Phoenix Pheathers

Two new, emerging best practices in alliance management

The ASAP 2009 State of Alliance Management Report looked at thirty-six commonly recognized best practices of alliance management and benchmarked them across the community of respondents representing 431 companies. This year the researchers looked a bit deeper into innovation alliances and identified two new emerging best practices. While innovation alliances were found to be more treacherous in terms of likelihood for success than other types of alliance, these two practices yielded up to 15% more sales for those companies that employed them.  How do these practices generate more productive value?

 

First, a practice termed Specialization.   It was found that “companies that have a large variety of alliance functions generate more sales from products that are both new to the market and new to the firm than companies that do not have such a variety.” In Specialization, it was assumed that by bringing together different functional perspectives, a broader set of skills were brought to focus on bringing innovation to market.

 

The second, called Hierarchy referred to a practice that “centralized decision making power with regard to alliances.” These companies also “generate more sales from products that are new to the firm than companies that do not centralize decision making.”  This applied to decisions affecting partner portfolios rather than day to day, operational decisions within a partnership.  By looking across a portfolio, alliance executives could make investment decisions that allocated resources to high value partnerships and to disinvest in lower value ones.  It also allowed a look across alliance valuation across multiple functions, business units, or product lines, creating greater synergy in optimizing alliance value.

 

We look forward to hearing more detail on these best practices as research continues.

The full report is available in the member’s library of the Association of Strategic Alliance Professionals. www.strategic-alliances.org

Serving our Customers thru better Partnering: Doing More with Less

Certainly in this economy doing more with less is an imperative we all face.  It is also the fundamental premise of partnering and in these times Partner Managers are pressed even harder to do even more with even less. 

A few weeks ago I was asked to moderate a gathering of senior alliance executives by the Association of Strategic Alliance Professionals to discuss this very challenge but with a perspective of what changes had they made in their partnering practices. How were they managing their portfolios, targeting market initiatives, stretching what's left of their budgets and headcount?

The event was comprised of Silicon Valley notables: Cisco, Apple, Citrix, Symantec, eBay/PayPal, Intel and IBM, the host. Some key takeaways from this illustrious group of Silicon Valleys tech leaders:

• Alliance activity is increasing but with a "ruthless focus on sales".

•  Scarce resources was forcing  more internal collaboration, more internal alignment on the big plays, and more pooling of resources.

• Placing bets to incubate new business opportunities - stimulating the stimulus

• Unusual partner combinations due to M&A activities that were disrupting partner ecosystems, an example is the Oracle acquisition of Sun.  Long time partner HP is now a competitor.

• Convergence of technologies were also causing new alignments.  Cisco going into the server business straining the relationship with longtime partner HP who is now aligning more closely than ever with Microsoft on Unified Communications.

Alliance executives also voiced a sense cautious optimism that maybe the worst was behind us, but there was also a recognition that recovery was not linear and not evenly spread across sectors.  They were reacting to this  by tuning their portfolios to follow the money.

•  Cost take out was a major opportunity for industries that have been consolidating through mergers and acquisitions.  Large data centers needed to be consolidated and management systems integrated.These were critical spends for the companies involved since they were counting on the consolidations to liberate operational costs that could be used to restructure.

• Alignment with Stimulus spending was a frequent refrain and recruiting partners that could enable them to better pursue those funds and the opportunities they were expected to spawn.  Many mentioned healthcare and green/clean technologies such as the green grid.

There was a recognition that disruptive innovation and disruptive business models often take root or take off during times of crisis.  The event closed with a discussion of some these technologies and business models i.e. SAAS, Mobile applications, Web 2.0 that offered opportunities for continued growth and new partners.

Innovation lights the way to prosperity. 

The Power of Green Alliances

 

Attended an ASAP Green breakfast this morning and it was certainly eye opening even if the coffee arrived late.

