الرئيسية
Faculty of Business Studies
Arab Open University
Managing Across Organizational & Cultural Boundaries B325
Tutor Monitoring Assignment
Spring 2015
CASE STUDY
Extract from
Collaborative Advantage: The Art of Alliances
Rosabeth Moss Kanter
Introduction
Alliances between companies, whether they are from different parts of the world or different ends of the supply chain, are a fact of life in business today. Some alliances are no more than fleeting encounters, lasting only as long as it takes one partner to establish a beachhead in a new market. Others are the prelude to a full merger of two or more companies’ technologies and capabilities. Whatever the duration and objectives of business alliances, being a good partner has become a key corporate asset. This is called a company’s collaborative advantage. In the global economy, a well-developed ability to create and sustain fruitful collaborations gives companies a significant competitive leg up. Yet, too often, top executives devote more time to screening potential partners in financial terms than to managing the partnership in human terms. They tout the future benefits of the alliance to their shareholders but don’t help their managers create those benefits. They worry more about controlling the relationship than about nurturing it. In short, they fail to develop their company’s collaborative advantage and thereby neglect a key resource.
What follows will reflect on the results of article studies done to understand intercompany relationships that spanned over two or more countries and cultures. The studies included 37 companies and their partners from 11 parts of the world (the United States, Canada, France, Germany, the United Kingdom, the Netherlands, Turkey, China, Hong Kong, Indonesia, and Japan). Large and small companies from both the manufacturing and service industries were included.
Main Uncovered Aspects of Business Alliances
The research uncovered three fundamental aspects of business alliances
1) They must yield benefits for the partners, but they are more than just the deal. Beyond the immediate reasons they have for entering into a relationship, the connection offers the parties an option on the future, opening new doors and unforeseen opportunities.
2) Alliances that both partners ultimately deem successful involve collaboration (creating new value together) rather than mere exchange (getting something back for what you put in). Partners value the skills each brings to the alliance. They cannot be “controlled” by formal systems but require a dense web of interpersonal connections and internal infrastructures that enhance learning.
3) North American companies, more than others in the world, take a narrow, opportunistic view of relationships, evaluating them strictly in financial terms or seeing them as barely tolerable alternatives to outright acquisition. Preoccupied with the economics of the deal, North American companies frequently neglect the political, cultural, organizational, and human aspects of the partnership. Asian companies are the most comfortable with relationships, and therefore they are the most adept at using and exploiting them. European companies fall somewhere in the middle.
Varieties of Relationships
Exploring the different outcomes of the business relationships of other companies can help companies manage their own. Successful alliances build and improve a collaborative advantage by first acknowledging and then effectively managing the human aspects of their alliances.
Cooperative arrangements between companies range along a continuum from weak and distant to strong and close.
1) At one extreme, in mutual service consortia, similar companies in similar industries pool their resources to gain a benefit too expensive to acquire alone—access to an advanced technology, for example.
2) At mid-range, in joint ventures, companies pursue an opportunity that needs a capability from each of them—the technology of one and the market access of the other, for example. The joint venture might operate independently, or it might link the partners’ operations.
3) The strongest and closest collaborations are value-chain partnerships, such as supplier-customer relationships. Companies in different industries with different but complementary skills link their capabilities to create value for ultimate users. Commitments in those relationships tend to be high, the partners tend to develop joint activities in many functions, operations often overlap, and the relationship thus creates substantial change within each partner’s organization. In value-chain partnerships, companies with different skills come together to build value for customers. Companies can participate simultaneously in many kinds of relationships, and partners in any relationship may play a variety of roles.
In every article, a business relationship is more than just the deal. It is a connection between otherwise independent organizations that can take many forms and contains the potential for additional collaboration. It is a mutual agreement to continue to get together; thus its value includes the potential for a stream of opportunities.
Selection and Courtship
Relationships between companies begin, grow, and develop—or fail—in ways similar to relationships between people. No two relationships travel the same path, but successful alliances generally unfold in five overlapping phases.
Eight I’s That Create Successful We’s
For smaller companies, family businesses, and companies that are operating in developing countries, the “rational” model has been considered the ideal to which all organizations would eventually conform. However, intercompany relationships are different. They seem to work best when they are less rational. Obligations are more diffuse, the scope for collaboration is more open, understanding grows between specific individuals, communication is frequent and intensive, and the interpersonal context is rich. The best intercompany relationships are frequently messy and emotional, involving feelings like chemistry or trust. And they should not be entered into lightly. Only relationships with full commitment on all sides endure long enough to create value for the partners.
