Phoenix Pheathers

Creating Value from Innovation and the Role of Alliances

Innovation takes many forms.  We often focus on innovation as technological breakthroughs and indeed those are important to fuel corporate growth.  But there are other forms of innovation which can be just as powerful and just as disruptive to the status quo in creating strategic competitive advantage.  Innovation in operations, in business processes and in business models can have transformational benefit for the companies that successfully implement these new ways of doing business. 

Partnerships and alliances are among those transformational business model innovations.  Yes, partnerships are not hardly new, but there are always interesting ways in which to combine two entities to create innovation and new value. Think peanut butter and chocolate.   Innovation often springs up when you have differences in thinking, differences in business processes, differences in technology.  This implies that partnerships and alliances are a natural breeding ground for innovation.

 Differences often result in conflict and tension. This is true in alliances where conflict is resolved through mutual agreement and not through fiat.

Yet, it is a mistake to assume that all conflict is bad. It is an insightful alliance manager that understands that diversity is an opportunity to create value. When members of an alliance are invited to contribute their knowledge, their perspectives, their unique expertise, some amazing innovation can happen. 

The Starfish Alliance is and example of business model and business process innovation. Starfish is a consortium of five logistics suppliers and Rolls Royce.  Rolls Royce, jet engine division, took a radical approach to optimizing their global supply chain in 2003.  They sought to partner.  They invited their logistics suppliers to collaborate to increase value to the customer and to increase the value in their business relationship with not only Rolls but with each other.   This was radical in that these suppliers had been locked into the traditional vendor/supplier relationship, where by the vendor relentlessly pressures suppliers for greater price concessions. They had also become locked into very hostile competition with each other, each hoping to gain a bigger piece of the logistics pie. But this model had become a game of inches.  Pricing concessions could only yield incremental cost savings of a few percent a year.

What was needed was a different way of working together that would shift the focus of optimizing each silo of operation to optimizing the end result.  The Starfish Alliance was met with distrust at first.  A key operating principle for the alliance was that there was no limit to profit. In other words, Rolls was not in this to transfer margin from their partners’ balance sheet to theirs but to create greater profitability for everyone, even the customer. They began to see results in their collaboration by optimizing and automating their end to end business processes.  Customer delivery rose to 99% on time.  Costs were reduced 20% across the operations.  The value of the alliance became a competitive differentiator and other customers began to take interest in forming similar operating alliances.

The very premise of alliances is to create new value that could not be achieved independently.  In this sense alliances are a natural incubator for collaborative innovation. 

 

To learn more please join the December 10, 9:00 am Pacific  worldwide webcast:

Collaborative Innovation & Value Creation

Harnessing the diversity of alliances to create innovative value

 Register: http://www.acteva.com/booking.cfm?bevaid=193215

PhoenixCG guests can take advantage of the ASAP member pricing of $25 for this 1-1/2 hour instructional session.  The webinar will be recorded and will be made available to registrants. So no worries if you have a schedule conflict, you will be able to view the recording at your convenience.

 

 

 

Managing Communities and Ecosystems with Social Media

Findings from a Survey Conducted by Phoenix Consulting Group, June 2009

Social media is gaining presence within partner ecosystems. These are natural communities and naturally lend themselves to these media.  There has been a trend for some time by large vendor companies to position themselves as the hub in a vendor-centric partner ecosystem. Most have built partner directories on their websites so that customers may search and find partners that meet geographic and technical needs. Some have invested heavily to enable partners to find each other, to collaborate and to build more integrated solutions. Social media facilitates this trend. Where vendor companies once invested in proprietary software to create communities, companies may now leverage open social media networks. Public networks are still quite new to facilitating these activities, but there are an emerging host of enterprise social networking platforms that incorporate many aspects of the public networks or integrate with them.