Hal LaFlash, Dir Emerging Clean Technology Policy from PG&E -that's Pacific Gas and Electric for the non-Californians - spoke on the many alliances that PG&E has been cultivating in the interest of providing sustainable energy. While one is not used to thinking of utilities in terms of innovation, social responsibility, or even collaboration, PG&E certainly differentiates itself from its peers.  One reason came to light during the discussion.  The State of California has decoupled energy sales from earnings. Other utilities are trapped in a conundrum that in order to earn more, they need to sell more energy. The net is there is no incentive to encourage consumers to conserve energy or to explore external, alternate sources of energy.

 

The decoupling enables PG&E to operate in a model where there are incentives for efficiency and to encourage alternative sources of energy to supply to the grid. Alignment of goals and core values was described as a critical success factor for PG&E alliances.  Their CEO is deeply commited to environmental responisbility.  The company has adopted a Pryamid of Values which includes environmental responsibility.   The resut is an amazing array of partnerships, both formal and informal to stimulate innnovation in  energy. 

The ROI of Loyalty (Part II)

Part I  discussed how demographic segmentation allowed targeting programs, benefits, and attention to engender greater loyalty and business through their developers.  Part II addresses how segmentation by 'Loyalty' itself helps to identify and to address specific concerns of developers.    While net promoter score seems to be the popular rage, we used the Apostle model to segment loyalty. The Apostle model gives much information with respect to how loyalty affects behavior.

 

The Aposlte model maps the community into a four quadrant graph. One the horizontal dimension we map overall satisfaction.  On the vertical dimension, we map likelyhood of continuing to use the service.    This gives us interesting insight into behavior. 

 

Apostles: In the upper right quadrant, the magic quadrant as some would call it, are the Apostles.  Those who are very happy and very loyal. They are your evangelists.  In this study they value the community blogs, a good thing because it gives them a forum to spread their good will. You want to nuture this community and continue to give them the opportunity to spread the word and do your 'marketing' for you.

 

Mercenaries: In the lower right quadrant, were the mercenaries. These were developers who were satisfied but not very loyal. These respondents who fall in this corner, typically as the name implies, can be price sensitive and they can be rather fickle. 

 

Hostages:  The upper left quadrant maps the hostages. These are a most interesting segment. They are not happy but they feel they have no choice or feel trapped into the business relationship. Understanding the drivers of loyalty and satisfaction in this quadrant is key.  Hostages are very vulnerable to competitive alternatives when they see an opportunity to switch.  Their loyalty is often based on features they percieve to be extremely important and cannot be found anywhere else. These features may be competitive differentiators.  Ironically many of the hostages actually want the client to be successful. Addressing their grievances can quickly move this segment to the right into the Apostle quadrant.

 

Sniper:  The lower left quandrant is hostile territory.  Here be Snipers.  They are dissatisfied and they are dangerous because they tend to be vocal about their discontent.  Molify these guys quickly or help them exit your community gracefully. 

 

Managing loyalty is becoming even more critical in a virtual world where social media enables everyone to have a voice.  Understand loyalty drivers are critical to managing your on-line reputation and growing your business.

The ROI of Loyalty (Part I)

I was approached by a client some weeks ago to present at conference some work we did on Developer Loyalty.  Now there are a lot satisfaction type surveys out there, but my client presented a very specific challenge. She was new in the role as the Director of the Developer Community and needed to understand very quickly "Who are the developers?"  What do they care about?  What is their impact on the business? What  investments would most improve their productivity? and increase their usage of the company's service and thus increase ROI to the company?

 

At the outset we knew we had a very diverse community, we needed to segment that community and understand what made each segment unique.

 

Technical Segmentation:

We found an entire spectrum of technical skill: intrepid amateurs to industry experts.  We found a corresponding spectrum of commercial influence: one time implementors to serial implementors. This enabled the client to differentiate technical support and documentation for different segments.  Targeting the more sophisticated (and costly) benefits to the serial implementors who could best drive repeat business.

