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Thursday 28 August 2008

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Developing a Partnering Proposition »

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Assuming that a partnering relationship has high impact potential--that it could, for example, dramatically reduce duplication and waste, or allow a new and creative combining of partners' core strengths—how is this potential impact turned into a convincing vision? It's right here that we've seen many suppliers make serious mistakes. Fired up with enthusiasm for their own vision, suppliers rush to talk with their prospective partners about the great new opportunities that partnering could provide. Why is this a mistake? Gabe Rosica, Chief Operating Office of Bailey controls, provided this insight:

"It's like going out on your first date and spending the whole evening talking about marriage. You'll scare him or her off because it's just a date--it's not appropriate. But sometimes salespeople will do just that--they'll talk partnership on a first date--and sometimes they will actually make a lot of headway. But if they do, then usually there's something wrong. If you talk marriage on a first date and the person you're with responds well and wants to engage in discussion, then they are probably as crazy as you are."

Usually it's better, as Gabe suggests, not to go to a customer with a fully developed concept of partnership. Our research suggest that the most successful partnering suppliers don't present their customers with grandiose ideas for collaboration; indeed, they studiously avoid presenting a unilateral vision of partnership. Effective visions are never unilateral; for partnership to work, both parties need to commit to following a shared road map. A unilateral vision puts the author of the vision in a sales role rather than in the role of a partner. But if the task is to engage in collaborative development rather than in selling, where do you start? How do you take an initial step in helping a potential partner to collaborate in developing an enticing vision, one that will generate excitement--and make partnering a reality?

Before you can begin to develop a shared vision, someone has to put a first stake in the ground. Somebody has to make a first attempt to answer the all-important question "why partner?" As Hemang Dave, a Vice President at Lotus Development Corporation, put it:

"There has to be a value proposition for the customer, one that shows substantial impact on both sides. Why should two organizations change the way they do business with no compelling reason?"

We call this initial articulation the partnering proposition. The partnering proposition gets partnership on the table for discussion by providing a first-cut view of what partnering could achieve for the two organizations. The proposition isn't a shared vision. It's a simple statement of what partnering could potentially bring to both organizations that can serve as a platform for collaborative discussion. Suppliers who've been most effective at developing partnerships have become very skilled at articulating a proposition for partnering to their customers, one that has three basic characteristics:

1. It is expressed in terms that are brief, compelling, and believable.
2. It specifies the impact that each party will attain as a result of partnering.
3. It specifies the major changes that each party must make in order to achieve that impact.

The partnering proposition, of itself, is less important than the thought process that organizations normally go through to create it. The struggle to distill partnering ideas down into simple and clear statements clarifies and sharpens thinking. It provides a model in the mind of its creators of what the partnership means. It may, indeed, remain a model that exists only in the heads of its creators and never gets written down. On the other hand, sometimes a partnering proposition becomes prototype business case for partnering. Either way, the partnering proposition gets partnering on the table for discussion by putting an initial stake in the ground.

Brief, Compelling, and Believable

Organizations who are newer to partnering tend to develop elaborate, complicated cases for partnering, in an effort to convey every contingency and demonstrate awareness of every potential issue. Conversely, the propositions that successful suppliers develop for the potential partners rarely consist of more than a few sentences. Successful partnering suppliers recognise that the purpose of the proposition is to establish an initial business case for partnering that can be used to communicate both to the partner as well as internally. More importantly, they know that every element of complexity they work through on their own puts them at risk of working through details that need to be examined and evaluated jointly with the partner. So their initial propositions are simple and brief.

Even more importantly, good partnering propositions must convey a powerful message. Marketing gurus like Bud Hyler of Logical Marketing suggests that a powerful message must be both compelling and believable. The two don't often go together. A compelling partnering proposition might, for example, include a statement such as "Partner with us and we'll double your profitability with little effort." It's certainly compelling, but it's not likely to be believed. On the other hand, consider a statement like"If you're prepared to put in the enormous time and effort required to set up a partnership with us, there's a possibility that it will bring modest but worthwhile results." This is a very believable message, but it's hardly compelling. Compelling and believable pull against each other.

Partnering propositions need to maintain a careful balance between being compelling and being believable. A compelling proposition that isn't believable has no credibility. It will sound unrealistic. This is what typically happens when one side is overcome with excitement and missionary enthusiasm. Caught up in the compelling picture of their own vision, they don't realize how much believability they have sacrificed. As a result, their vision creates skepticism and resistance in their potential partner.

