The Impact of Cultural Factors in Strategic Alliance Success
Research conducted by Alliance Best Practice Q4 2012 – Q1 2013 for a global Pharmaceutical Company
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What is Alliance Best Practice (ABP)?
ABP is a research consultancy specialising in business to business alliances
Alliance Best Practice
Alliance best practices are the identified practices that research has shown lead to optimal alliance results
ABP is a group of over 20 international alliance experts able to cover the world and work in multiple languages
ABP is dedicated to: discovering, developing and disseminating best practices for its clients
It does this through the ABP Database (ABPDBTM)
Purpose and Conduct of Benchmark
ABC Ltd wished to understand the impact that cultural factors (both personal and organisational) have on strategic alliance relationships.
Specifically it (ABC) was looking to discover whether there was any correlation between high Cultural Critical Success Factors (CSFs) and overall alliance performance.
Alliance Best Practice Ltd (ABP) captured data from 93 alliance related executives; 41 people in ABC and 52 from partners.
The benchmark shows a significant correlation between high cultural scores and alliance performance.
Partners benchmarked were: PPD, Quintiles, Cognizant, Covance, ICON, and RPS.
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83.50% correlation between Cultural CSFs and alliance performance
Cultural Scores v Alliance Performance
Partner A Partner B Partner C Partner D Partner E Partner F0
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ABCPartnerPerformance
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Cultural CSF scores are an accurate predictor of alliance success
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Commercial Technical Strategic Cultural Operational
Co1 Business Value Proposition (BVP)
Co2 Due Diligence
Co3 Optimum Legal / Business Structure
Co4 Alliance Audit
Co5 Key metrics
Co6 Alliance reward system
Co7 Commercial cost
Co8 Commercial benefit
Co9 Process for negotiation
Co10 Expected Cost value ratio
T11 Valuation of assets
T12 Partner company market position
T13 Host company market position
T14 Market fit of proposed solution
T15 Product fit with partners offerings
T16 Identified mutual needs in the relationship
T17 Process for team problem solving
T18 Shared Control
T19 Partner accountability
S20 Shared objectives
S21 Relationship Scope
S22 Tactical and strategic risk
S23 Risk sharing
S24 Exit strategies
S25 Senior executive support
S26 B2B Strategic alignment
S27 Fit with strategic business path
S28 Other relationships with same partner
S29 Common strategic ground rules
S30 Common vision
Cu31 Business to business trust
Cu32 Collaborative corporate mindset
Cu33 Collaboration skills
Cu34 Dedicated alliance manager
Cu35 Alliance centre of excellence
Cu36 Decision making process
Cu37 Other cultural issues
Cu38 B2B Cultural Alignment
O39 Alliance process
O40 Speed of progress
O41 Revenue flow
O42 Business plan
O43 Communication
O44 Health check
O45 Alliance charter
O46 Change mgt.
O47 Operational metrics
O48 Operational alignment
O49 Exponential breakthroughs
O50 Internal alignment
O51 Project plan
O52 Issue escalation
Common Success Factors : Best Practices
There are currently 52 CSFs in 5 categories
Background
Critical Success Factors fall into 5 separate categories or dimensions.- Commercial – Co1 – Co10,- Technical T11 –T19,- Strategic S20 – S30- Cultural Cu 31 – Cu 39- Operational O40 – O52
This summary report focuses on one of the five dimensions – the Cultural Dimension.
Normally scores would be captured from both / all parties to the relationship to be able to compare results and identify areas of misalignment.
White space on a graph shows opportunity for development.
Understanding of misalignment of scores is a good starting point for relationship development.
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The Questions asked
CSF Question
Cu31What is the degree of trust in the relationship and how is this evidenced? (Please place score in Score Box and Evidence in Comments box.
Cu32 What is the level of maturity of alliance thinking in your organisation?
Cu33What degree of collaboration skills exist in this relationship on both sides and how have these skills been applied in your organisation? (Please place score in Score box and Evidence in Comments box).
Cu34Is there a dedicated relationship manager role identified to work on this alliance from both sides?
Cu35Is there a dedicated alliance department in your organisation to whom you can turn for help in this and other alliances?
Cu36How long is the decision making process in your partner’s organisation and how does this compare with decision making in your organisation? (Please place score in Score box and comparison comments in the Comments box).
Cu37 Are there any other cultural issues which ‘get in the way’ of business as usual?
Cu38What degree of Business to Business cultural alignment exists and what measures were used to ascertain this? (Please score in Score box and evidence in the Comments box).
