The case for partnering

© 2011 IBM Corporation

Partnering Relationships

The Case for Investing in the Relationship

10 January 2011


Table of Contents

1. Value of Effective Partnering Relationships

2. Framework for Effective Partnering

3. The Partnering Journey

4. References

3 May 20232

A case study is available and published as a separate document


The IBM Global CEO Study has been tracking the growing importance of partnering

3 3 May 2023

0%

20%

40%

60%

80%

100%

Innovation Priorities(operating margin growth CAGR)

Underperformers Outperformers

% o

f res

pond

ents

by

inno

vatio

n pr

iorit

y

Products

Services

markets

Operations

Business Model

• Organization Structure Changes (66%)• Building Strategic Partnerships (53%)

2006 – Strategic Partnerships as a significant source of business model innovation

2010 – Partners help drive speed and dexterity, moving costs from fixed to variable

Be “glocal”: Leverage the world through partners, constantly tune your operating model – global where possible, local where necessary.

Simplify whenever possible: Simplify interactions with customers, simplify products and services by masking complexity, simplify for the organization and partners.

Manage systemic complexity: Put complexity to work for your stakeholders, take advantage of the benefits of analytics.

Promote a mindset of speed and flexibility: Act quickly, push execution speed, course-correct as needed.


Annual Contract Value

Customer satisfaction Delivery of value added projects on time

and budget Quick response time to requests Innovation and thought leadership Resources freed for more productive work

Resource waste due to inability to trust / delegate

Greater need to monitor and audit Frequent conflict escalation Low customer satisfaction Ineffective execution and follow up Lack of clarity in roles & responsibilities Decisions based on limited information

+15%

-15%

0%

When asked to compare the value at stake between a good and poor outsourcing relationship:

Over 80% of private sector buyers

Over 50% of public sector buyers

Over 60% of providersFelt that at least 30% of the annual contract value was at risk

High-performing relationships and governance have a direct financial benefit to IBM, and the client

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Source: Vantage Partners


But, as the Global CEO Study also shows, fundamental change is required to succeed

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Extent of Fundamental Change Needed Over the Next Two Years

Fundamental change

65%

Moderate change

22%

Little or no change

13%

Less than half have successfully managed fundamental change before

Business model innovation, including building strategic partnerships, matters

External collaboration for innovation is essential

Collaboration is recognised as indispensable to innovation - “Without collaboration, innovation would be impossible.”

Source: IBM Global CEO Study 2006


Change Needed Past ChangeSuccess

However, the gap between the capability and the challenge ahead is growing

The Change Gap* Triples

* Difference or ‘gap’ between expected level of change needed and past success in managing change

“We have seen more change in the last ten years than in the previous 90.”Ad J. Scheepbouwer, CEO, KPN Telecom

Change Needed Past ChangeSuccess

2006 2008

Source: IBM Global CEO Study 2008; n (2006) = 709, n (2008) = 1104

Change NeededNo/limited Change

Moderate Change

Substantial Change

No/limited Success

Moderate Success

Successful

Past Change Success

22%CHANGE GAP*8%

CHANGE GAP*

6%11%

83%

19%

20%

61%

13%

22%

65%

12%

31%

57%

6 3 May 2023

© 2011 IBM Corporation7

Poor Communication

Breakdown in trust

Negative partisan perceptions

Festering conflicts

“Fingerpointing”

Disrespect/coercion

Stress …

Foremost Causes of Partnership Failure

Poor or Damaged Relationships Between Firms

Bad Legal and Financial Terms and Conditions

Poor Strategyand Business

Planning37%

11%

52%

* Source: Ertel, Danny, Jeff Weiss, and Laura Judy Visioni. Managing Alliance Relationships - Ten Key Corporate Capabilities:A Cross-Industry Study of How to Build and Manage Successful Alliances. Cambridge, MA: Vantage Partners, 2001.

64%

6%

30%

Signs of critical working relations:

Research confirms relationship issues as the prime reason for partnering failure – a failure to manage change

A cross industry study conducted with over 120 companies revealed the strong need to manage relationships professionally and systematically

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Operational Attributes

• Service delivery … Managing SLA’s• Technology Management• Processing new service requests • Reporting and billing • Prices, fees, rates• Management, Operation, Security of IT

assets ….

