THE STORY
Recently, I was at a technology conference. One of the
presenters wanted to demonstrate their technology on a large screen. Unfortunately,
they could not get the technology up on the screen to demonstrate it.
At first, the presenters were panicking. Then they came to
the conclusion that the problem was not with their technology, but with the
technology used to get it up on the screen. So they told everyone that their
inability to do the demonstration was the fault of someone else’s technology.
Then they merrily continued their presentation without showing us the
demonstration of their product.
My first reaction was “why are these presenters so happy?” Their
ultimate goal was to try to sell me on the merits of their product. Yet, that
attempt was seriously destroyed by the inability to demonstrate the product to
me.
Apparently, they had lost sight of that bigger picture. They
were fixated on the smaller picture: As long as they or their product was not
to blame, then the presenters were okay. And if they were okay, then everything
was okay.
But everything was not okay. The audience was denied the
most important part of the presentation and the technology company was denied
the opportunity to fully sell their product.
Very few companies are fully self-sufficient. Instead,
companies rely on many other partners to get their work done. It could be depending on suppliers for parts.
It could be depending on distributors for getting the product sold. And in
today’s economy, it could also be outsourcing almost everything in-between,
from payroll to call centers to manufacturing to key pieces of design and
technology.
Look at how much of the Apple ecosystem is outsourced. Apple
does not manufacture the hardware. Apple does not create most of the apps. Apple does not create the music. Apple does
not operate the cell towers which allow everything on the iPhone to actually
work. The portion of the ecosystem actually produced by employees of Apple is
quite small.
Everything from all the partners needs to work in order to
accomplish the strategy. If one of the partners really messes up on their part
of the grand design then the whole grand design is at risk. Just ask the folks at Boeing about how their
grand design for the Dreamliner is faring as a result of the problems with an
outsourced battery. All the planes are
grounded.
In the story, the presenters were happy because they could
blame their problems on someone else. Since
they did not feel “at fault” then they felt satisfied. However, I don’t think that the audience or
the technology company was happy. The
purpose of the presentation had failed.
What if the executives at Boeing had been like those
presenters and said, “Nothing Boeing did in-house on the Dreamliner is at
fault. Therefore, we should all be happy
and just move on.” Nobody would have accepted that behavior. Boeing is being
held accountable and the planes were not allowed to fly.
You should not accept that behavior, either. In the big picture, if the grand design doesn’t
work, then you have failed. And blaming a strategic partner doesn’t make the
failure go away.
The principle here is that just because you can blame
someone else for a problem does not make the problem go away. Your customers
really don’t care all that much which of your strategic partners is at fault.
All they know is that something is wrong. They are angry and they want YOU to
fix the problem.
There is no room for smugness is the fact that none of your
own people were directly at fault.
Everyone is in this thing together. As the old saying goes, a chain is
only as strong as its weakest link. It
doesn’t matter if your link is strong when the link of your partner is weak.
The whole chain will fail.
Since modern business models seem to be adding ever more
outside links to the strategic chain, the potential for outsiders to mess up the
chain for everyone increases. And to compound the situation, consumers are
being ever more demanding about the social consciousness of the companies they
do business with. So even if your outside partner produces its link in the
chain well, it could still create a failure if the WAY they produce their link
violates the societal and ethical demands of your customers.
And thirdly, the social network exposes more disappointments,
more quickly, to more people than ever before. This make mistakes harder to
hide and more damaging when discovered.
As a result, the potential for strategic disaster in this
area is increasing exponentially. Partnership management can no longer be tangential
to strategy. It needs to be integral to strategy.
So what can one do to minimize partner problems? Here are
some suggestions.
1. Choose Your
Partners Well
The best way to fix a problem is usually by preventing the
problem from occurring in the first place.
And one way to prevent partner problems is by choosing the right
partner. And what makes a partner “right” has to be more than just “can they
get the job done cheaply.”