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Responses were received from; 41 people in ABC and 52 from partners
ABC and Partner Cultural Alignment Overall
Page 8 BIC = A leading Pharma + CRO alliance
ABC
Alignment / Misalignment Areas
Factor ABC Partners Dif
Dedicated Resource 51 77 -26
Cultural Alignment 47 59 -11
Decision Making 48 55 -7
Alliance Maturity 60 66 -6
B2B Trust 58 62 -4
Partnering Skills 60 60 0
Centre of Excellence 68 66 2
Cultural Issues 63 57 7
Totals 57 63 -6
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Strengths / Weaknesses Areas
Type ABC Partners Comb
Centre of Excellence 68 66 67
Dedicated Resource 51 77 64
Alliance Maturity 60 66 63
B2B Trust 58 62 60
Cultural Issues 63 57 60
Partnering Skills 60 60 60
Cultural Alignment 47 59 53
Decision Making 48 55 52
Totals 57 63 60
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Partner Scores (Range)Relative Scores
A B C D E F G H I J K L M N O P Q R S T0
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Ptrs
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BIC
Cu31 Business to business trust
One of the most hotly debated aspects of strategic alliances. Needs to be business to business to be replicable rather than personally based (although often grows out of personal chemistry between partners).
Trust is a high impacter but is the result of a number of low impacters like; communication, information sharing, quality delivery, etc.
The incidence of business to business trust is far from common and no organisations identified in the database have a formal or credible business to business trust building model. This is due in no small part to the fact that the essence of organisational trust is misunderstood. See Trust / Competency Model
Paradoxically the impact that trust can have on relationships was almost universally identified as a critical success factor (94%) with many individuals able to cite quite clearly the commercial value of developing trust.
There has been an increasing degree of attention paid to this important area in the recent literature on alliance management (see particularly - Getting the measure of culture: from values to business performance by Prof Fons Trompenaars, PhD and Prof. Peter Williams, PhD and also Strategic Alliances between American and German companies : A cultural perspective by Khaled Abdou and finally ‘Managing Cultural Differences in Alliances’ by Pablo C. Biggs ).
The degree to which each organisation trust each other to deliver on its commitments.
Cu32 Collaborative corporate mindset
Many individual alliance managers cited this aspect as being the most difficult to deal with. Quotations such as the one below from a senior executive at Atos Origin were typical;
“We don’t do alliances very well, this is due in no small part to our historical growth, if we see an organisation that we would like to work with we don’t ally with them we buy them!”
Organisations that exhibited an immature or nascent organisational collaborative mindset tended to fall into the Stage I – Opportunistic category.
This means that they would pursue collaborations only in so far as they helped them to secure particular opportunities which were too large or too complex for them to win alone.
When that particular opportunity was secured they would then pursue another one, but there was no co-ordination of alliance activities other than those necessary to ‘win deals’.
In comparison those organisations that had reached Stage III – Endemic saw partnering not as a separate function but rather as ‘the way we do things around here’.
Such organisations regarded partnering as the core of their business and took great pains to ensure that partnering ethics and behaviours were practised throughout their organisations (e.g. Starbucks, Eli Lilly, Dow Corning, Siebel, etc).
The degree to which both organisations understand and practice partnering as an organisational competence.
Cu33 Collaboration skills
Very few organisations in the database had a coherent and integrated structure for collaboration skills development although many had individual training courses for aspects of the collaboration skill set (e.g. negotiation, inter personal skills, 360O review, project management, influencing skills, mediation, Etc.).
This is in many respects surprising given that there is a clear and strong causal link between the collaboration skills of key stakeholders and the success of collaborative relationships.
It appears that the reason might be that no association or trade body has sufficiently articulated a comprehensive framework of skills to describe the competencies of professional collaboration.
However, evidence suggests that such initiatives are now gaining ground. E.g. the ASAP Certification programme and the underpinning competencies framework. See Alliance Competency Framework.
The degree to which the individuals in both / all parties to the alliance have been trained to use a set of defined collaboration skills.
Cu34 Dedicated alliance manager
This factor is very often a defining one in the understanding of a strategic alliance. If the role exists then it is a strategic relationship if it does not then it is not.
The actual title can be many and varied; relationship manager, account manager, sales manager, key account manager, etc.