• Trust and mutual respect • Ease of working together• Bridging cultural diversity• Openness and quality of communication • Collaborative decision making• Fairness…

Operational Performance Impacts Relationship Characteristics

Relationship Attributes

Relationship Quality Impacts Operational Performance

Issues are often seen as performance related, but root causes are more often relationship related

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Table of Contents




4. References

3 May 20239



Effective partnering depends on alignment of long-term and every-day relationship aspects

SharedKnowledge

MutualBenefits

Linkage Pre-disposition

DistinctiveCompetencies Commitment

CommunicationRoles & Responsibilities

Culture-in-action

FinancialRisk SharingInnovation

Shared GoalsMotivationMeasurements

TrustAttitudesAssumptions

ProcessGovernance

Social

SkillsDecision-makingProblem-solving

Relationship in ActionOperational Day-to-Day

Relationship over TimeStrategic Long-Term

Partnering Framework

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Transactional Value Add Special Unique(market exchange) (performance contract)

T V/A S U

Source: Prof. Henderson, Vantage Partners

• Commodity goods and services

• Value derived from low price and convenience

• Relationship not really a differentiator

• Eg. Utilities, fast food

• Customized goods and services

• Value derived from stability and economies of scale

• Some customer-supplier intimacy and knowledge

• Expertise will overcome unexpected contingencies

• Eg. Tax Consultant, Doctor

• Complex or innovative goods and services

• Value derived from optimization across organizations

• High degree of customer-supplier intimacy and knowledge

• Eg. Auto value chain

• High complexity or one of a kind goods and services

• Value derived from creating a new organization

• One Team – conscience seamless integration of capabilities

• Eg. Formula 1 team

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Partnering relationships exist to go beyond transactional relationships, but to what extent?

11


Think of relationships as a continuum, with a series of steps required to achieve the ‘ideal’ state

Transactional

Value Add

Special

Unique

Self interest is predominant

Cross-company teams are formed to enhance value

We share risks and rewards and our key people have relationship-oriented incentives

We are one organisation, value is totally derived from our inter-dependence

IBM is able to leverage its expertise to drive value and resolve contingencies

Value is enhanced for both of us through innovation and continuous improvement

0

1

2

3

4

5

3 May 202312


By looking at each dimension we can build up a matrix, serving as both Shared Intent (Vision) and Roadmap

Mutual Benefits Commitment Pre-

DispositionShared

KnowledgeDistinctive

Competencies Linkage

Level 0 - Transactional

Level 1 – Building Capability

Level 2 – Value Add

Level 3 - Special

Level 4 – Mutual Value Creation

Level 5 - Unique

Vertical Progression

Horizontal consistency

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Example of a Roadmap / Maturity Model

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Mutual Benefit Commitment Pre-disposition Shared Knowledge Distinctive Competencies Linkage

5

Both parties achieve above industry average profit,

growth & enhanced brand reputation. The relationship is

known as a driver of value.

Incentives are aligned on relationship performance and

outcomes. Goal setting is integrated within each others corporate planning process.

Leaders are role models. Team members are

indistibguishable from each other. High-performance

teams are the norm.

Knowledge is viewed as a shared asset to be grown,

nurtured, harvested and re-used. ICAP is a source of

competitive advantage.

Resources are treated as a shared pool to ensure the most

appropriate resources are deployed. Personal &

professional development is valued by all employees.

Leaders from both parties are highly involved with communications. All

processes are defined and subject to continuous

improvement.

5

4

Value is enhanced for both of us through innovation and

leveraging intellectual capital. Centres of competence are

established.

The partnering team are proactively involved in

genrerating strategic opportunities.

Self organising teams form around opportunities.

Collaborative relationships and teaming are extended into

the value net.

Thought leadership drives opportunites. Work with each

other's LoB and extended value net extends knowledge

networks.

Specialist competencies as required are sourced from the partnering team, wider partner

organisations and extended value nets.

Common organisation infrastructure is deployed

across partners. Information is freely available through

common access capabilities.

4

3

Complex projects are routinely performed under

shared risk/reward or incentive arrangements, enabled by a disciplined

benefits realisation process.

Relationship-oriented behaviours and individual

development are institutionalised in both

partners performance management processes.

Leaders undertake team development initiatives. Teams are beginning to

develop high-performance characteristics. Trust is high.

Intellectual capital is regularly harvested from projects and initiatives and shared by the

partners. Teams regularly re-use ICAP.

Cross organisation process requirements drive skill

development. Team members are drawn from partners on the basis of skills and capabilities.

Regular professional and social interactions across

organisations occur. Leaders are highly visible and engaged

with both partners.