Remember the thoughts of astronaut Alan Shepard as he was
flying through space: “It's a very sobering feeling to be up in space and
realize that one's safety factor was determined by the lowest bidder on a
government contract.” Cost is important,
but it isn’t the whole story. Here are just
a few of the other issues to consider:
a)
Will their practices upset the ethical and societal
expectations of your customers?
b)
Are their practices consistent with the strategic
intent of your business model?
c)
Can they scale at the rate needed for the grand design?
d)
If they are to achieve their strategic intent, will it
make it difficult for them to provide what you are looking for?
e)
Will they protect company secrets?
f)
Which of you has more power/clout in the negotiation
process?
g)
Will they have concerns or issues about being tied in
with your other partners?
h)
How will working with this partner impact your
competition?
When you tie up with a partner, you get more than just their
output (if they are the provider) or their money (if they are the client). You
get the personality, practices and principles of the partner. Is that something
you or your customers want you to be associated with?
2. Set Up the
Partnership With The Grand Design In Mind
If you want a partnership to work well, it needs to be
structured in a way which increases the likelihood of that occurring. Set up expectations in advance and get a
sign-off. Create incentives (positive
and negative) which encourage strategic compliance. Think about the big picture
(the grand design) when creating the small picture (individual partner
arrangement) so that compliance with the small supports improving the big.
3. Monitor Your
Partners
Don’t assume everything is fine once the deal is
signed. If you are going to be held
responsible in the customer’s eyes for something the partner does, then make
sure the partner does the right thing.
Have the right to monitor progress and principles. Have systems in place to detect problems
early, so they can be fixed with the minimal amount of down-side implications.
Test output to see if it meets requirements.
In many ways, treat the partner as if they were your own
employees that you were responsible for. After all, if they disappoint, they
can hurt your reputation and business as much as if they were your own
employees. Don’t blindly assume
compliance with a “hands off” approach.
This is not to say you don’t trust your partner. Rather, to quote Ronald Reagan, “Trust, but
verify.”
4. Put Solving
Ahead of Blaming
Finally, when problems do occur, put the main focus on
finding the solution rather than finding the blame. Yes, a problem cannot be solved until they
source of the problem is discovered. And yes, the process of finding the source
of the problem will touch a little on finding who and what is to blame. So blame cannot be ignored.
But the main focus cannot be put on assigning blame. The main focus initially needs to be in
solving the problem. Full assessment of
blame can come later, once the problem is solved. The problem with too much focus initially on
blame is that:
1) Those that work hard to “prove” they have no blame will
be more reluctant to pitch in and help solve the problem. Because they feel no obligation to the
problem, they feel no obligation to the solution. Unfortunately, the problem hurts everyone in
the chain, regardless of blame, so everyone should be incented to help solve
it.
2) In addition, a lot of the problems do not clearly fall in
one camp or another. For example, problems
can occur at the point when one partner hands off to another. Interpretations
and assumptions can vary among partners.
So it is often not immediately clear where the blame lies. Time spent sorting all of that out at the
beginning is time spent not solving the problem. And the longer the problem goes unfixed, the
worse it can become. How time was
wasted, and how much oil leaked out into the Gulf of Mexico while BP argued
with its partners over who was to blame for their massive oil leak?
3) The blame game tends to increase the friction among
partners rather than the goodwill needed to create stronger, more effective
partnerships. When trust is broken, the
entire chain suffers.
Yes, I know people worry about the eventual lawsuits and
that is why they are so concerned about blame. But if potential lawsuits are
your primary worry, then get some of the ground rules written into the original
partnership agreement. That way, the general
resolution is already in place before the problem happens. And it gives you a chance to get a resolution
which works best for everyone in the chain at getting problems resolved quickly.
In today’s economy, ever more of a company’s fate is in the
hands of its partners, including its customers.
Therefore, the way those partnerships are formed and are operated
increasingly impacts our strategic success.
And just because my firm is not directly at fault when problems occur
does not mean that I do not suffer from the problem. Therefore our strategies need to take these
partnerships seriously and look for ways to a) prevent problems in the first
place; and b) when problems occur, focus more on solving the problem than in
assessing blame.
There’s an old saying that “Success has many fathers, but a
failure is an orphan.” This means that
if you focus on finding who is the father of the problem, you may end up
finding no one. It is far more
productive to focus more on just fixing the problem.
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