In many respects this is the simplest and easiest best practice factor to track. There is empirical evidence that when dedicated resource is allocated to a strategic relationship that
relationship improves by between 50% and 80% defined in the success terms of the individual relationship (e.g. more products sold, greater influence with introducers, quicker time to market, better profit margin, greater gross sales, higher revenue, etc.).
Given this fact it is surprising that so many organisations continue to expect individual managers to run multiple alliances.
The reason appears to be a damaging catch 22 situation. When a manager asks to be allocated full time to a relationship the common answer from executive management appears to be ‘When you can generate x amount of increased revenue I will allow you to go full time on the relationship’.
However, the problem is that without being full time the individual manager will never have the time available to produce x revenue, let alone develop a coherent long term growth plan for the relationship.
“I spend all my time running from one of my three so called strategic alliances to the next desperately fire fighting operational issues which arise and then I get criticised by my manager because I haven’t developed a coherent strategy for each!”
The existence of an individual dedicated to the day to day management of a strategic alliance.
Cu35 Alliance centre of excellence
Best practice examples include both back office and front office functions.
There was overwhelming evidence from the database that when organisations start to share alliance knowledge amongst practitioners performance goes up (Incidence 46% Performance improvement 87% increase on average).
These centres were by no means all physical entities, some were ‘virtual’ groups of multiple disciplines. Yet further not all were formally established some were clearly operationally started as a common observation of need;
“We started a regular teleconference call once a month to share experiences on our alliances. To be honest at first it was just a chance to share frustrations but pretty soon people began to share experiences or tips and tricks that had worked well for them that others could use. We started to share documents and templates and it really helped with our day to day jobs!”
There was a common misconception in Hi Tech alliances that the technical centres of excellence that were formed to test technical solutions was the same as alliance centres of excellence this was clearly erroneous although there were aspects of technical collaboration that shred common best practices with alliances e.g. communication models, operating protocols, budgetary sign off procedures, etc.].
The existence of an actual or virtual group of people tasked with developing, coaching, and implementing alliance and partnering standards.
Cu36 Decision making process
Disparate rates of decision making speed can be the most frustrating incidence of cultural misalignment.
Most commonly shows up where there is a large size disparity in companies.
For example, generally in a large multinational organisation, a significant decision needs to be vetted and validated by a number of management levels; whereas in a small organisation the same decision can be made quickly by a handful of senior executives sitting together or communicating remotely via telephone.
The problem is not so much that both organisations take different timeframes to make decisions; it is that both sides misunderstand the nature of the other organisation.
In the large organisation (not unreasonably) managers have been told to generate a traceable audit trail of authorisation thoroughly through multiple levels of senior executives; whereas in the smaller, more agile company, risk-taking and entrepreneurship is generally encouraged.
The manner in which this factor affects relationships is in the misconception of either side to the pace and depth of consensus needed to affect a successful decision. (e.g. Accenture / BT and Delta / Air France)
The process, speed and quality of decision making in both / all partner organisations
Cu37 Other cultural issues
In every strategic alliance relationship examined there exists some specific aspect of both organisation’s culture which give problems with the relationship.
Sometimes this can be the nature of communication, in others it can be an organisational reflection of arrogance or aggression; yet again it can be the attitude of organisations to escalating problems (in some organisations this seems perfectly reasonable, whilst in others it is seen as a fast track to proving that you can’t do your job and leads directly to an early exit from the organisation);
Whatever the particular instance there is a highly repeating occurrence in the database of specific cultural issues providing specific problems (over 86%).
The existence of any other cultural aspects of your partner’s organisation that ‘gets in the way of doing business’
Cu38 Business to business cultural alignment
In those organisations that recognise organisational culture as an in-house enabler or barrier to progress with partnership; many of them have developed their own language to describe their own cultural norms.
They use this language as a framework to identify to potential partners the culture to which that partner will be aligning and they actively encourage the partner to consider their own organisation’s culture along similar lines.
There is good evidence that such an active and early cultural alignment helps minimise the delays, misconceptions, and damaging perceptions commonly found in the cultural dimension.
In those organisations that do not already have a cultural alignment language or framework many are now actively turning to external advisers to help them with the situation (e.g. SAP and Siemens and Air France / Delta).
See Identity Compass
The ability of each organisation to an alliance relationship to understand the business culture of the other and align their own business culture to it for best effect.