 

Geographic Segmentation:

Where developers were located did not correlate one to one to market penetration of commercial services. For example, not surprising India represented the third largest geography of developers, but the client had almost no commercial business there.

That finding prompted more specific developer marketing to India where there corporate marketing was not reaching a key community.   Additionally, a key growth trend was spotted in Australia which became a focal point for new market development.

 

Vertical Segmentation:

Another actionable learning was in identifying non-traditional vertical market segments that could represent opportunities for growth. Vertical segmentation revealed a large number of developers in the non-profits sector signaling a growing market for the client services. 

 

Beyond the straight forward segmentation that enabled better targeted benefits delivery, we also segmented by Loyalty Profiles, using the Apostle model.  This model provides much deeper insight into behavior and motivations than a Satisfaction Index or the popular Net Promoter Score.  More on that in  the next blog - Part II!. 

Strategic Alliance Bookshelf

 Have you read a book in the past year that made an impact on you and how you manage alliances and partnerships? Could even be one you've written!! 

Here are some that I read this past year which I found had relevance to the field of alliance management. NOT listed in any order other than how they were stacked by my desk.

1.  The Innovator's Dilemma  - Clayton M. Christensen
An oldie but goodie, copyright 1997, this book focuses on disruptive technology and how it can leave market leaders of mainstream technology in the dust.  Required reading for anyone working with technology alliances and perhaps insightful as we try to navigate a disruptive economy, a prime time for disruptive technologies to take root.
 
2. Coolhunting: Chasing Down the Next Big Thing - Peter Gloor & Scott Cooper Trendspotting.
 Don't we all wish we had crystal balls.  One of the more interesting facets is how to leverage social networking to spot trends.  Who is linking to whom.  What ideas get picked up most by bloggers? The idea has some interesting implications for alliance networks.
 
3. Divide or Conquer: How great teams turn conflict into strength - Diana McLain Smith
I had the fortune of hearing Diana address a local (to me, Silicon Valley) chapter of the Association of Strategic Planners (ASP).  She provides sound and practical advice and frameworks for altering how we interact.  Her approach had very strong appeal to a community of engineers and technology nerds, not known for being touchy/feely, mainly because there was a defined framework for action vs emotions.

4. Fierce Conversations: Achieving Success at Work & in Life, One Conversation at a Time - Susan Scott
 "You get what you tolerate"  That was the fierce nugget that caused me to sit up and pay attention.  Scott provides a recipe for those difficult conversations in a way that elicits cooperation and change. I've tried it, it works, usually.  I haven't gotten my husband to clean the barn, yet.

5. The World is Flat - Thomas L. Friedman
Globalization means more businesses depend upon a network of worldwide alliances.  Alliance management skills have never been needed more. I reread this book this year trying to better understand how we position our profession in the context of a global economy.

6.The Speed of Trust - Steven Covey, Jr.
I am frequently asked "How do you build trust? How do you get it back when it is broken?"  I found many good answers here.  I now recommend this book to everyone who asks me about trust issues.
In fact, I think I loaned my copy out, since I can't find it.  Now who would I trust with that?

7.  Strategic Alliances: Three Ways to Make Them Work - Steve Stienhilber, V.P. Strategic Alliances, Cisco
I put this on my favorites list of books regarding strategic alliances. This is a short but powerful read, chocked full of straight talking advice about what it takes to make alliances succeed. As we know by all the research out there, the success rate is less than 50% and largely because organizations still approach alliances in an ad hoc fashion. Stienhilber addresses the issue to the CEO on how to get it right: the right framework, the right organization, and the right relationships.

What do you have on your list?  Why would you recommend it?

Alliance Strategy in Challenging Times: Rebalancing the Portfolio

Is it time to reevaluate your alliance investment?  Do you have the right partners to weather the economic climate?  Are you retaining the right partners to ensure you have a strategic advantage when the thaw comes?  

