Seeing the wood for the trees

Management courses and textbooks stress the need for a business to continuously review its portfolio of products, services and capabilities, to ensure that it can continue to prosper in an evolving and changing business environment. Business strategy, they stress, should be looking at how funds can be invested in developing new things, that can take over from the old things when the old things come to an end.

At the level of the "strategic business unit" (SBU), the Boston Consulting Group created the famous Boston Matrix, and urged businesses to nurture "Rising Stars" that would become the "Cash Cows" of the future. At the product level in all industries, management seeks to have a portfolio of products at various stages of the product lifecycle. The idea is that the mature products generate cash to support the marketing and development of products that are in the early adoption phase of the lifecycle.

The crucial characteristic of SBUs and products is that they die a 'natural' death, brought on by the forces of the competitive marketplace and consequent technological evolution. Managers are forced to do something about investing in new things, because they can see that in two or three, maybe five years' time, the products or business units they have today will no longer be suitable for the market.

Partnerships, however, rarely die a natural death.

Some end prematurely, withering through lack of investment or interest, or are simply abandoned because they couldn't be made to work. We have spoken a great deal about this unfortunate type of partnership over the course of these articles, identifying many ways for companies to avoid the common pitfalls and make their relationships successful.

What we need to consider now is how a partnership can be ended, especially when both or all partners are deriving significant financial and/or other benefits from the relationship. The question you may well ask is: Why would any of the partners want to end such a partnership?

Woodland management

The problem is that partnerships – even successful ones – do not come for free. They need managing, motivating and directing. They require investment of time and skills, and some funds in the form of collaborative marketing or product development. They are a drain on a pool of resources that, although renewable and expandable (if required) over time, is – at any one moment – finite and bounded. If partnerships are allowed to go on and on, they will continue to eat into this source of time, effort and money until there is no capacity left to develop new relationships. They will crowd out and stifle any new initiatives, of which at least some will be vital to the ongoing success of the business.

We need to take lessons from an industry that prospered for centuries in Britain and elsewhere in Europe. It provided a variety of products and services from a finite and bounded source of growth, but in a way that ensured continuity and allowed the pool of resources to be constantly replenished. It was the management of woodland that ensured a steady supply of timber for building, coppiced wood for rods, sticks for firewood and beech mast for feeding swine. Our ancestors learned that the harvesting of mature trees, thereby creating clearings with increased sunlight, was vital for the encouragement of new growth. They realised that the best use of the land and the nutrients within it came from taking an active role in the planning of the woodland, identifying some trees as being timber trees (i.e. allowed to grow tall), while others would be cut back regularly to stimulate the growth of new shoots.

Managing partnerships

Larger companies need to decide which of their partnerships will be the 'timber trees', encouraged to be long lasting, providing stability and establishing the company in strategically important market segments; and conversely, which partnerships will be pursued for a shorter time, before being closed down to make room for newer relationships. For smaller companies getting into partnerships with larger companies, it will be important to understand where your relationship fits into this scheme. Both types of partnership are valid and valuable, but only truly so if all parties involved have a common understanding of the partnership's nature and purpose.

Currently there is little evidence that companies are actively managing their collections of partnerships. Relationships are struck up for a variety of reasons: but apart from those that are based around a specific time-bounded project, there is generally no defined, controlled procedure for closing them down again. Instead, the number of active partnerships grows over time until all of a company's resources that are dedicated to partnering are tied up in managing the current relationships. There is nobody searching out and developing new partnerships. No one is studying existing relationships to check that they are still delivering a sufficiently high level of benefits.

So it is time for companies to look critically at their existing relationships and start planning how they will maximise returns from the finite and often scarce resources dedicated to partnering. As with their SBUs and products, companies now need to learn to see the wood, and not just the trees.

Partnering Points on seeing the wood for the trees

• Putting someone in charge and setting them relevant objectives is the best way to ensure a clear focus on optimising returns from the resources dedicated to partnering. Some companies appoint managers responsible for outbound partnerships and/or inbound partnerships.
• When setting up a relationship, include in the discussions with your imminent partner(s) how the partnership will be dissolved: what will trigger it, how will it be managed, what is the expected life of the partnership?
• Ensure that the relevant people in your organisation know which relationships are for the long-term, and which are intended for a shorter duration. It is a good idea that your partners also know this!
• When evaluating an existing partnership, don't assume that just because it is still generating a return or saving costs that the relationship should be allowed to continue. There may be other potential partnerships you could set up that would bring greater benefits. Always be aware of the opportunity costs of keeping existing partnerships alive.
• When the time approaches when a 'timber tree' partnership needs to be felled, make sure you have identified how the gap it creates is going to be used, and that all relevant parts of the business have bought in to the plan.

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