 

Spontaneous communities are a good indicator of this natural affinity. There are, for example, several Microsoft partner groups on LinkedIn; these are not owned or sponsored by Microsoft.  They arose through the initiative of partners who wanted a place to exchange information and insights on how to work effectively with Microsoft.  Example: http://www.linkedin.com/groups?home=&gid=82575&trk=anet_ug_hml

“Breadcrumbing” was mentioned as a technique to tie these spontaneous and independent communities together. This technique entails leaving a trail of links or breadcrumbs back to the company site. Company employees might address a question or complaint and lead back to the company website by posting links where questions or concerns could be addressed in more detail.  Monitoring posts to these sites and proactively responding can be an effective means of fostering loyalty and keeping a pulse on partner sentiment.  While there are use cases for this activity among the consumer brands, only a few of the interviewees offered that they were proactively monitoring partner or public sentiment this consistently.

Partnerpedia  www.partnerpedia.com is a free social networking forum intended for partner recruitment, connection and collaboration.  It provides a mechanism to find new partners and to contact them for potential  collaboration.  Partnerpedia offers a private network option for sale that a vendor can adopt  to provide a social networking forum and community management platform  specific to their partner ecosystem.

 

Incorporating customers into the ecosystem is a powerful trend. Citrix pioneered the concept of a Community Verified network which has eclipsed their traditional partner certification program.  Alternatively to rigorous lab testing, products are subjected to the scrutiny of the user community.  Users vote or recommend whether these partner products are compatible. Released in October of 2008, the Community Verified community consists of 1,500 products supported by 9,000 verifications as opposed to 800 traditionally certified products. Furthermore, customers can reference the product reviews and they put more stock in the community verified products.

Citrix is on the leading edge of adoption of social media within their partner community. There is extensive use of public social media and extending to these communities strategic partner portals. For example, there are sub communities for Dell, HP, Intel, Microsoft, NetApp, Oracle and SAP. These strategic partner networks integrate many social networking links, RSS feeds for related product and company blogs, YouTube product demos and video tutorials and Twitter streams as well as featuring the community verified products of these partners.

It is clear that social media is becoming deeply integrated into these natural communities and becoming inseparable with the business processes in communicating and collaborating within these ecosystems. 

Contact the author normaw@phoenixcg.com for the full white paper of the research findings.

Social Media and Partnering

Social media hype is everywhere. We are deluged with it on-line. We see it on TV. Our kids are absorbed by Facebook. The  State department even requests that Twitter delays maintenance to ensure continuity in the information flow from civil unrest in Iran.

Even as we are coming to grips with Social media - socially, we are becoming aware of how this new media is infiltrating all aspects of human interaction.  As the Iran elections show and indeed in President Obama's campaign would indicate, social media has become a political media.  Businesses are now adopting these forums to manage and monitor customer relationships.  As a business that focuses on collaborative B2B relationships, PhoenixCG conducted an informal study by interviewing 20 partner management professionals to understand how partner managers are leveraging Web2.0 and social media in building partner relationships. 

We wanted to get beyond the basics of what's a tweet and how often do you tweet?  We wanted to understand how partner organizations were deriving business value from the use of social media. Most of the individuals we spoke to were in the technology sector. Though we did speak to two who were not - a control group if you will. These two were in the pharma sector. 

What did we learn?  While there is huge momentum and adoption, as a business tool, we still don't know all the ways in which social media can be used.  There are few proven practices on how to optimize and measure impact especially in enhancing business relationships. Yet many of those we interviewed are using these new tools for productive use if not clearly measurable use. It is fair to say that we are still in the early adoption phase, where the first entrants are engaged in a process of invention and creation in developing applications for these media. 

Only one of the respondents had developed a social media strategy and metrics for optimization and they had not yet deployed. The others, even those who characterized themselves as leading edge users, were at various stages of trying formalize their use of social media, making the transformation from experimental to strategic use. 

Since a single blog is not going to cover the ah-has of twenty interviews, we will be posting our findings, observations, and recommendations in a series of blogs.  If you would like to contact us directly for a copy of the white paper of our findings or a more in-depth discussion, please contact me at normaw@phoenixcg.com or info@phoenixcg.com. 

To learn more about Phoenix Consulting Group, www.phoenixcg.com

 

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

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!.