Any organization can quickly come up with a list of the top 50 partners with which they would love to work… identifying these opportunities really isn’t hard.
The real trick is to identify what you can offer and align these incentives with a company that fills one of your needs. Look for companies that might be able to bring in valuable customers and give you added credibility. The key is finding a partner with a similar vision who wants to find mutual value, “beyond the press release.” Chances are you are going to be working closely with these companies for extended periods of time, so it’s in everyone’s best interest to make sure the spirit, vision, and culture are all aligned.
Why are the strategic objectives so often forgotten in the hurry to get a deal done?
The stakes are always high: capital is always scarce, management always under pressure, and high-quality talent is in short supply. Challenging economic conditions so often compel those involved to ‘close the deal’ as quickly as they can. Whatever people say, the experience of partnerships is nearly always mixed; how often do partnerships take longer to negotiate and become harder to implement, than expected? We all know how people operate when they rush these things – they may look great on paper, but rarely deliver in practice.
Let’s face it; it’s time for a rethink and a fresh perspective on the structuring of strategic partnerships.
So here are ten questions to make your strategic partnership successful:
1. How does the partnership fit into the bigger strategic picture? The partnership may be significant in itself but should be seen in the context of other partnerships and other strategic activities. Are there under-exploited synergies or conflicting objectives?
2. Is everyone onboard? Cultural fit is often as important as financial fit and is often overlooked. Be sensitive to cultural differences – whether between organizations, industries or countries. The “softer issues” are often the most difficult to tackle, but the most lucrative when you get them right.
3. Are you afraid to iron out your differences? Identify the potential clashes between individuals, and any conflicting goals and ideas between you and your partner. Don’t just stay in the comfort zone; you need to deal with conflict upfront and find your common goals and outcomes.
4. How well do you really know your future partner? Anticipate and evaluate your partner’s value proposition – get inside their head. It will help avoid surprises and enable a solution that works for both parties.
5. How well have you defined and monitored KPIs for the partnership? It’s important that both parties agree on both “what” to measure but also “how” to measure it. Otherwise, you’ll struggle to call your partnership a success, or identify how to improve it.
6. How much ongoing evaluation and analysis are you doing? Continuous analysis and assessment or your partnership make you both more confident, agile and sensitive to differences in culture and approach, in addition to avoiding misunderstandings.
7. How positive and constructive are you in your negotiations? Framing the proposition in a positive, constructive manner makes a huge difference – ‘take-it-or-leave-it’ deals may appeal, but risk alienation and relationship breakdowns.
8. Are you prepared for disagreements? Establish review and dispute steps in the negotiation and implementation process early on – it avoids the potential for litigation and opens up new possibilities for challenge and improvement.
9. How many unanswered questions remain? Always raise questions or issues that have come from the analysis and preparation you have conducted – the path untrodden may have been paved with gold, or at least been an easier journey for all parties.
10. How much sponsorship with all stakeholders do you currently have? Communicating benefits along the way helps to keep up momentum and increase support with the parent companies – it also keeps spirits up when times get tough (which they will, at some point!).
Bottom-line: Creating a strategic partnership is wisdom and art combined. Like all areas of business, perception is still essential. It’s important to choose brands with an excellent reputation, but you also want to work with companies that will make good partners. When assessing a potential partner, look at which brands or individuals they’ve worked with in the past. Reach out to those brands or individuals and ask them how the partnership worked out. And don’t hesitate to reach out to those outside of your industry for a fresh perspective. It is ideal to cooperate with an organization that stays true to your key messages, goals, and demographics. Most of all, enjoy the ride. This “mini-MBA” will enrich your career forever!
The rapid onset of Digital business models is having a number of implications for developing a service provider – client contract, including:
Lack of defined outcomes: Engagements are starting to have a more open ended nature: the end result is not clearly defined nor are the steps needed to get there. Experimentation and agility are key characteristics of many new engagements.;
Challenges of embracing new tech: Accelerating change driven by more and more emerging technologies that affect the operating environment of enterprises and service providers;
Setting future milestones: Plotting a detailed course of action (and relevant KPIs!) over multiple years has become virtually impossible: one simply cannot know what one needs in 2 years’ time, let alone look 5 years’ ahead
I see service providers and buyers struggle to deal with this new reality.
Existing commercial models and contracting practices are no longer viable to capture the outcome of the engagement, let alone the spirit of collaboration, co-innovation and partnership.
The old way of contracting is not sustainable and leads to sub-optimal results in a Digital, As-a-Service world. What should the sales process, the contract, governance, contract duration and responsibilities then look like?
The big issue here is trust. In a situation that calls for innovation and new ways of working, there is a double trust dilemma. It’s the classic “agency problem” times two: neither party has an information advantage in the relationship and aligning interests is very difficult in situations with a lot of moving parts and uncertainty about goals and how to get there. Trust requires mutual understanding of people’s and companies’ interests and culture. A huge part of trust is predictable behavior, knowing what to expect from the other. Understanding each other and customers’ customer is critical in creating mutually beneficial relationships.
In typical (legacy) engagements today, many parties have failed to contract in a way that cements trust.
