How smart alliances lend a hand to help midmarket growth.
By Melanie Haiken, Business 2.0 Magazine
February 28 2007: 7:24 PM EST
(Business 2.0 Magazine) -- Modest growth might have been acceptable a few years ago in the wake of the dotcom crash, but in today's competitive climate, slow and steady just doesn't cut it. Midsize companies are squeezed between startups with buzz and stock options on one side and multinational behemoths on the other. How to turn up the throttle? There's a reason "strategic collaboration" and "team building" are the catchphrases du jour. The smartest companies know it's usually unwise to go it alone. They also know who to team up with and how to forge strong relationships so everyone gets ahead. Read on for a guide to smart partnering, whether it's with your competition, your employees, or the wider community. After all, sharing is most satisfying when everyone makes money.
MAKING STRATEGIC ALLIANCES PAY OFF
Self-sufficiency may be a prized trait in our culture, but being a lone ranger can be a big mistake for a midsize company, especially in an increasingly global economy. "We're finding that we have to be better at more things than we used to have to be," says Ed Rigsbee, a corporate consultant and author of PartnerShift and Developing Strategic Alliances. "But it's impossible to be good at everything, so the key is to look for partners with core competencies that fill in your gaps."
Partner relationships can take many shapes, from simple supply-chain or distribution deals to complex joint ventures involving multiple parties. But the point is to join forces with someone whose skills or connections allow you to accomplish something bigger, faster, or better than you could on your own. As an example, Rigsbee cites the model of a buying group, in which a number of smaller distributors join together to better compete with the purchasing muscle of larger players.
One mistake many businesses make is refusing to partner with the competition for fear that it'll steal secrets or gain an advantage. It's far better to follow the oft-quoted advice of Michael Corleone: Keep your friends close, but your enemies closer. After all, your competition is your competition because you share the same goals. So why not use that common ambition to your mutual benefit? You might even find that partnering can double your success. "Nowadays," Rigsbee says, "somebody might be my competitor in the morning, and by the afternoon we might be working together on something."
PAPA JOHN'S AND SIX FLAGS
Marketing partnerships work best when two products go well together, which is certainly the case with pizza and amusement parks. Hence the multiyear strategic alliance between Papa John's pizza restaurants and Six Flags theme parks, announced last March. The partnership makes Papa John's the only pizza available within Six Flags properties, and helps Six Flags reach out to consumers at some 1,100 Papa John's restaurants located within a 100-mile radius of a Six Flags park.
The alliance will certainly boost the stature of fast-growing Papa John's. The Kentucky-based company, which started in the back of an Indiana bar in 1984, operates 2,978 restaurants in 49 states and 25 countries. The deal includes a Web and e-mail campaign promoting Papa John's to Six Flags online customers and in-park distribution of Papa John's coupons. For its part, Six Flags, headquartered in New York City, receives an undisclosed annual sponsorship payment and the chance to advertise its parks on Papa John's pizza boxes.
THE SECRET TO STRATEGIC ALLIANCES THAT LAST
It might seem like the simplest thing in the world to join forces with companies whose interests are complementary to yours. But statistics tell another story. "The fact is, 65 to 70 percent of strategic alliances fail," says Larraine Segil, author of Intelligent Business Alliances and Measuring the Value of Partnering. "Most often, the issues that come up reveal inadequate attention to building the relationship and aligning business interests and goals." And you can't afford to fail: In a global economy, experts say, strategic partnering is both the surest road to growth and the best insurance against failure.
To ensure that your partnerships push you up the ladder rather than down, here are a few of Segil's golden rules for success.
1. Do due diligence on prospective partners. Check for gaps in skills and competency; can they deliver what you're looking for? Investigate prospective partners by talking to other companies they've partnered with, and examine their relationships for conflicts and synergies. Segil calls this analyzing the spider network.
2. Make sure your partnership has approval and support. That means gaining the backing of the executive suites in both organizations.
3. Analyze the value each partner puts on the alliance. It doesn't have to be equally important to both sides, Segil says, as long as it's of real benefit to both. "Too often, partnerships fall apart because one party starts to gripe that the other party is getting more out of the relationship. But that's a false measure," she says. "The real question is, Are you getting more out of this relationship than you would have without it? Then it's still a value-add, whether it's equally beneficial or not."
ACXIOM AND ACCENTURE
For a midsize company looking to grow, an alliance with a much bigger company can be like grabbing onto the back of a train. An example is the partnership forged between Acxiom, a leader in customer data mining, and Accenture, a global management-consulting firm. Based in Little Rock, Ark., Acxiom provides customer data to everyone from Ford and Nissan to Condé Nast and Blockbuster. Accenture - the Bermuda-based consultant to an A-list of multinational telecommunications, energy, aerospace, and financial services firms - is now embedding Acxiom's customer database directly into Accenture's client-specific customer-relationship management solutions. In other words, Accenture is taking Acxiom with it all over the globe.
