Teaming with outside partners to hit the target

Collaboration with external companies, including competitors, can take many forms. Such relationships require agreeing on the extent of the collaboration, defining shared goals and a relationship built on trust
By Rod Newing

Financial Times, 8 November 2006

Blinded by the potential returns from a new idea or business concept, organisations often rush headlong into implementation before properly considering the ramifications. Unfortunately, finding the right balance between responding quickly and responding well is not always easy, especially if you are collaborating with a competitor.

“Collaboration is often driven by an entrepreneurial idea that sprouts from a Eureka moment,” says Matt Parkinson, chief operating officer at Catalysis a consultancy. “Parties come together convinced that they can deliver greater than the sum of their parts. However, implementation requires a different set of skills than the creative skills of the entrepreneur. Even worse, the sponsoring entrepreneur often becomes distracted by their next great idea.”

Everybody agrees that the single most important success factor in collaborating is for all parties is to be absolutely clear of not just the common objective, but also each party’s individual objectives. Success only follows if these objectives align into a win-win situation for all parties.

“Managing any collaborative process is very difficult because there are so many different points of influence and potential upset,” says Simon Rawling, global head of PIPC, a consultancy. “Managing risk is essential and it has to be planned and executed with genuine synergy and a common goal. Collaboration should not be used to cut corners, get something on the cheap or to deflect blame on to another business.”

Whereas these considerations are important when collaborating with third parties, they become critical when working with competitors. Common goals with competitors are not hard to find, and include issues such as market growth through standardisation, sharing of resources, exchanging products, cross-selling to each others’ customers and joint research.

Edouard Croufer, head of the chemical and pharmaceutical practice at Arthur D Little, a consultancy, points to a number of alliances between innovative European pharmaceutical companies that have difficulty entering the huge US market. “They collaborate with global competitors on a particular product for the life of the patent,” he says. “It is a very efficient and economic way to penetrate markets where they would have difficulties on their own.”

Obviously, initiating talks with a major competitor is not easy. Telecommunications company Orange has alliances with several competitors, including the Freemove Alliance with Telecom Italia Mobile and T-Mobile in Europe, and with Cingular Wireless in the US. Although consumers mainly want international roaming, multinational companies want a deeper service, including a single point of contact, streamlined contracting and volume discounts. Orange and T-Mobile are fierce competitors in the UK and the Netherlands, so there are strict rules in the Alliance about confidentiality, competition and who leads on business and who does not.

“The idea of the Freemove Alliance was initiated at international level, which oversees individual countries, to sort out the rules of engagement,” says Derek Austin, European head of enterprise marketing at Orange Business Services. “When dealing with competitors you need to be very clear on your legal position and the extent of the collaboration, in terms of particular types of customers and particular types of product. Be very clear on the areas you are talking about collaborating in and the areas that are definitely excluded.”

Capgemini the consultancy, believes that it has achieved good skills in working with others. For instance, on its outsourcing contract with Her Majesty’s Revenue & Customs, one of the world’s largest, 60 per cent of delivery is through third parties, including natural competitors such as Accenture, BT and Fujitsu, “On the face of it, giving revenue, market share or references to our competitors seems a silly idea,” says Martin Cook, Capgemini’s global sales officer, who originally set up and managed the deal. “However, there is a premium on being able to work with others to better meet the strategic need of the client. Doing so successfully is a fantastic reference.”

Obviously, the biggest issue when working with competitors is establishing trust. Early meetings should be at a high level and be aimed at setting out the overall guidelines and boundaries. “Start to get to know each other and proceed stepwise,” advises Mr Croufer. “Then expand it to bring in experts later.”
Orange’s Mr Austin believes that trust comes from solid agreement on what is acceptable and what is not. The “rules of engagement” in countries where you compete must be very strictly documented and enforced. “We started cautiously, but trust built-up as time passed and things were delivered and agreements were maintained,” he says. “ People are just as keen and focused now as they were three years ago to make sure we don’t breach any of the agreements, but there is a much easier atmosphere now.”

Mr Cook warns that there are many pitfalls that can prevent a successful relationship being established, such as: woolly objectives; trying to pick one player off against another; being insufficiently transparent; and deliberately not working to build up trust. In order to succeed, he advises parties to: focus on their common objectives; set up transparent operating procedures; involve all partners in designing solutions; and give them access to the information they need to do a good job. “If you have in the back of your mind that you would like them to fail, to show that you are better, then it won’t work,” he says. “Above everything else you have to be committed to their success.”

Collaborating with third parties is excellent for harnessing different skills and exchanging ideas. Alex Shephard, group account director at Space, a marketing agency, points out that the output from collaborative thinking is significantly greater, and potentially much more powerful, than the sum of its parts. “Collaboration allows smaller, typically younger, organisations to gain a larger share of ‘voice’ than they might otherwise enjoy,” he says. “The larger, more traditional, agency leaders get to see a new way of working, with the potential for reinvigorating a potentially staid process and blinkered way of problem solving. Individuals need to be open to casting aside their usual ways of working and receptive to an unfamiliar environment in which different does not have to mean worse.”

Although all representatives must be able to contribute on an equal footing, particularly during the initial planning process, some parties will play a greater role than others in implementation of individual elements. “Be confident that you are at the table on merit and be relaxed that your collaborators are there for the same reason,” advises Mr Shephard. “They are not a threat. Also, do not feel prevented from bringing in an additional third party if specific competency is required. This is an indication of maturity, not inadequacy.”

As Catalyst’s Mr Parkinson puts it: “People see the pound signs, but don’t always understand one another’s priorities. With a typical success rate of three in ten, the opportunity cost of the effort that it takes to make a collaboration work should not be overlooked. There is a strong correlation between project success and failure and the time parties invest upfront in agreeing ground rules and working practices. Each party must know what success will look like to the other parties.”

© Financial Times