Thick documents, dozens if not hundreds, of KPI’s to measure performance, and other metrics, which all create a (false) sense of certainty. This hasn’t been terribly effective, as business environments change and KPIs often don’t as they are part of the contract, and it is even less satisfying from a perspective of really solving business problems. Business cases are often based on a best estimate or just plain guesswork as the glass ball gets more foggy as tech driven change accelerates. Enter even more uncertainty, velocity and tech driven change and it becomes almost undoable to define the goals and terms of contracts.
So what is the way forward for contracting in an age of uncertainty and novelty?
HfS is going on an ambitious journey to answer the key questions:
What ways are there to tackle the double trust dilemma?
How to deal with the open-ended engagements?
With more risk involved, is there a tendency to share risks? If so, how does that work out, what works, what doesn’t
What ways of contracting are actually enabling innovation rather than hindering innovation, new ways of working, collaboration and co-investing?
One solution we are exploring is that of an “Uncertainty premium” for the service provider taking on more risk in new commercial constructs. This uncertainty premium could be in the form of an “Innovation bonus” which entails achieving innovation and/or cost savings (with the savings earmarked for innovation). This approach could then drive budget for additional innovative work, benefitting both parties. One increasingly popular measure is the introduction of Robotic Process Automation into an engagement – one oil and gas firm stipulated that if the service provider can hit a 20% saving, that 20% will be added to a budget earmarked for innovation projects. Another I’ve heard is along the same lines but with the savings being earmarked for more industry talent / SME’s to be paid for by the client, and so introducing more quality and higher value work into the engagement.
We have launched our research initiative recently with selected buyers and providers. We will report back to the industry in twofold: a report and a session at the HfS Buyers Convention in New York September 14-16 2016.
This is my all new spot on Horses for Sources. The home of razor-sharp analysis and the place where hypes are crushed and real trends are born. Phil has set the bar incredibly high over the past decade. Inspired by the best analyst blogger around, my aim is to be as edgy as you are used to on Horses for Sources.
What you can expect on Berzerk with Derk I lead the energy, utilities and natural resources practice at HfS. I’m passionate about these industries and the huge shifts they need to make to stay relevant to this world. These are the largest and most fundamental industries in the world. The looming departure from fossil fuels mean the world’s energy systems, which have historically been slow to change, are in an unprecedented period of rapid transformation.
Renewable energy is the next normal – but the world has not woken up to this new reality yet This blog will help you stay abreast of all these fast-moving trends plus cut through all the hype that is out there. We’ll be covering the energy markets and the ongoing energy transition; away from fossil fuels and toward renewables. And specifically zoom in on the transformation of energy companies and service providers. The As-a-Service Economy has arrived in the services world and holds the potential to play a critical role in the energy transition.
The holy triangle of services; People, Process and Technology In my focus areas, besides aforementioned Energy, these are Supply Chain Management and Procurement, we see a fast convergence of people, process and technology, forever changing market demand and the offerings of service providers. Talent is a major topic for enterprises and service providers; there is a deficit of skills needed in the As-a-Service Economy. We need more people who can be strategic, experiment, play with business and revenue models, design new organizational structures and cultures, implement and pivot rapidly. People who have a keen eye for societal, political and technological developments and its ensuing opportunities and threats. There is an enormous opportunity for technology and business service providers to become part of the solution. This requires investment from both sides, real partnerships and the application of leading-edge technologies: intelligent automation, IoT ecosystems, actionable data and analytics are essential ingredients of digital transformations designed to push energy providers forward on the energy transition journey.
Change = new stuff = hype The common theme in much of our work at HfS is change. The old, legacy way of doing things is not cutting it anymore. Labor arbitrage, lift and shift and the traditional models of outsourcing are well past their prime and the services industry is transitioning into this new phase of As-a-Service. Before new things come to fruition, there is often a lot of hype and fluff surrounding them, clouding the view of what is real and what is not (yet). This is where HfS analysts come in… This blog won’t shy away to expose bs, calling out cookie cutter hype and identifying what is real.
All nice and well Mr Erbé, but why should I care? My goal is to tell you something you may not know with every post. I have been in the trenches of technology implementations, business transformations and operating model changes. I’ve managed the backlash of failed implementations on the business, designed business and IT functions. So in a lot of situations where theoretic solutions and vendor promises have broken down and the real issues still need to be fixed.
On this blog I will address the real-world issues screaming for real change, exploring what works, what doesn’t work and what needs to be done.
I will be:
– Harsh (sometimes)
– Real (always)
– Candid (the key to being an analyst isn’t it)
Are you of the curious variety, care about the world around you and the vast opportunities there are for business and you as a professional? I will introduce you to the most intelligent, innovative and forward looking folks in energy, supply chain and procurement. And help you navigate the real-hype divide, which solutions are aspirational and which solutions can bring scale, results and impact now.
Procurement’s very existence is in trouble. The function must be part of the whole negotiation process, not only to protect the company from making deals that do not benefit the firm but also ensure they are sensible, cordial and well-balanced – and both supplier and buyer realize the outcomes they both want to achieve. Sadly, this is so not the case with so many pivotal business deals today.