The best organizational relationships are true partnerships that tend to meet certain criteria:
1) Individual Excellence. Both partners are strong and have something of value to contribute to the relationship. Their motives for entering into the relationship are positive (to pursue future opportunities), not negative (to mask weaknesses or escape a difficult situation).
2) Importance. The relationship fits major strategic objectives of the partners, so they want to make it work. Partners have long-term goals in which the relationship plays a key role.
3) Interdependence. The partners need each other. They have complementary assets and skills. Neither can accomplish alone what both can together.
4) Investment. The partners invest in each other (for example, through equity swaps, cross-ownership, or mutual board service) to demonstrate their respective stakes in the relationship and each other. They show tangible signs of long-term commitment by devoting financial and other resources to the relationship.
5) Information. Communication is reasonably open. Partners share information required to make the relationship work, including their objectives and goals, technical data, and knowledge of conflicts, trouble spots, or changing situations.
6) Integration. The partners develop linkages and shared ways of operating so they can work together smoothly. They build broad connections between many people at many organizational levels. Partners become both teachers and learners.
7) Institutionalization. The relationship is given a formal status, with clear responsibilities and decision processes. It extends beyond the particular people who formed it, and it cannot be broken on a whim.
Cool Integrity. The partners behave toward each other in honorable ways that justify and enhance mutual trust. They do not abuse the information they gain, nor do they undermine each other.
Steps To Be Followed to Form a Partnership
In the first—courtship—two companies meet, are attracted, and discover their compatibility. During the second—engagement—they draw up plans and close the deal. In phase three, the newly partnered companies, like couples setting up housekeeping, discover they have different ideas about how the business should operate. In phase four, the partners devise mechanisms for bridging those differences and develop techniques for getting along. And in phase five, as old-marrieds, each company discovers that it has changed internally as a result of its accommodation to the ongoing collaboration.
Such analogies are appropriate because business pairings aren’t entirely cold-blooded. Indeed, successful company relationships nearly always depend on the creation and maintenance of a comfortable personal relationship between the senior executives. Alliances and partnerships are initially romantic in another sense: their formation rests largely on hopes and dreams—what might be possible if certain opportunities are pursued. Strategic and financial analyses contribute a level of confidence, but, like all new business ventures, collaborative relationships draw energy largely from the optimistic ambition of their creators.
The risk of missing a rare opportunity also motivates company leaders to enter into relationships with open-ended possibilities beyond just clear financial payoffs. For example, newly privatized telecommunications businesses in Europe, Latin America, and Asia often find many foreign companies bidding for their affections, even when financial payoffs are uncertain and venture strategies confusing. Those companies offer a rare chance for outsiders to acquire inside positions in country markets.
Furthermore, distance lends enchantment. Company leaders often don’t know each other well enough to be aware of, never mind bothered by, a potential partner’s subtle differences. Selective perceptions reinforce the dreams, not the dangers. Leaders see in the other what they want to see and believe what they want to believe, often realizing only later that infatuation blinded them to early warning signs.
The selection process may go better if companies look for three key criteria:
1) Self-analysis. Relationships get off to a good start when partners know themselves and their industry, when they have assessed changing industry conditions and decided to seek an alliance. It also helps if executives have experience in evaluating potential partners. They won’t be easily dazzled by the first good-looking prospect that comes along.
2) Chemistry: to highlight the personal side of business relationships is not to deny the importance of sound financial and strategic analyses. But deals often turn on rapport between chief executives. And the feelings between them that clinch or negate a relationship transcend business to include personal and social interests. Also, a good personal rapport between executives creates a well of goodwill to draw on later if tensions develop. A relationship between CEOs that includes personal and social interests can make or break a business deal.
3) Compatibility: the courtship period tests compatibility on broad historical, philosophical, and strategic grounds: common experiences, values and principles, and hopes for the future. While analysts examine financial viability, leaders can assess the less tangible aspects of compatibility.
Sometimes, particularly in Asia, partners are selected more for their potential to open future doors than for immediate benefits. However, many relationships die an early death when they are scrutinized for quick returns.
Getting Engaged
What starts out as personal rapport, philosophical and strategic compatibility, and shared vision between two companies’ top executives eventually must be institutionalized and made public. Other stakeholders get involved, and the relationship begins to become depersonalized. But success in the engagement phase of a new alliance still depends on maintaining a careful balance between the personal and the institutional.
Meeting the Family: the rapport between chief executives and a handful of company leaders must be supplemented by the approval, formal or informal, of other people in the companies and of other stakeholders. Also, each partner has other outside relationships that need to approve of the new tie: government ministries, major customers and suppliers, other partners, and investors. Sometimes those meetings don’t go well.
