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
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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
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13. Alliances : A growing source of revenue HP/Cannon partnership
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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
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
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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
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Editor's Notes
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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