The fact of the matter is, for some bizarre reason, most senior executives just don’t care about them, and they seem to show up when the deal is already made and “promises” have been made that are hard to break. All that transpires is both the senior executives from the supplier and the buyer end up frustrated – and feelings of mistrust can really break down what was a blossoming partnership with a very “transactional” experience.
The problem really is two-fold – executives doing the buying probably don’t even think about involving procurement, as they see no value in their contribution – or have no awareness of any potential value. They probably never even thought about involving them. In many cases, they never even intended to include them and procurement only inserted itself when they were asked to make the payment. Which means procurement’s role has been reduced merely to a last minute attempt to sabotage a deal; otherwise, its existence in the company is rendered completely useless, and you might as well phase it out (or replace with some software).
Who’s to blame when procurement comes along to mess everything up? Yourself!
To all executives out there who like to spend company money on things:
Ignoring procurement in the buying process nearly always ends in tears for everyone. I often feel the amount of time, negative energy and lost money tied to the procurement experience is simply not worth the investment of having them in the first place. So stop acting like they don’t exist and start communicating.
This means getting procurement into the loop regarding your intentions, once you know what it is you want to invest company money in. Train your sales people that procurement exists for a reason and that they are not the boogie man from the outset. The reason it often goes wrong at the end of a sales cycle is that procurement people feel they are not participating in the process and need to make last minute changes to the contract (which is usual to try and squeeze the supplier on price, which just pisses everyone off).
When procurement people are feeling ignored, all they will try and do is derail the buying process, as opposed to helping shepherd it through and add some value (or at least a few sensible suggestions) along the way. Procurement needs to feel it has a reason to exist, like any other business function. With HR, we often know it adds no “strategic” value in the hiring process, but at least it will run the background checks, the references, sort out the payroll, etc. At least HR has a role in the company, whereas procurement is in danger of extinction if its contribution is worthless. So while procurement still exists, you must involve it, or it will make everything unravel down the road.
To Procurement Executives:
Be a business relationship manager, not a transactional negotiator. Get off your backsides and serve the people who pay for your salary. Yes, we are a team, but sending these emails such as “No more discount or we need a minimum of 20% margin”, or “We only accept 90 days payment”, do not help at all. You’ve made it clear in the time your profession exists that you are not business people and care nothing for “customer service” or “employee experience”. The fact you feel you are the police of the people that call themselves “sales” is a fairy tale. You should get up and try to understand what your firm is doing, the clients you are serving and the history that exists between your company and your customers. Only looking at making a personal gain is not a solution for anyone but yourself. If you like to have war stories, join the army. Don’t pull this nonsense on the work floor.
Bottom line: Communicating with each other is the first step to getting business done
We all need to live with certain professions within a process. Some we like, some we just have to tolerate. But we can make it nice along the way to work more closely together and stop pretending we do not exist or need each other. If you listen, you will learn, if you keep doing what you always do, you keep getting what you always had. We have enough islands in this world, let us not fight internal battles all the time, but let us communicate and not harm the clients and eventually our business.
“When we first outsourced, our service provider had the newest ideas, but now three years later, we have caught up to them and they’re treading water. So what’s next?”
These are quotes from operations executives over the past months of research, when asked about whether or not they (still) consider their service provider “innovative.” Since the term is open to interpretation, for the sake of this blog, let’s view it as an ongoing improvement in the impact of the work being delivered by doing something differently… something over and above the basics of what you would have expected, beyond the letter of the contract.
And, often, these comments are followed by, “it may be… well it likely is, our organization that is holding us back.”
If you really want what’s next… your service provider might actually have the ideas… but is your leadership willing to listen, invest, give them access to your intimate data, and give it a try? Is your organization genuinely culturally ready for innovative change? And is the service provider capable and culturally aligned as well? If not, maybe you aren’t ready for innovation; or, maybe not with your current partners.
Consider three “Power Ups” to change the face and increase the value of outsourcing: Courage, Budget, and Stories
Harken back to the days of Mario brothers in the video games, when Mario and Luigi tapped into “power ups” to help achieve their goal. (Maybe this is not such a leap in time for you!) “Super mushrooms” gave them temporary size and height advantage, ability to take multiple “hits” before dying, and additional lives. The “super mushrooms” of outsourcing—to achieve innovation and increased value through partnership—are good for use by any player—operations executives, delivery staff, service buyer or service provider:
Courage: The “gumption” as a leader to “allow,” and as an employee to “take” a chance, to leave egos at the door, to experiment, to “play,” to quickly acknowledge and shut down what does not seem to be working.
Budget: Realistically, nothing much will happen without a dedicated budget to finance time and materials that support research, dialogue, and prototypes.
Stories: Visuals and stories connect with our emotions, and are memorable. When you really want someone to understand, appreciate, engage, own, and promote a concept, a result, an idea, or a change, then “show and tell.”
If you want innovation—new ideas implemented to drive step changes in results—you need to be willing to do 1-2-3. If not, you are probably keeping yourself in a dangerous continuous improvement cycle—and also likely to get lost in the dust of other companies that are innovating.