3

2

Cross-company teams are formed to develop new

opportunities and enhance value through continuous

improvement.

Shared goals are developed and agreed. Performance is monitored and proactively

managed by the Governance Team.

Cross-company teams operate across business as usual

operations and are routinely formed for specific

assignments.

Teams regularly undertake lessons learned instead of

assigning blame and fingerpointing. Learnings are

shared by the partners.

Skills / capabilities, including partnering relationship skills,

for each role are mapped. People have individual

development plans.

Specific processes to improve the partnering relationship performance are developed

and deployed by cross-company teams.

2

1

Economies of scale primarily drive value. IBM is able to

leverage its expertise to provide supplemental value and resolve contingencies.

Line of Business needs and expectations are known and

communicated throughout the partnering team.

Team members are aware of the new way of thinking and are beginning to collaborate

on tasks.

Information is shared across organisations. Team members share information relevant to the task and development of

the team.

New roles and responsibilities re defined and documented.

People understand the purpose and required outcomes.

Communications across organisational boundaries are ocurring on a regular basis.

Leaders are involved in briefing partner groups.

1

0Self interest is pre-dominant. Both parties seek to maximise their benefit, with benefit sharing a rarity.

There is a focus on the contract. Contract scope and service standards are frequent

topics for negotiation.

There is a win/lose orientation. Most work is

subject to competitive tender and often protracted contract

negotiations.

Information is protected. Mistakes and consequent

learnings are hidden.

Skills are defined by contractual requirements. The same skill sets often overlap as IBM operations and client

verifier.

Contact between the organisations is largely

formal. There are few social interactions across teams.

0


The Roadmap can also be used to measure progress or relationship ‘maturity’

5 5

4 4

3 3

2 2

1 1

25% 50% 75% 100% 25% 50% 75% 100% 25% 50% 75% 100% 25% 50% 75% 100% 25% 50% 75% 100% 25% 50% 75% 100%

Distinctive Competencies LinkageMutual Benefit Commitment Pre-disposition Shared

Knowledge

3 May 202315

© 2011 IBM Corporation16 03/05/2023

A Relationship Alignment Survey measures the health of the relationships over time

Purpose and Objectives Monitor whether the relationship is developing

in the right direction Identify emerging weaknesses / pain points Measure relationship progress over timeDeliverables Graphs and statements showing the

relationship health and in particular the degree of alignment

Average, median and mode scores with standard deviations and gaps

Conclusions and RecommendationsLogistics Web based multiple Choice questionnaire Participants selected by IBM and partner Takes 15-20 minutes to fill in Repeat approximately every 6 - 12 months,

ideally linked to an Annual Planning cycle

Relationship Management – Interview for Relationship Launch — For Client / IBM Interviewees

IBM

Former Client

Former IBM

Client

Executive yes no

Stro

ngly

agr

ee

Agr

ee

Slig

htly

agr

ee

Slig

htly

dis

agre

e

Dis

agre

e

Stro

ngly

dis

agre

e

Mutual benefits

Client and IBM agree that they are together creating the value they expected

People act in a manner that is consistent with the purpose of the relationship.

Client and IBM share fairly in the risks and rewards.

Innovation (new ways of creating value) is one of the outcomes of the relationship which benefits of both organizations.

Client and IBM are entering a new type of cooperation.

Client and IBM need and want the relationship to be successful (Image).

I understand Client’s/IBM’s overall business strategy and vision (where they are going).

I understand Client’s/IBM’s operating model (how they are getting there).

I understand Client’s/ IBM’s goals in outsourcing.

I know how Client/IBM defines and measures success.


Table of Contents




4. References

3 May 202317



Strategic partner / outsourcing deals almost always involve a handover from deal makers to implementers

OpportunityDevelopment

Solution Design

DealSigning Transition Continuous

Improvement Growth

Relationship Charter

Contract

Relationship Goals and

GovernanceInnovation

Stabilise Operations

Continuous Improvement of Operations

Value Add

Strategic Partner / Outsourcing Program Lifecycle

The Artefact

The Intent

IBM Focus of Activity

Partner ‘Expected’ Activity

3 May 202318


Relationship alignment is important throughout the lifecycle, but so much easier if started with ‘the intent’

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Define the Relationship

Intent

Joint Planning & Governance

Execute Plan& Measure Outcomes

Monitor Relationship Health & Maturity

Ideal to start at ‘Solution Design and Deal Negotiation’ stage• Captures intent at source• Provides effective handover to implementation teams• Creates momentum during ‘honeymoon’