 Regular portfolio rebalancing is a best practice even in good times, but especially important now.  How do you know if you are wasting resources on a non-performer?  How do you rank the alliances that represent the best long term strategic bets if you can no longer afford to support all of them?  

 Well don’t go wading in with the loppers until you reassessed your alliance strategy.  In the best of worlds, you do this in concert with your corporate strategy to be sure that you align and that you appropriately invest in partnering.  Once you’ve identified which product lines are the most recession resilient, where the shifts in buyer behavior will occur and which customer problems cannot wait for an economic upturn, then you can align your alliance strategy accordingly. And consequently you will have better understanding what your portfolio should look like. 

 This is also a great opportunity to reopen a strategic discussion with your partners. How are they adapting to the economic situation?  Do they have insight into opportunities you may want to partner on?

 Most organizations have a few ‘zombie’ alliances, those alliances that you keep around because they’ve been a partner for years but no one can really articulate why the alliance continues to be strategic or whether the performance level makes the cut.  Take a hard look at these.  It may be time to put these to rest. On the other hand, if the working relationships are sound, these alliances are potential transformation targets. Rejuvenate them with a new strategic direction.  Given that it can take a new alliance 12-18 months to build the operational linkages and relationships required to deliver performance, these alliances could represent a significant advantage in time to results.  They may be a vehicle that just needs a destination.

 Also rethink what performance metrics will have the most impact on helping you manage through the next few quarters or years.  Don’t rely solely on revenue history. Remember buying behavior will change.  Past performance doesn’t guarantee future results.

 A cross portfolio evaluation will enable you to stack rank alliance performance against strategic importance so that you make clear and informed decisions given the changed dynamics of today’s economy. 

 

Alliances in the News

Plans for Strategic Alliances on the Rise 

Nearly one-third of consumer products companies plan to forge new strategic alliances in the upcoming 12 months (30 percent), up 8 points from the second quarter of 2008 according to PricewaterhouseCoopers

NEW YORK, Dec 4, 2008 (GlobeNewswire)

 

Chrysler Presents Reorganization Plan to Congress
"To further enhance its product portfolio, support growth, and improve its cost structure, Chrysler continues to aggressively pursue strategic alliances and partnerships.”

CEO Robert Nardelli - Online News Desk (12/03/08)

 

I've been seeing heads lines and lead-in like these of late.  And while I am heartened that companies are recognizing the value of strategic alliances, it drives me nuts to see them positioned as the last ditch attempt to revitalize an ailing company.  One wonders if these companies had engaged in strategic partnering prior to hardship, if they would be much stronger position to weather the economic climate.  Never-the-less, a lesson learned late is better than never. 

 

As noted in previous artlicles and blogs, the reasons to partner for growth, is the reason to partner to reduce to costs and risks. The reason is the leverage of strategic alliances - the more for less benefit of shared risks, costs, and rewards.  But what also goes along with that is shared CONTROL!  Ahaa! maybe now we are getting to the crux of the matter.  Shared control is not always easy for the X / alpha personality commonly in leadership roles in many organizations and it is critical to the success of any partnership. Organizations must be willing to give to get. They must willing to invest in the time and attention to collaborate rather than to dictate. And when you are finally resolved to ask for help from a partner, perhaps that is the time you are more willing to collaborate.

 

Alliance management is part operational skill and business acumen, but another vital job skill is the ability to collaborate and more importantly the abiltiy to coach, lead, and influence others to do so.

Alliance Strategy Realignment: Finding Opportunity in Economic Disruption

Have you rethought your alliance strategy in terms of what new opportunities lie ahead? Are you prepared to find the opportunity in disruption?  We can assume that business as usual is not going to work in today's volatile economic climate because business has become unusual. Yet, disruptive times are times of great opportunity for those who are alert in spotting them.

