Playing to Win
What is the same for businesses in 2005 is the same as it was in 1905—economic viability and profitability. What is different is how to maintain and grow profitability by simultaneously shrinking costs and increasing revenues in a competitive world market without missing a beat. These increased pressures have given rise to a number of business models that represent uniquely different ways of doing business. However, the one area these models have in common is that they all require a new form of relationships, one where every party is invested in the outcome, where everyone is a potential winner. We call this new frontier partnering.
The Need for Business Partnering
By shedding non-essential services and functions, organizations across the world are building complex supply chains, networks of strategic vendors and outsourced service providers, and creating new alliances to forge more profitable products and services. Many people who once did the work are now responsible for managing non-company resources that are responsible for the work. And to keep it interesting, many of these people have never managed anyone before, much less someone outside their own organization.
Equally significant is how these external relationships have changed the internal landscape. Businesses change direction. Departments reorganize. Roles and responsibilities change.
On the surface it appears that the need for partnering is focused with external resources. However, it is safe to say that partnering is equally important inside the organization as people compete for resources and dollars in a business sense, and mindshare and commitment in a personal sense.
Measures of a Successful Partner Relationship
The success of a business partner relationship differs from the traditional customer – supplier relationship. The customer-supplier relationship is typically based on a set of operational factors and measured by cost and performance. Successful business partnering, however, is dependent on an additional set of criteria related to developing effective relationships. Relationships take into account issues of trust and credibility, open communication, shared sense of urgency and commitment, faith in each other, and a belief in the future. While measured more by evidence than quantitative metrics, the relationship criteria are nonetheless critical for producing greater efficiency and effectiveness in the short run, and new business opportunities in the long run. While it is possible for a “partnership” to succeed only by its operational and business effectiveness without regard to relationship building, it is far less possible to sustain profitability without business partners.
Partnering Best Practices
The process of business partnering consists of nine best practices. Each is uniquely important to fulfilling the short-term business objectives and building capability for the future.
- Clearly Defined Business Objective. The business objective is statement of what needs to happen. It forms the basis for the relationship and therefore sits at the base of the pyramid. There are three critical dimensions of a clearly defined objective:
- A business case. Without a clearly defined business case it is difficult to determine the intended outcomes, what processes are needed, and how results will be measured.
- A shared purpose, meaning that the entities—the partners—approach each other with the mindset that each side must “win”
- A legal agreement specifying roles, responsibilities, terms and conditions. While a legal agreement is not the norm when working internally, nonetheless, there needs to be a “contract” where expectations clearly spelled out.
As a footnote, the lack of a clearly defined business objective is one of the primary reasons why alliances and partnerships, either internal of external, fail. What is particularly frustrating is those people in implementation roles of having to sell the need or make decisions they are not prepared or authorized to do. Its criticality cannot be underestimated.
- Operational Alignment. Operational alignment determines how the objective will be accomplished. It is the extent to which critical processes between/among partners are aligned. This requires an assessment of the processes in order to identify potential risk factors and to implement a strategy to mitigate them. Another key alignment component is the clarification of roles and responsibilities. This is particularly crucial in start-up mode or when there are changes in direction or personnel.
- Relationship Management Strategy. The Relationship Management Strategy is a plan to identify who partners need to spend time with in order to manage expectations for what is required (the Business Objective) and how it will be accomplished (Operational Alignment). This practice of Relationship Management is often overlooked or ignored because partners spend more time on getting results than building relationships. People often cite the lack of time as the reason for building relationships. However, without knowing who are the key decision makers and critical people in your partner’s organization, one’s ability to impact the desired outcomes is minimized.
- Trust & Credibility. Unfortunately trust and credibility are referenced most when they are missing as opposed to when they exist in the relationship Developing credibility and trust needs to be a conscious practice between partners. It consists of listening to and understanding the perspective of others, making personal connections, maintaining honesty, and making and honoring commitments. Trust is the basis upon which partners exchange ideas and debate the best course of action, get buy-in, and push forward. If the lack of a clearly defined business objective is the number one reason why partnering fails, then the lack of trust and credibility is reason #2.
- Performance Metrics. Metrics are typically linked to the business objective and measure the elements of cost and performance. Some organizations also use customer satisfaction as a metric. This puts additional teeth into measuring performance since customer satisfaction is an indicator of the customer “win” and it is indicative of what business partners together must do to be successful.
What partners often talk about but fail to measure are relationship-based requirements. Some argue that issues of trust or commitment are not measurable. However, it is possible to look at response times for problem resolution or for special requests as evidence that a partner shares your sense of commitment. Therefore performance metrics should include measures and evidence that demonstrate the desired level of performance outcomes.
Preferably business partners use shared metrics. These are forged initially through the process of developing a shared – win-win-win – business objective. Shared metrics increase the probability that partners understand what is critical to their customer and therefore share a same sense of commitment and responsibility for meeting the customer’s needs.