Start point for ‘troubled’ relationships• Identify what is wrong• Usually after a number of

failed initiatives to improve• Usually after high turnover

of leadership of both partners

Start point for operational issues• Intractable

performance issues• Usually address

symptoms• Initiatives burn out

quickly

Relationship Alignment Workshop

Joint teams drive priority initiatives

Relationship Alignment Survey


“adherence to process produces consistent

results, decreases risk”

“minimizing and reducing costs is

high priority”

“we identify and present the best option for

achieving desired results”

“business controls, policies and measures

are important management tools”“customer service

orientation, even to point of heroics” “a single approach is

most efficient and effective”

“achieving results is more important than following consistent procedures”

“achieving schedule is most important”

?

“we are a family”

“broad involvement in decision making”

Partner A: “client” Partner B: “outsourcer”

People will respond to business scenarios with what is “right” in the culture of their company

Each company brings their own set of business practices, many of which will be in conflict with those of the other company


?

Situation: A leader from Partner A has requested a due date on a project that a leader from Partner B believes it significantly aggressive and is likely to be missed. How is each leader viewing the situation?

Partner A should be open to an alternative

date or be willing to change the

requirements

Partner A should understand that

processes cannot be compromised since it will increase cost and

risk

It is vital that we follow “tried and true”

approaches since this environment is complex

Due date is vital due to its impact on customers so Partner B should do whatever it takes

Partner B should be willing to forgo certain steps of its processes to make this happen

To change this decision, we need to involve a broad group of stakeholders and run the risk of unacceptable further delays

Partner A: “client” Partner B: “outsourcer”

Reconciling “right Vs right” responses is critical so people know how to respond to business scenarios


Business Practices: Are customary, habitual or

consistent way that work is performed and adhered to by members of the same organisation

Include intangible, subtle and difficult to define aspects of how the work is undertaken that may be driven by underlying mindsets, assumptions, beliefs, norms, styles, and customs

Are more often “caught” than “taught”

Are often not well documented so they are learned through mentoring, coaching, and watching others be successful – and unsuccessful

Business practices are the unwritten rules that drive expectations and actions within organizations

Right Vs Right Identify business scenarios to which

the response may be ambiguous or not well defined

Map out the response that both partners agree should be the standard business practice

Describe the business scenario and business practice response in narrative form

Describe how the business practice is different to a partners normal culture and why the changed business practice is important

Communicate to people and create an easy to access reference point, e.g. Intranet

© 2011 IBM Corporation23 03/05/2023

Initially the change program will focus on enablement as a series of phases - align, enable and perform

Align Strategic Intent

Enable Organisational Frameworks Perform Culture

Get the Basics Right• ‘Table stakes’ -

consistently achieve contracted outcomes

Relationship Alignment Workshop

• Relationship intent & Vision

• Joint Objectives• Define culture• Governance

• Align KPIs• Joint Planning• Reconcile right Vs right

business practices• Document & Improve

Processes• Measurement• Communications

Strategy• Reporting

• Communications• Deploy joint plans• Leadership• Roll out business

scenarios• Integrate into BAU• Feedback cycles


Subsequent cycles are more driven by Roadmap priorities and relationship health requirements

24 3 May 2023

Mutual Benefits Commitment Pre-

DispositionShared

KnowledgeDistinctive

Competencies Linkage

Level 0 - Transactional

Level 1 – Building Capability

Level 2 – Value Add

Level 3 - Special

Level 4 – Mutual Value Creation

Level 5 - Unique

Vertical Progression

Horizontal consistency

1 2 3 4 5 6

Q 1.5

Q 5.3

Q 2.4

Q 6.7

Q 2.2

Joint projects are staffed with skilled and competent individuals who fulfil assigned duties.

Systematic approach to jointly identify problems and address the root causes.

- ’ve + ’ve

n = 18

Q 3.6

The messenger isn’t shot when bad news is delivered.

Q 3.7Issue resolution does not turn into a “blame game” and into “finger pointing”

The organisational measurement system supports the overall purpose and objectives of the relationship.

1.67 Diff

Innovation is one of the outcomes of the relationship which benefits both organisations.

1.53 Diff

1.48 Diff

People act in a manner that is consistent with the purpose of the business relationship.