In contrast, the careful, credible, and entirely believable approach to the message can be equally ineffective if it isn't compelling enough.

We knew an engineering firm that wanted to partner with a leading high-technology company. They had set up initial discussions with some movers and shakers, at which they presented their partnership proposal. The following day we ran into one of the high-tech participants and asked him whether his company intended to go ahead. "I don't think so," he confided. "They were nice guys--and real honest about their limitations. But there wasn't any excitement in it. It sounded like a lot of effort that wouldn't yield much in the way of moving us forward as an enterprise." In other words, the partnering proposition was believable but not compelling.

Try crafting a simple proposition for a prospective partnership. You might create something like this:

A partnership would change our role from being a component vendor to becoming the drive-train designers for Frostco's proposed new snowmobile. This would let Frostco bring the snowmobile to market several months earlier, maybe even in time for next season. It would also free up some of their internal design resources and could be done within Frostco's present budgets. We would create a drive train that would be easier for us to manufacture, which would save on our tooling costs. We would have to allocate a design team to the project, and we would expect Frostco to bear a part of that cost. However, the savings in time and resources for both of us should give us both a better product at a reduced overall cost.

You'll soon see how difficult it is to be both compelling and believable--particularly as you are unlikely at this early stage to have all the information you need to quantify the benefits. So you will be forced to make broad assertions like "reduced overall cost," "saving in time" and "improved quality." It would, of course, be more compelling if you could say, "at a 23-percent reduction in cost, with an 11-week gain in the time to market, and a 45 percent lower reject rate during the first three months." But the purpose of the partnering proposition is not to provide a comprehensive vision. It doesn't provide the answers; its goal is to act as a catalyst to raise important questions. It provides a stimulus for both parties to ask, "Exactly what could we save here?" "Would this really get the product to market in time for next season?" A good partnering proposition is not to provide a comprehensive vision. It doesn't provide the answers; its goal is to act as a catalyst to raise important questions. It provides a stimulus for both parties to ask, "Exactly what could we save here?" "Would this really get the product to market in time for next season?" A good partnering proposition doesn't persuade people to partner, it persuades them to look more closely at whether partnering would be worthwhile.

Why is it so important to have a simple, compelling, and believable proposition? It's not as if you were intending to partner with a customer you've never met. You know these people. So why can't you just sit down with them and talk it out? The answer is that, much more than in a transactional sale, partnering discussions are likely to involve a range of people from both sides, many of whom you may never have met. Dennis Courtney, CIO of Dunlop Tire Corporation, describes a typical example from the early stages of their partnership with Oracle:

"We put together a 22-person cross-functional team. Oracle had to talk to our manufacturing people, warehouse people, sales and marketing people, as well as people in finance and IS. They had to satisfy everyone, to convince them that Oracle was the right partner."

In partnering relationships, a lot of people from the customer side get involved and need to see why the partnership internally within supplier organizations. Suppliers usually see great risk in making the open-ended commitments and taking on the risks of partnership. While people from within sales and marketing may see the point, others within the supplier organization may not. We got a good taste of this in talking to an account manager at a specialty lubricant company. As he described it:

"I saw real potential to get into a new kind of relationship with (the customer). They were high-temperature specialists and they had done very interesting R&D that extended our own. From initial discussions it seemed like there was scope for working together on some new high-temperature formulations. I saw this as being very advantageous to both parties. In the short term some of their experience would be useful, and in the long term there were a number of joint development and marketing opportunities that could be good for both of us.

So I went to see my VP and I sort of sold him the idea. But then things began to unravel. When he talked it over with the labs, they had an agenda of their own and that somehow got tacked on to the basic idea. Then one of the product managers got in on the act and introduced more complications. The thing never got off the ground; it sank under its own complexity. A lesson I've learned is that you have to put a lot of effort into your internal selling, and a big piece of that effort is fighting to keep it simple.

Keeping it simple, internally, is one of the important functions of a partnering proposition. Without clear, compelling, and believable ideas--ideas that internal people can buy into--the partnering concept can fall apart before it ever gets to the customer for consideration. A strong partnering proposition, one that people can understand and that is enticing but realistic, is a necessary starting point on the road to vision.