The Vows: third-party professionals—lawyers, investment bankers, and their staffs—play their most important roles at this point in the process. But if they dominate, the relationship can become too depersonalized and lose the leaders’ vision. It is important to remember that outside professionals don’t have to live with the results of their work. Also, because of their professional bias, they are less likely to be interested in the symbolic substance of relationship building: the gestures of respect or the mutual give-and-take that cement a relationship.
The best agreements between companies contain three important components. First, they incorporate a specific joint activity, a first-step venture or project. This project makes the relationship real in practice, helps the partners learn to work together, and provides a basis for measuring performance. Having real work to do makes it possible to get the relationship started; the longer a courtship drags on without consummation, the more likely conditions or minds or both can change and jeopardize it.
Second, the vows should include a commitment to expand the relationship through side bets such as equity swaps or personnel exchanges. Such a commitment reflects a willingness to connect the fates of the companies.
Third, the vows should incorporate clear signs of continuing independence for all partners.
Setting Up Housekeeping: The romance of courtship quickly gives way to day-to-day reality as partners begin to live together. Joint ventures are also new ventures and are thus fraught with uncertainty and unanticipated roadblocks. Now more than just the upper echelons of management must work together to make the partnership succeed.
Problems of Broader Involvement
As actual projects get under way, many more people filling many more roles must work with members of the other organization. This broader involvement threatens to undermine the commitment forged at the top, for four reasons:
1) People in other positions may not experience the same attraction and rapport as the chief executives did. For example, during their alliance’s early years, Publicis and FCB top executives maintained close contact, traveling often to each other’s headquarters. They spent a lot of time together both informally and formally. Other employees had not been in touch with one another, however, and in some articles had to be pushed to work with their overseas counterparts.
2) Employees at other levels in the organization may be less visionary and cosmopolitan than top managers and less experienced in working with people from different cultures. They may lack knowledge of the strategic context in which the relationship makes sense and see only the operational ways in which it does not. For example, a member of the team developing a new financial product to be launched with a foreign partner complained repeatedly to his boss about the risks inherent in the product and the difficulties in introducing it, even recommending termination of the venture. He didn’t realize that the foreign partner was a key gatekeeper for a lucrative development deal in another country. Senior managers were tolerating this risky venture in the hope of a larger payoff elsewhere.
3) Usually only a few staff people are dedicated full-time to the relationship. Others are evaluated on the performance of their primary responsibilities and therefore often neglect duties relating to the new alliance. Venture managers, more concerned about their future in the parent company that appointed them, often give priority to their own company’s events or executives and subordinate those of the partner.
4) People just one or two tiers from the top might oppose the relationship and fight to undermine it. This is especially true in organizations that have strong independent business units or among professional groups whose incentives aren’t aligned with the interests of the organization as a whole. For example, a health care services company formed an alliance with a group of hospitals to create a single new facility to replace duplicate capacity in the hospitals. All the hospitals invested in the alliance, and the services company assumed they would bring enough business to make the venture profitable quickly. But that assumption proved wrong. While the hospital heads had committed to the relationship, they had ignored the views and needs—and the power—of the staff at the units to be closed. The staffs fought back. They cited issues about quality for not sending business to the new venture, and because it was having start-up problems, their claims were plausible. They also cut the transfer prices to internal customers to win their backing in keeping their units alive. And they neglected to send their people to work with the venture, which began to hemorrhage money badly. Eventually the alliance folded.
Discovery of Difference
Operational and cultural differences emerge after collaboration is under way. They often come as a surprise to those who created the alliance. That failure could reflect blind spots on the part of the legal and financial analysts who dominate the engagement period, but even operating people see the similarities more often than the dissimilarities in potential partners. Experience has a way of opening their eyes.
Differences in authority, reporting, and decision-making styles become noticeable at this stage in the new alliance: what people get involved in decisions; how quickly decisions are made; how much reporting and documentation are expected; what authority comes with a position; and which functions work together.
Differences in structuring authority can have immediate practical consequences. In China, a chief engineer reports typically to the chief executive, whereas in Canada, at Northern Telecom, he or she reports to the manufacturing director. Numerous other logistical and operational differences are soon discovered to be hiding behind the assumed compatibility: different product development schedules, views of the sales process, or technical standards, for example. Also, when the partners extend their areas of collaboration, the relationship becomes more difficult to govern and to evaluate on a purely financial basis.
The most common conflicts in relationships occur over money: capital infusions, transfer pricing, licensing fees, compensation levels, and management fees. Also, the complexity of roles each partner has with respect to the other can make economic decisions difficult. Remember, the relationship is larger than any one venture.
