understood and navigated through by either side. we have heard so many leaders from either country complain about the lack of trust that we observed emerged from lack of cul-tural understanding. this precaution will obvi-ate any feelings of hurt that can arise in dealings at the operating level and prevent failure of the partnership. the success of tata group in their partnership with Jaguar, in this regard is remark-able and shows their sensitivity and understand-ing to this crucial issue.

An important success factor for the part-nership is communication, internal and exter-nal.internally, it helps to have a co-ordinator defined for the respective teams enabling orderly

processing of issues in imple-menting the decisions. direct contact between team mem-bers with the partner’s team can follow to facilitate speed and clarity.

partners have to also agree on how the external commu-nication concerning the asso-ciation will be addressed. in most cases a simultaneous joint statement is the preferred option. this will obviate any surprise element of either part-ner on what is being commu-nicated to the outside world

and eliminate friction that could arise. size is an important criterion for successful

partnerships. Joint ventures and strategic alli-ances usually work best if the size of partners is comparable. however, in a partnering scenario, the two organisations may differ substantially in size. corporate giants are partnering with small companies and in some cases with start-ups. example can be quoted of Apple or google part-nering relatively small companies and develop-ers worldwide. the agreement therefore must must take into account the advantages and dis-advantages of size and guard the interests of both parties irrespective of size including on terms of separation if that situation were to arise.

partnering offers a unique opportunity to start ups, small and medium size companies to partner with successful large corporations pro-vided they can bring to the table a product or service that enhances and adds value to the part-ner. in the recent past, the App ‘yo’ developed by an israeli entrepreneur has become an over-night success on Apple’s itunes store. All it does is to say ‘yo’ between smartphone users world-wide and has met a need no one knew existed. u

CORFPORATE GLOBALLEADER/MANAGER

Connectivity Cross culturalcompetency

Partneringskill

Collaborativeleadership

Globalmindset

Tech Savvy

path must be in the agreement signed between the partners.Consequences: partnerships take lot of effort and resources. if one partner decides to walk out of it for any reason then what are the consequences for the partners to not keep their commitment. this can be due to change of intention or due to unavoidable external circumstances, never-the-less they must be anticipated and planned for.Conflict resolution: how the conflict between the two partners will be resolved? it can be a agreed upon mediator or any other agreement that is acceptable to both partners.Agreement: to cement the trust on a continu-ing basis for the long-term and to avoid possible misunderstandings, it is essential that the com-mon goals and time lines are reduced to writ-ing in a formal agreement and be signed by the ceos. for transparency, it is rec-ommended that the agreement is also ratified by the respective Board of directors. Before the Agreement is signed, sequential steps required to be taken by the ceo’s are involvement of respec-tive top management teams fol-lowed by negotiations between the two leaders. the modalities are that the ceo must discuss objec-tives and time lines with his team, incorporate suggestions that add value and in the process bring all on board. the leaders must then meet on a one to one basis to sort out differences which normally will exist and thus ensure that both organisations are satisfied with terms of the proposed engagement.

in addition to the above there are some addi-tional factors that are considered significant for the success of partnerships.

Cultural compatibilitymany global partnerships that start with good intention fail due to cultural incompatibility. Behavior and personal interaction patterns con-sidered normal in the usA may be perceived as offensive in other countries. expecting to sign an agreement in the first meeting without build-ing a relationship in china, Japan or india may be considered too aggressive. sometimes, even in the same country such as in india, compa-nies based in the south differ significantly from those in north and cultural compatibility may not exist.

the partnering organisations have to address these twin issues. they must ensure that the teams charged with implementation possesses or is tutored to cultivate the cultural competence needed for a successful partnership. consider