Describing the Impact

Successful partnering suppliers "make the case" for partnering by describing the potential impact that the parties can expect to gain from partnership. This might seem a little like the traditional concept of "benefits" that has been part of the language of selling since the 1920s. It isn't, and the difference is an important one. In selling, the "proposition" is about the benefits to the customer--how the customer gains from a product or how it meets needs that the customer has identified. The benefits used in transactional selling are all one-way. They are exclusively concerned with what the customer can gain. Partnering involves a different perspective. The proposition is a two-way statement of potential; it's about the impact for both parties through collaboration.

This is much more than a play on words. Partnering vision isn't primarily about the customer; it isn't primarily about the supplier. It's about the partnership in which both organizations will invest and from which both hope to gain. A typical one-way message like "As a result of partnering with us, you will be able to reduce your inventory, contain your future costs, and have access to new developments in advance of the general market: is one-sided and tells only part of the story. It becomes a more complete, more realistic, and more candid proposition if it adds "And as a result of partnering with you, we will be able to schedule production more economically, reduce our own inventory costs, and have a competitive advantage from developing a better understanding of your business."

As David Montanaro of NED explains:

"A big difference selling and partnering is that selling is only about what's in it for the customer. In a sale, you have to show things like the savings the customer will make or the improvements in efficiency and responsiveness of the customer's systems. There's not a lot about what's in it for the seller. That's assumed, but it's never discussed. You're there because you want the sale--period. No more has to be said. But in a good partnership, right from the very first exploratory contacts, both sides should be interested in what's in it to reach other. It's a sign that you're in serious partnering discussions when it's just as legitimate to talk about the benefits you want as about benefits for the customer."

The partnering proposition must be about the potential impact for the partnership--and that means both parties. This can be an uncomfortable concept for people with a sales background. Years of training in one-way benefit communications have left many salespeople feeling very comfortable discussing benefits for the customer but uncertain when it comes to talking about the reciprocal benefits from partnering. In the partnering proposition, benefits for both parties must have equal weight. The partnering proposition, after all, is not about the customer or supplier; it's about the partnership.

Changes Each Party Must Make

The impact that each party stands to gain from partnering is an important part of the partnering proposition. The other part, equally important but often neglected, is an outline of what each party must pay, in terms of costs and changes, to obtain the benefits of partnering. Until the parties have worked closely together to explore feasibility, however, neither will have a clear understanding of what changes really need to be made or of the costs that those changes will entail.

This raises the question "why talk about changes and costs at all—why not just focus on impact and benefits?" The answer is that the partnering proposition is the core of a business case for partnering--and no business case can just look at benefits without considering costs. There's another, more subtle reason, though. Partnering rests on the hypotheses that through working together differently the parties can make productivity gains. Frequently, the most immediately achievable of these gains are reductions on the cost side of the cost-benefit equation. As we've seen, a natural starting point for creating impact is through cost saving by reducing duplication and waste. By specifying the costs of the changes required to make the partnership work, the partnership proposition can prevent a realistic and attractive business case.

One Presentation Fits All

Even if the parties are not yet ready to think as a partnership, they should be ready to take an important first step in the candid information sharing that characterizes partnership. The best test we've seen that a partnering proposition meets this condition is that it could be presented, unedited and unchanged, to people from either organization. This is an excellent way to check whether or not a partnering proposition has a genuinely bilateral message. As Rick Keene, Anixter's Executive Vice President for North America, put it:

When you talk about partnering, you talk about the extended enterprise. You don't do anything based solely on your own internal needs. Suppose you put together a set of, say, 50 overheads to articulate the strategy to your Marketing Department. The same presentation should work for your client, for your supplier, for your credit department, or for sales. That's because you have a strategy articulated that's based on the market, not on internal needs. When all is said and done, it must improve our supplier's position, reduce cost to market, enhance the knowledge base, or help the client's total cost to acquire and distribute goods. Anything internal that doesn't do one of these things is evil because the market isn't paying for it.

Most propositions end up, sooner or later, as a set of overhead slides that will be presented to senior executives within a supplier organization to lay out the business case for partnering. Think about a partnering situation you've got. Imagine that whatever internal presentation you have--whether it's a collection of slides or a verbal description--will, tomorrow, be shown to your intended partner. How much would you have to change? If you would need to re-word points to make them more palatable, or exclude important data, then you've not produced a partnering proposition; you've produced a unilateral business case. If so, your initial thinking about the partnership may be off to a bad start. With successful partners, the business proposition--and the shared vision that eventually emerges out of it--is exactly the same for both organizations.

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This resource is from "Getting Partnering Right" by Neil Rackham, Lawrence Friedman and Richard Ruff. (c) The McGraw-Hill Companies.