Article 60–Business relationships - SCCI………........Page 1 of 4

This article covers a highly topical subject; it examines the reasons why many alliances between members of a supply chain fail to fulfil their potential whilst others go from strength to strength. It summarises the key points contained the recently published book by Kogan Page: “Strategic Alliances & Marketing Partnerships – gaining competitive advantage by collaboration and partnering” written by Dr Andrew Humphries and Dr Richard Gibbs. Both men are highly qualified to address this issue. Andrew is currently CEO of SCCI Ltd which specialises in measuring commercial relationship performance. He completed a 34 year career in the Royal Air Force culminating as Head of UK Defence Aviation Logistics. Richard is a recognised expert in marketing channels and has held senior positions with Xerox and Novell Inc. The research for their PhD’s underpins much of their findings explained in this article

Gaining competitive advantage through collaboration and partnering

In recent years, globalisation and the increased sophistication of products and markets have rendered the old style of adversarial relationships between customers and suppliers as redundant. Increasingly, effective partnering is seen as a key capability of the organisation and the most effective strategy for long-term, competitive success.

Nevertheless, the success or failure of such alliances covers a broad spectrum. At one end, many alliances fail to live up to expectations. Often small issues are left unresolved and the relationship enters a downward spiral from which there is no recovery. At the other end, the value that the parties to the alliance foresee drives both sides to invest, to innovate, to achieve customer focus and to communicate freely in a virtuous spiral of collaboration. Most partnerships exist somewhere between these two extremes and it was the need to determine their position on the spectrum that led Humphries and Gibbs to combine their research to identify the important drivers of relationship performance and to develop the diagnostic tools for their management.

Three “super factors” – collaborative innovation, partnership quality and value creation emerged from the analysis and when plotted against value judgments of alliance success, eight discrete relationship “personalities” were defined. These are the G & H Partnering Types They represent the company partnership equivalent to the Myers Briggs personality profiling. Knowing your specific partnering type enables you and your partner to take tactical and strategic decisions to maximise the value that both parties derive from the relationship.

Through collaboration, business can improve operational processes and reduce costs and time to market. Strategic alliances can be used to bring new skill sets and capabilities into the organisation and enable objectives to be accomplished that would not be possible if acting alone. Most importantly, partnerships can be a long-term source of competitive advantage resulting in higher returns on investment, better gross margins and above average levels of growth. Despite the proven benefits of partnering, many alliances fail to live up to expectations and some 40% are dissolved in their first year.

Part of the reason has been the lack of management tools that can measure the state of the relationship rather than historical and specific process outcomes. The latter are lagging indicators of what has happened or what has not happened. They reflect the business needs of one side of the partnership only and interpret the results in the context of the single firm. If the objective measures of performance – quality, delivery, cost etc – are below target, the supplier is held to account and conflict ensues that further damages the relationship. The downward spiral begins.

What has been needed are better management tools, better ways of understanding and discovering the root causes of the partnership challenge and a way of highlighting those actions that will allow the partners to achieve their aims and objectives as efficiently as possible.

 

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