The New Competitive Battlefield: Building Cross-Partner Value

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I work with a number of firms that most would call large companies, yet if you spent time with them, you’d find they are at a stage where they feel quite pressed.  It’s a paradox that puts multi $100 million firms in a quandary around growth and innovation.  Internally constrained teams leave a lot of potential value on the table because of the tyranny of making the quarterly numbers and delivering on incremental improvement promises.

The traditional first step for these firms is within enterprise cross-functional teams directed towards markets they currently have distribution into (see the Growth Zone ebook here).  This is Zone 2, and it traditionally has the highest ROI.  For those of you looking for a good checklist for these teams, you can check out this earlier article here.

For some of these firms, there is emergent work that bears looking into that involves cross-functional efforts to unlock value across multiple enterprises.  A recent HBR article pointed out what is being termed “living innovation labs” (article here) that are being initiated by Cisco.  These are very early stage efforts, with an emphasis on speed and agility, without hugely encumbered IP arrangements.  If participants choose to launch an idea, ownership will be in proportion to the human capital, IP, and financial investments that each made. These are different from the traditional efforts of years past, where competitive member teams contributed their core technology in complex deals to established distribution teams in niche markets and fought like cats and dogs (article here).

Regardless of of whether we choose to call them “living innovation labs” or simply joint development agreements, elevating this cross-enterprise engagement will greatly change the “game” on many levels – speed, risk sharing, distribution channels and market formation.  The common currency of unlocking this value is trust, which points us to one of the hardest problems: choosing high-value partners. Choosing partners that you have some level of cultural fit with (and where the person to person match ups make sense), allow the trust platform to be established, which in my experience, trumps the formal agreements every time.

Why does this make sense?  Well it works on several levels:

  1. Digitization is a very harsh task master, and its disruption moves swiftly and simply cannot be held at bay.  Since these projects are all about finding breakout applications, and these firms all have a stake, but have not figured the path out, it’s to their advantage to collaborate to form a market.
  2. We know from Rita McGrath’s work, the new world is Transient Advantages, that is no one firm can get the kind of multi-decade locks that we saw decades ago.  Because of this, and since each of these potential business models has a finite shelf life, rapid formation and early time to profit is key.  Once the window is open, real value is draining away.
  3. Building business takes a community, even for the strongest incumbents.  Famously, Apple’s iPod moved to production in only 9 months using outside resources.  Developing products and services sourced from existing assets is a time-honored strategy; what make this unique is its emphasis on speed and cooperation.  This can also take the form of activating existing supply chain relationships (There are three nice examples here).

So how would one go about activating this type of valuable work?

  1. It’s absolutely critical to start with a specific and compelling zone or area of problems to be solved.  Since this is quadrant IV work (see Growth Zone ebook here), it’s best to “make wide the narrow road.” There is a nice example of how Paypal’s CEO was able to access the real issues of clients who were not traditional banking customers here.  That is the type of big, emotive and powerful problem area we are looking at.
  2. Find the right group of partners – this takes some strategy work.  In addition to the cultural fit mentioned earlier, you are looking for a group of team members who complement one another and can cover the space described above – ideally without significant overlap. (overlaps are where the friction develops – like sand in the gears)
  3. Make sure you have senior sponsorship. Motivated subject matter experts can take this a long way, but to make it work, you need a leader at the table who “owns” the resources.  One key point is that larger firms are not known for their agility, so an early marker of success is the willingness of Sr Leadership to get involved and stay involved.  If you can’t get an EVP or equivalent to run air cover for the effort, it’s likely not the right team member.
  4. Don’t overlook enlightened staff.  You need a chief counsel who is comfortable with agreements in principle and CFO’s who can be flexible.  If you haven’t built a team that can explore, this path is not for you.
  5. Last but certainly not least, you need to have built your own Growth Leaders.  We have talked about this skill set here, here and here.  The success of these efforts rises and falls daily in the trenches of hard work, and as we have discussed before, that is one of the 4 keys that every growth leader needs to be successful.

If you are interested in developing a plan to take advantage of this strategy, I’d look forward to having a discussion of experiences and applications.  For more on my engagement model, take a look at my services page here.  As always, to reach me send me an email or call me at 847-651-1014.

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