Developing Strategic Alliances, by Ed Rigsbee (Crisp, 2000)
Measuring the Value of Partnering: How to Use Metrics to Plan, Develop, and Implement Successful Alliances, by Larraine Segil (American Management Association, 2004)
The Five Dysfunctions of a Team, by Patrick Lencioni (Jossey-Bass, 2002)
Strategic Alliances, an Executive Course Caltech Industrial Relations Center, Pasadena, Calif. Taught by Larraine Segil, Jan. 29-30
Executing Strategic Change in Dynamic Environments (www.gsb.stanford.edu/exed/esc/index.html) Stanford Graduate School of Business Executive Education, Palo Alto, Calif. Taught by Robert Burgelman and Robert Pearl, March 25-28 (application deadline Feb. 15)
Building Winning Teams (www.tablegroup.com) New York City Taught by Patrick Lencioni, Nov. 6-7, 2007 Clients have included Novartis, Novell, and State Farm
EMPLOYEES: THE ULTIMATE PARTNERS
It's easy to forget that the most important allies your company has are the ones who come to work every day. Executives at successful companies are quick to tell you that finding and retaining top talent is the key to growth. This is particularly true for midsize firms, which have to compete with larger - and richer - companies for management and entrepreneurial expertise. "Great companies and leaders have started to understand the connection between employee satisfaction, high levels of productivity, and the bottom line," says Patrick Lencioni, a business consultant whose book, The Five Dysfunctions of a Team, is a business best-seller.
The secret, Lencioni says, is creating a team-based culture of connectedness in which employees feel that their input is respected and rewarded. "You have to build trust among team members so that people feel free to admit what they don't know, make mistakes, ask for help if they need it, apologize when necessary, and not hold back their opinions." In other words, just say no to yes-men.
The result? A company in which creativity and innovation can flourish. Stanford University management professor Robert Burgelman advocates "internal corporate venturing." Developing new ideas is integral to growing any company, but too many executives wait until a crisis occurs before putting resources into fostering innovation, Burgelman says. Instead, successful companies make innovation an ongoing strategy, committing resources and management from the top down.
Patrick Lencioni teaches managers in his team-building seminars to strengthen trust by admitting vulnerability. It worked for Brian Scudamore, the 36-year-old founder of the hauling and cleanup service 1-800-Got-Junk. "As soon as I stopped trying to be the CEO who's got everything under control, there was an instant shift," he says. "My managers started seeing me as someone they could disagree with - and that makes all of us stronger." Teamwork is at the core of the operation based in Vancouver, British Columbia, which has expanded to 278 North American cities and has outposts in Australia and the United Kingdom. Its revenue was $67 million in 2005, almost double the previous year, and the company is on target to nearly double it again this year.
TAPPING TOP TALENT: GIVE 'EM WHAT THEY WANT
Of course, when it comes to luring the best and brightest, perks don't hurt either. Here are a few of the pluses that have employees at these firms staying put.
1. Onsite day care: BE&K Construction, Compuware, Novant Health, Quad/Graphics
2. Onsite pets: Autodesk
3. Onsite gourmet meals: Analytical Graphics, SAS
4. Onsite fitness center: Northwestern Mutual Life, Progressive Insurance, Yankee Candle
5. Subsidized vacations for all employees: Homestead Technologies, S.C. Johnson & Son
6. Incentives for buying a hybrid car: Hyperion, Integrated Archive Systems, Timberland, Topics Entertainment
7. Tuition reimbursement: American Specialty Health, CambridgeSoft, J.M. Smucker, Wegmans Food Markets
8. Concierge service to run errands: Chicago Children's Memorial Hospital, Norton Healthcare
9. Sleep breaks at work: Kaye/Bassman, Le Gourmet Gift Basket
PARTNERSHIP WITH THE COMMUNITY: THE POWER OF CORPORATE CITIZENSHIP
Nowhere has thinking about strategic partnerships been turned on its head more dramatically than in the area of corporate citizenship.
Old thinking: Social responsibility is a good thing, but where's the return on investment? Wait for a good year, and then give some money to charity - hopefully a high-profile one. Better yet, ask employees to contribute to United Way.
New thinking: By following what some experts are calling "the new principles of corporate design," companies can seamlessly integrate social and financial goals, aligning themselves with their communities in ways that boost the bottom line.
For more information on how to align your company's business and social efforts, consult these resources.
1. The Center for Corporate Citizenship at Boston College (www.bcccc.net) A wealth of resources for socially ethical management
2. CRO (www.thecro.com) An offshoot of Business Ethics magazine, a newly minted membership organization that sponsors an annual conference for corporate responsibility officers
3. Corporation 20/20 (www.corporation2020.org) Co-founded by Tellus Institute and Business Ethics, an effort to spell out what a corporation would look like if it was designed to combine social and business goals
TIMBERLAND INVITES CUSTOMERS TO BECOME RESPONSIBLE CONSUMERS
Long known for its Path of Service program, which pays all employees for 40 hours a year of community work, Timberland this fall upped the ante by tackling environmental issues. All of the shoe company's boxes sport a Nutrition Facts-style label detailing the product's environmental and community "footprint," including where the shoes were made, the typical amount of energy used to produce a pair, and the percentage of Timberland's energy that came from renewable resources. The message also includes measures of how well Timberland factories are performing against the company's pledge not to use sweatshops or child labor. A successful marketing ploy? You bet.
Melanie Haiken is a San Rafael, Calif., writer and a frequent contributor to Business 2.0.