1.40 Diff

1.27 Diff

1.16 Diff

1.09 DiffPartner

Partner

Partner

Partner

Partner

Partner

Partner

The Roadmap• Sets out agreed priorities and

business outcomes• Takes into account that there needs

to be ‘horizontal consistency’ along with ‘vertical progression’

• Establishes a multi-year program, to be refined as required

Relationship Health• Focuses on the organisational and

cultural enablers• Measures current health and

identifies issues requiring attention• Monitors evolving expectations of

the relationship


A Partnering program must be actively led by the joint leadership team – with specialist support as required

IBM and Partner Leadership Team

Participate as a ‘joint IBM/Client team member

Participate in planning Support RM&G consultants

Contribute to workshop planning and preparation

Support relationship alignment surveys

Deploy relationship processes Establish and maintain

governance regime Implement and monitor plan Conduct joint relationship

management & governance planning with partner

Develop ICAP, specialist skills, facilitator, coach

Lead change,

transition to BaU, sustain culture

Relationship Alignment Consultant

Conduct in-depth data gathering, analysis and report

Design program of work Provide consulting support for

IBM / partner teams

Facilitate workshops or joint IBM / partner meetings

Conduct surveys, analyse and report results

Review plans and materials

Education Training Coaching / mentoring

Level of involvement


Table of Contents




4. References

3 May 202326



IBM’s Relationship Alignment Approach and Method itself evolved from a collaboration

27 3 May 2023

Vantage Partners is a global management consulting firm that specialise in helping companies achieve breakthrough business results by transforming the way they negotiate with, and manage relationships with, key business partners.http://vantagepartners.com/

The IBM Institute for Business Value is the business research arm of IBM Global Business Services. It focuses on managerial and economic issues faced by companies and governments around the world, publishing between 35 and 50 major studies each year.http://www-935.ibm.com/services/us/gbs/thoughtleadership/


The Global CEO Study 2010 is the fourth biennial CEO study, building on our insights and findings over the last 6 years

1,541 CEO interviews

2010Capitalizing on Complexity

Key Findings Rapid escalation of

complexity creates need to: Embody creative

leadership Reinvent customer

relationships Build operating dexterity

2008 Enterprise of the Future

1,130 CEO interviews

Key Findings Hungry for change Demanding customers as

opportunity to differentiate Extensive business model

innovations Moving towards global

business designs

2006Innovation

765 CEO interviews

Key Findings Business model innovation

matters External collaboration is

indispensable Innovation must be

orchestrated from the top

2004Your turn!

456 CEO interviews

Key Findings Revenue growth is the

number one priority Responsiveness is a new

key competence Improving internal

capabilities is a first step toward growth

3 May 2023

The Global CEO Study 2010 can be downloaded at:http://www-935.ibm.com/services/c-suite/ceo/leadership_and_innovation.html


IBM’s book on this new approach has just been published, and it contains a chapter devoted to outsourcing

For more information about the book:http://www.tangibleculture.com/

For more information on Right vs. Right:http://www.research.ibm.com/thinkresearch/pages/2004/20040604_brain.shtml

"This is an excellent book that provides a pragmatic approach to identifying and alleviating cultural issues created when two groups of people must work together. Effectively blending business cultures is a key requirement for successful outsourcing, and most companies lack the tools necessary to do this. Companies looking to reduce outsourcing risk should follow IBM's Tangible Culture approach.“

-Lance Travis, vice president, Outsourcing Strategies, AMR Research

http://www.tangibleculture.com/

http://www.research.ibm.com/thinkresearch/pages/2004/20040604_brain.shtml

http://www.research.ibm.com/thinkresearch/pages/2004/20040604_brain.shtml


About the author...

Alan Williamson Alan Williamson is a Senior Managing

Consultant in the Strategy and Transformation practice of IBM Global Business Services. Alan has 15 years experience in partnering relationships, business transformation and organisation change across a range of industries and Government in Australia, Asia and Europe.

Alan is IBM’s lead in partnering relationships and Relationship Alignment for Australia, New Zealand and Asia Pacific

Alan authored a number of papers on inter-company relationships and was a speaker at an international conference on business collaboration.

Alan has also facilitated a post-graduate program for RMIT University and has acted as a mentor and coach, both within IBM and his wider professional network.

Alan has a Masters of Applied Science in Innovation and Service Management. His thesis, titled “Unlocking the Potential of Inter-Company Relationships” draws from hands on experience in helping companies establishing productive and healthy partnering relationships.

Alan’s partnering clients include:

Alan can be contacted at: [email protected]

3 May 2023