Further Details
For further details please contact;
Mike Nevin
Managing Partner
Alliance Best Practice Ltd
Web: www.alliancebestpractice.com
Office: +44 (0)1675 442490
Mobile: +44 (0)7766 752350
E Mail: [email protected]
OPTIONAL FURTHER SLIDES
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Partner Range
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VST Methodology Analysis (Example)
Stage CSF Score Attention Impact
Vision
Common Vision 50 Y Long
Formal Business Plan 50 Y Short
Alliance Process 75 Y Medium
MOUP 0 Y Short
Skills
Collaboration Skills 50 Y Medium
Decision Making Process 48 Y Medium
Communication 23 Y Long
Collaborative negotiation 23 Y Medium
Trust
Trust 20 Y Long
Cultural alignment 83 Y Medium
Operational Metrics 50 Y Short
Operational Alignment 50 Y Short
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ABC Range
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Suggested Next Steps
ABP would suggest the following immediate next steps:- Ratify the scores with a range of key stakeholders from the partner organisation
(increase the data collection points).- If the same score patterns persist then take immediate action on the RED areas:
communication, collaborative negotiation and trust- Keep a watching brief on the AMBER areas: Decision Making Process and track
impact.- Celebrate the relationship strengths GREEN areas: Cultural alignment.
- Further information: white papers, training courses, templates and research reports exist in the ABP database to guide members in the best practices in each of these areas.
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Partner ‘Intimacy’ Spectrum
Tran
sact
ional
Commodity Price Interchangeable
Product Highly specified
deliverables Buy from and sell to
Shared risks & investment
Deeply integrated Mutually
interdependent Breakthrough
market value
Some customization Flexibility/levels of
service Special knowledge Buy from, sell to and
sell with (GTM together)
Customized/ individualized
Process & data integration
Solutions oriented Shared rewards Greater cost value
leverage
Colla
bora
tive
Str
ateg
ic
Enhan
ced
0 = None 25 = Low 50 = Median 75 = High 100 = Perfection
Both partners need to define the topology of the progression and the ‘value of the journey’
LowValue
HighValue
LowIntimacy
HighIntimacy
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Alliance Best Practice Framework
There are 52 Critical Success Factors (CSFs)
identified from examining over 27,000
international strategic alliances.
By combining the principles established in
the CSFs a range of Best Practices (BPs)
have been developed
‘Tools’ refer to any documents that help users apply the Framework knowledge.
The Alliance Maturity Model TM establishes: current situation, (benchmark) current and future challenges, the nature of the journey’ and success strategies for cost effective progress.
DiagnosticsDiagnostics
MOUPMOUPBenchMarks
BenchMarks
Relationship OptimisationRelationship Optimisation
The ABPDBTM with 180,000+ entries lies at the heart of the Framework
ABPDTM
The Alliance Maturity Model AMMTM
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Stage IIStage I Stage III
• Planned investment in partnering capability
• Wide scale use of full range of alliance capability building
• Close integration of sales, marketing, innovation etc
• Separate corporate efforts in different areas of business• Strategic partners developed• Effort begun to adopt “best practices” in alliance
management
• Alliances are opportunistic• Each alliance is a ‘stand
alone’ venture• Alliances are not part of the
company’s “Standard Operating Procedure”
Company 2
Company 1
Individual relationship benchmark example
Generally consistent scoring
Client scored lower (usually) than the Partner
Differences were perceived in the following areas;- Co1 Defined business value
proposition- T2 - Partner company market
position- T3 - Host company market position- S7 – B2B Strategic Alignment- Cu8 – B2b Cultural Alignment- O2 – Speed of progress so far- O12 – Internal Alignment
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Co2 Co3Co4
Co5Co6
Co7Co8
Co9
Co10
T11
T12
T13
T14
T15
T16
T17
T18
T19
S20S21
S22S23
S24S25S26
S27S28S29
S30Cu31
Cu32
Cu33Cu34
Cu35
Cu36
Cu37
Cu38
O39
O40
O41
O42
O43
O44
O45
O46O47
O48O49
O50O51 O52
Alliance Capability Model (ACMTM)
Alliance Capability Alliance Performance
Leadership
People
Processes
Commercial
Key Performance
Results
Governance Technical
Resources Strategic
Structure Cultural
Technology Operational
Internal Benchmarking on an Ongoing Basis : Continuous Improvement Cycle
Alliance Maturity Model (AMMTM) Alliance Best Practice Index
External Benchmarking Alliance Best Practice Database (ABPDTM)
The goal is to establish partnering as an organisational competence
KEY MESSAGES: Investment in training alone will not deliver alliance competence (AC) Alliance managers need ongoing support to produce best results Building capability is essential to delivering results AC = Competitive business advantage