- Communication Structure. The purpose of creating a communication structure is broader than deciding when to use different types of communication. By creating a structure for communication, you enhance your ability to stay plugged into and abreast of critical issues that impact both your customers and your business partners. These could be formal meetings -such as scheduled project update meetings –or informal conversations – such as contacting a business partner to get their perspective on a change in schedule.
Because organizations are working with more business partners in a virtual world, they need to build in additional communication opportunities in order to build a “virtual presence,” to get to know people and have them thinking about you and your organization even though you are not face to face.
The communication structure also includes the critical processes of decision making, problem resolution, prioritization, as well as access to information. Each of these processes needs to be established and continuously updated, particularly as changes occur.
- Knowledge Exchange. As partners begin to build upon their successes and trust each other, they tend to share more intimate details about their businesses. This goes beyond a discussion of how they do things or which processes are most critical. This is an exchange of how each partner perceives the future, what keeps them awake at night, and what new ideas and directions that want to pursue. There is openness – an appreciation and respect for how the actions of one partner impacts the other. It is through this type of exchange that partners build intimacy and envision opportunities of working together in the future.
- Organizational Alignment. Organizational alignment is the synergy that enables business partners to “reinvent” their businesses in such a way that they can engage in new business opportunities. As part of this reinvention, partners could change their organizational structures and locations, add new business processes, implement shared data and information systems, or develop completely new business models.
- Long-term Relationship. A belief in a long-term business relationship is a belief and faith in the future. Business opportunities come and go. What partners commit themselves to is to pursuing new business opportunities together and add value to their customers by working together.
The Phases of Partnering
There are three critical phases to consider in the partnering process. Each phase consists of a subset of the best practices.
The first phase of any business partner relationship is alignment. Alignment consists of:
- The Clearly Defined Business Objective – The What
- Operational Alignment – The How
- Relationship Management Strategy – The Who
- Each is important. Without each element of in the alignment phase, those people responsible for implementation will spend countless hours trying to figure what they have to accomplish, what they have for an infrastructure, and who they need to spend time with. Good alignment enables effective execution. Poor alignment produces waste, frustration, and potential failure.
Execution is Phase 2 in the Partnering Relationship. It includes each element of alignment and incorporates metrics to monitor performance. Effective execution also requires a good structure and system for communication that builds in control and commitment. Execution also requires trust and credibility, the need to honor commitments, speak openly, and demonstrate an appreciation for your business partner’s perspective.
Shared Vision and Strategy
Some would argue that a shared vision should be Phase 1 of Partnering, not Phase 3. What is critical in Phase 1 is for business partners to define what each needs to “win” to accomplish the business objective before them.
What happens in Phase 3 of the relationship is more than just one successful project or engagement. Truly sharing a vision and strategy is the result of repeated successes, where the demonstration of results far exceeds the desire for success. Successful partnering breeds trust and respect. Trust and respect, in addition to the ability for partners to execute effectively, create a belief in the future together. Successful execution (Phase 2) is needed for a shared vision and strategy (Phase 3).
The Best Practices Pyramid : Three Critical Principles
Types of Best Practices The pyramid depicts the critical elements for success in terms of critical business and relationship practices. The business practices are in blue on the left side of the pyramid. The relationships practices are in red, on the right side
Accelerators : Practices in the Middle
There are three practices that accelerate the ability for the partner relationship to get “to the next level.” These are the three that appear in the middle of the pyramid: Clearly Defined Business Objective, Trust and Credibility, and Knowledge Exchange. While the other practices are critical for success, these three drive the relationship in a direction where partners gain a higher comfort level with each other through common understanding and shared responsibility for the successes and failures in delivering value to their customers.
The practices are numbered. Does this mean there is an order in which the best practices should be implemented? Not exactly. In most partnering situations the steps – or practices- occur in parallel. For example, Performance Metrics(#6) may be hammered out at the same time as the Business Objective(#1). Developing an effective Communication Structure (#6) may be built in to a system for aligning operations (#2) or managing projects. Partners may discuss long term goals and exchange more intimate knowledge (#7) even as they work together in the early stages of the relationship (#2 & #3).
What is more essential to effective partnering is the sequence of phases through which partners pass. Effective alignment is the basis for effective execution. A repeated track record of successful execution brings business partners closer together and more likely to want to work together in the future. Over time they are more likely to be proactive, share the responsibility for results, and act in each other’s best interests and the interests of their customers. Wanting to collaborate and succeed together in the future is a logical evolution in their relationship.
Partnering is a process based on the economic necessities of paring down costs and growing revenue. Partnering defines unique relationships both inside and outside the organization. It requires the active development of operational/business capabilities as well as the development and management of critical relationships. To garner support, gain mindshare, and develop new capabilities, partners must join together to enable each other and their customer to win in a highly competitive marketplace.Share this: