The past two articles provided an overview of opportunity evaluation criteria and intellectual property considerations. However no technology or opportunity will succeed if the partnership isn’t right. And while the previous article focused on patents, other reasons for partnering include market access, brand equity, know-how, and already-developed products.
Still, partnering isn’t necessarily the way to go – depending on your needs and objectives, other arrangements (such as acquisition, licensing, or internal development) may be more advantageous.
So, when should you partner? What should you look for and how do you decide if the fit is right?
When Should You Partner?
Open innovation alliance guru and frequent Management Roundtable speaker, Gene Slowinski offers this advice: Strategic alliances can be very powerful but are not always the best approach to innovation. They must be chosen, screened and monitored carefully; otherwise they can drain resources, create IP problems, and cause unnecessary headaches. Seek out the opportunities that will make a difference.
David Lowrance* of Clorox concurs: The partnership must have more value than going it alone. He recommends being very choosy– partnerships should generate (versus extract) value. Clorox’s “Go deep” process assesses a technology partner’s potential. This process has three phases:
- Prequalification: Do an internal gap analysis first to define what capabilities to go outside for. Connect with your counterparts (R&D, commercial) to discuss strengths and benefits of partnering. Ask them to go beyond what’s obvious – understand the potential across all their businesses.
- More detailed discussion – pull in technical experts from both companies to create clarity around available technologies and capabilities of partner relative to internal gaps.
- Execute – begin work, begin the pipeline
Partners should be in it for the long term; sustainability allows for multiple innovation projects and builds scale. An example, described below, is Clorox’s relationship with Procter & Gamble. Their Glad® joint venture has flourished and led to additional collaborations in the plastic film business – despite being competitors in other areas.
Curt Rashke* of Texas Instruments who has had many years of co-development experience, recommends assessing alignment on 4 levels: business, portfolio, project and technical. He says not to expect perfect alignment, but significant misalignment is a no-go. Initial meetings with a prospective partner will give you clues about commitment, communication, culture and priorities. You will get an overall sense of compatibility – if the chemistry is wrong, walk away.
In fact, many experts compare strategic alliances to marriage – in the “dating” phase, make sure the “people” fit is as strong as the technical/strategic fit. Trust and the ability to collaborate are key.
Assessment should cover depth of experience, short- and long-term objectives, and financials. Useful questions to ask include:
- Do the companies have a shared vision?
- Do their overall missions aim for the same goal?
- Will their fundamental principles make for a strong partnership?
- How might the two organizational cultures mesh? Are there cultural traits that pose the risk of conflict?
- Is this a potential partner that appears capable of, and interested in, a long-term relationship?
- Are there particular business models that would offer a better fit than others with the partner under review?
- Does it have earlier experience and presence in the market, a market track record?
- What is the prospective partner’s financial situation, especially if it is a start-up or small/medium size business (SME)?
- Does it appear capable of surviving, at least to the extent of a possible partnering relationship?
- If there are solvency issues, are there viable solutions to mitigating them, such as equity stakes or other investment and financing options?
Clorox and P&G Glad Wrap (Click link then scroll towards bottom)
Though P&G and Clorox compete in cleaning products, plastic wrap was an opportunity where both companies could benefit. P&G brought the IP – the technology behind Press’n Seal® as well as the next joint product, Glad ForceFlex®. P&G also contributed global marketing expertise.
Clorox brought its brand equity in the plastics category, focused R&D in plastics and resins, and the organizational structure for creating and distributing new plastic film products. Total Glad sales have doubled in the four years since the joint venture was formed, making Glad the second Clorox billion-dollar brand.
In order to compare potential partners for its hot beverage system, Kraft* considered several factors including:
- Compatibility of brand values
- Cultural fit
- Manufacturing capabilities
- R&D capabilities
- Investment in R&D
- Demonstrated competence and strength in product categories
- Compatible business strategies
- Cost leadership
Of particular importance to Kraft was the compatibility in terms of brand values. Kraft took into account a company’s attitudes toward quality, convenience, product variety and responsibility, all essential attributes of its own brand identity. Brand compatibility, in fact, proved to be especially important, and the partners not only employed a “360 degree” marketing approach to show a single face to the consumer, this focus ultimately revealed further similarities in company cultures and business strategies.
Overall, assessing potential partners is one of the most critical aspects of scouting. Certain criteria may be more important than others depending on your organization’s strategy. There will also be variations if you are considering collaboration with a university, government lab, start-up or other entity with a different organizational and financial structure.
Regardless, the first step is knowing what your organization brings to the table – and what it needs from the outside to create meaningful growth.
The Strongest Link: Forging a Profitable and Enduring Corporate Alliance, Gene Slowinski, Director, Open Innovation & Strategic Alliance Research, Rutgers University & Matthew W. Sagal, Senior Partner, Alliance Management Group, Inc.
“Good practices” in Open Innovation, Gene Slowinski & Matthew Sagal
David Lowrance, Group Manager, Technology Brokerage, Clorox Company (Clorox Model of Innovation Partnering audiosession 2006)
Curt Raschke, PhD, Texas Instruments (presentations from Management Roundtable’s CoDev conference and “Red Flags” 2005 audiosession)
Andreas Perschon, Director of Alliance Management, Kraft (presentation at MRT’s CoDev2009 conference
This article published in conjunction with MRT’s workshop series:
Technology Scouting to Accelerate Innovation – Implementing an External Sourcing Program – check our website for the latest dates and locations of this popular seminar.
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