 

I recently dusted off a white paper written in 2004 which discussed the results of Cisco's alliance strategy during the dot.com implosion. By continuing to invest in alliances and realigning their strategy,  Cisco generated 12% growth in alliance revenue during a time of economic contraction.  In today's environment, they are realigning their alliances around technologies they believe will address shifting buyer behavior.  With businesses restricting travel to control costs, telepresence is a lower cost alternative to business travel and has stronger appeal now than in prosperous times.  

 

A colleague of mine works with partners who specialize in the financial sector. I erroneously assumed that his business cratered with the financial institutions.  I was wrong. Business is booming. Financial institutions are facing mergers, acquisitions, and consolidation. They are addressing compliance and regulatory issues that were overlooked, leading to this crises and looking ahead to new regulations and compliance issues that are likely to be legislated. My colleague is in a unique position to help solve the big problems these businesses are facing.

 

In the last downturn a marketing colleague shifted all marketing spending to co-marketing with partners  resulting in lead generation at half the costs. A bonus of this strategy was that cross marketing on partner house lists yielded much higher quality leads.

 

Follow the shifts in buying behavior. Spending might be reduced in a recession, but it also shifts.  Buying behavior changes.  Smart businesses realign their strategies to take advantage of those shifts.  In the last downturn, there was greater emphasis on cost saving technologies. Webinars replaced seminars. Companies that marketed those technologies, such as WebEx, did well even as many internet companies collapsed.

 

Solve the big problems created by disruption.  The financial sector is not the only industry facing restructure. Auto manufacturers, transportation companies, pharmaceuticals, and retailers are facing industry restructuring.  These are opportunities for those who can address those pain points and provide solutions. How can you realign your alliance strategy to focus on where companies will be compelled to spend to stay viable?

 

Share costs and opportunities.  Leverage partner marketing and combine forces to provide even stronger customer value.

 

Disruption creates opportunity and those who weather the economic climate successfully will be those who can adapt their strategy to take advantage of the changes ahead. 

 

Strategic Alliances - More now than ever

Strategic alliances are often viewed as a strategy for growth and perhaps not always a strategy for economically challenging times. But many of the reasons that make strategic alliances a good idea in good times make them an even better strategy for uncertain times. What are these reasons to partner?

Create greater value for customers.  With businesses and consumers becoming more careful with spending, products and services must provide compelling value and solve real problems.  Well crafted strategic alliances are built around customer needs and are differentiated from offers from the competitors. Cisco Systems maintained their investment in alliances during the economic downturn earlier in this decade and refocused those alliances to create differentiated go-to-market solutions for joint customers. They consequently saw an increase of 12% revenue in their alliance related revenues, while revenues across the company over the same period of time remained flat. 

Leverage new sources of innovation. Innovative new products or services that serve unmet customer needs create new sources of revenue often at lower costs and shared risks with your partner. Proctor and Gamble is an example of a company that was struggling in 2001 with a dearth of new products in the pipeline. They adopted an innovation strategy that sourced 50% of their new products from external sources. While the business press touted this as a break through innovation strategy, an alliance professional readily sees this as a partnering strategy as well.

 Shared risks and costs. This kind of leverage is critical when resources are dear. One small, startup decided during the last downturn, to leverage all their marketing efforts through partners, thus sharing the costs of marketing and sharing their prospect and lead lists to generate sales for both companies.

Harnessing economies of scale, reducing costs of production and distribution are also benefits of strategic alliances and also a great strategy to economize in uncertain times.  Recently, United Airlines was actively searching for a merger partner to help create these economies in reaction to rising fuel costs and industry restructuring. They courted Continental Airlines and US Airways, but ultimately decided to partner with both in order to gain many of the same benefits of a merger but to avoid the high costs of acquisition and integration.

A white paper describing the Cisco case study is available on the PhoenixCG website: http://www.phoenixcg.com/documents/recessionstrat.pdf