Partnering in the New Economy

[Article placed on website: February 2003]

This article deals with a subject that is little understood today, but which is likely over the next five to ten years to affect the way the majority of companies do business.

For the past nine months I have been working with one of the leading UK business schools and the UK divisions of some major telecoms suppliers to understand how the new Information and Communications Technology (ICT) economy will affect companies' approaches to partnering.

There are three major drivers for change:

• First, the nature of the technology itself is creating innovative business opportunities, particularly in the service sector. New types of product and service have been developed that would not have been possible without the widespread availability of information and communications technology. Often, in order to build and/or deliver these new products and services, organisations have to develop or get access to new skills and learning. Following a frenzy of company acquisitions (many of which turned out to be ill-advised), attention is now turning to partnering as a way for businesses (particularly established companies) to rapidly acquire the expertise and "know-how" they need.

• Secondly, the technology is enabling traditional products and services, such as financial services and banking for example, to be delivered via new and different channels to the end customer. We are really only seeing the beginning of a dramatic move towards reliance on ICT to reach the consumer, that will increasingly allow the consumer a much greater degree of control and choice over when, how and where the products and services are delivered. In this environment the end customer is fickle. He or she can switch allegiance at the click of a mouse button or the touch of a mobile phone key. No one fully understands yet how branding will work, or how a company's value proposition can be successfully communicated to the end user market. But what is apparent is that partnering will be key to ensure that all the various components of the "marketing mix" are presented coherently in easy-to-use, easy-to-understand and easy-to-buy packages.

• Thirdly, the technology is enabling partnerships that would have been thought impossible, even five years ago. A small hi-tech start-up based in Cambridge in the UK can become a key player in a partnership delivering multi-media services into the Far East, fronted by an Australian media corporation. Software companies in Vietnam are becoming vital components in major retailing organisations' strategies for developing on-line businesses. Even the use of call centres in India to provide CRM services for UK-based businesses is an example of how new approaches to partnering can change business models.

The work that has been done so far in our group has identified some major differences between partnering "as we know it" and partnering as will be required/expected in the future. Certainly, all the basic learning that has been developed over the past twenty years or so will still apply – sensible things like ensuring there is a "win-win" business model, that your partner buys in to a joint business plan, that all parties contribute the agreed level of resources and ongoing commitment – will still be important for successful partnerships. But there are characteristics of partnering in the ICT economy that will call for a radical re-think in the way partnerships are established, managed, measured and monitored.

For an introduction to this subject click here.

One of the key realisations to grasp is that there will no longer be orderly, linear "value chains", stretching unbroken from generators of raw materials for components all the way through to the end customer. These value chains are structured and determined by businesses. They have worked extremely well for a century or so, to deliver tangible product and "face-to-face" services to an ever-growing and widening marketplace. However, in an economy where the end customer is in a position to, and wants to manage his/her consumer experience, such rigid and formal value chains are no longer appropriate. We will see over the next ten years a gradual replacement of such inflexible arrangements by a much more dynamic, reactive set of coalitions between companies, that come together as partners to address a specific market opportunity, then move on and re-arrange their relationships so as to take advantage of the next opportunity.

These types of coalitions have been termed "value webs", not only to emphasise the greater complexity involved, but also to evoke the idea of a key role to be played by a company or organisation positioned at the centre of the web, organising, invoking and disbanding coalitions, continually seeking out "best in class" partners to take part in the web, and removing those who do not live up to expectations. One name that could be used for these key players is "orchestrators", because their role can be compared very well to that of someone forming and managing an "orchestra" of companies that have the blend of core skills, experience and "know how" (core competences) that are required to provide the end customer with the consumer experience he/she is looking for.

So what will be the "core competences" of an orchestrator? What sort of partnering skills will such an organisation need? And if your company is too small, or too niche-focused, or does not choose to take on the orchestrator role, then how can you ensure that your partnering capabilities are good enough to get you included in the successful value webs of the future ICT economy?

It is questions like these that our group has been pondering for the past nine months. We don't have all the answers yet, but we have recognised that positioning a business to work in this way will require some fundamental shifts in thinking about partnering, particularly in the areas of risk management and control.

Partnering Points on Partnering in the New Economy

• Identifying and vetting suitable partners will become a vital "core competence" for orchestrators. Some companies in the media industry are already building their skills and experience in this area.
• Companies will need to learn how to collaborate on the basis of activities, learning and competence, rather than on "hard and fast" business cases with pre-determined target paybacks and rates of return.
• Being "partnership ready" and able to respond quickly to opportunities as they arise will become one of the most important core competences for companies to develop.
• Communicating value to partners and end customers will become increasingly difficult. Those companies that learn how to do this effectively and in a sustainable way will be the successful players in the value webs of the future.
• It follows, of course, that recruiting and building the right partnering skillsets and organising so as to use these effectively should become a major component of an organisation's ongoing human resource strategy.

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