Operational dissimilarities require working out—more communication than anyone could have anticipated. All operational dissimilarities require working out. More communication than anyone anticipated is necessary, and different languages make things even harder. In a Franco-American joint venture, meetings were conducted in both languages and thus took twice as long. Differences between companies do not disappear because of an alliance, but they can be handled so they don’t jeopardize it. Companies that are good at partnering take the time to learn about the differences early and take them into account as events unfold.
Learning to Collaborate
Active collaboration takes place when companies develop mechanisms—structures, processes, and skills—for bridging organizational and interpersonal differences and achieving real value from the partnership. Multiple ties at multiple levels ensure communication, coordination, and control. Deploying more rather than fewer people to relationship activities helps ensure that both partners’ resources are tapped and that both companies’ own needs and goals are represented.
The most productive relationships achieve five levels of integration:
1) Strategic integration, which involves continuing contact among top leaders to discuss broad goals or changes in each company. Leaders should not form an alliance and then abandon its nurturing to others. The more contact top executives have, the more changes they will hear about, the more chances they will have to work things out, the more information they will be able to turn into benefits, and the greater the possibility that the companies will evolve in complementary rather than conflicting directions. Often, new governance forums evolve after the relationship is under way.
2) Tactical integration, which brings middle managers or professionals together to develop plans for specific projects or joint activities, to identify organizational or system changes that will link the companies better, or to transfer knowledge. Establishing formal integrator roles is another way to ensure tactical integration.
3) Operational integration, which provides ways for people carrying out the day-to-day work to have timely access to the information, resources, or people they need to accomplish their tasks. Participation in each other’s training programs helped two companies in a technology-based relationship develop a common vocabulary and product development standards.
4) Interpersonal integration, which builds a necessary foundation for creating future value. As relationships mature beyond the early days of scrambling to create initial projects and erect structural scaffolding to manage them, the network of interpersonal ties between members of the separate companies grows in extent and density. Leaders soon feel the need to bring people together to share information.
Broad synergies born on paper do not develop in practice until many people in both organizations know one another personally and become willing to make the effort to exchange technology, refer clients, or participate on joint teams. Establishing many interpersonal relationships between partners helps resolve small conflicts before they escalate. Many strong interpersonal relationships help resolve small conflicts before they escalate.
5) Cultural integration, which requires people involved in the relationship to have the communication skills and cultural awareness to bridge their differences. Managers from either partners or affiliated companies must become teachers as well as learners. When managers accept teaching and learning roles, they demonstrate interest and respect, which helps build the goodwill that’s so useful in smoothing over cultural and organizational differences.
Integration in all five of these dimensions—strategic, tactical, operational, interpersonal, and cultural—requires that each party be willing to let the other parties inside, which entails a risk: the risk of change.
Recommendations for Successful Collaboration
Changing Within: Productive relationships usually require and often stimulate changes within the partners, changes that they may not anticipate at the outset of the collaboration. When two companies place themselves in intimate contact with each other through an alliance, it is almost inevitable that each will compare itself with the other: How do we measure up to our partner in systems sophistication or operational efficiency? What lessons can we learn from our partner? In fact, learning and borrowing ideas from partners is part of realizing the full value of the relationship.
Empowerment of Relationship Managers: Because collaborative ventures often make new demands, managers involved in the relationship must be able to vary their own companies’ procedures to make venture-specific decisions. Staff involved in alliance activities often needs more knowledge and skills.
Infrastructure for Learning: Companies with strong communications across functions and widely shared information tend to have more productive external relationships. Thus other desirable internal changes include greater cross-functional team-work and exchange of ideas.
Many businesses fail to realize the full potential from their relationships because internal barriers to communication limit learning to the small set of people directly involved in the relationship. The company’s systems are usually the culprit in such situations, not its people. Specific forums to exchange ideas can help companies import lessons from their partners.
Managing the Trade-offs: There are limits to how much a company should change to accommodate the demands of an alliance. The potential value of the relationship must be weighed against the value of all the other company activities, which also make demands on its resources—including the time and energy of executives. Even when relationships have high value, an organization can handle only so many before demands begin to conflict and investment requirements (management time, partner-specific learning, capital, and the like) outweigh perceived benefits. Sometimes companies must face the challenge of terminating an alliance. Relationships can end for a number of reasons. A partner may be suitable for one purpose and not another. Managers or other venture participants may be needed for more urgent tasks. Shifts in business conditions or strategy can mean that a particular relationship no longer fits as well as it once did. For whatever reason, ending a partnership properly is difficult to do and requires much skill and diplomacy. Partners should be fully informed and treated with integrity. If they are not, future relationships will be jeopardized—especially in Asian countries, where business and government leaders have long memories.
Conclusion
Like all living systems, relationships are complex. While they are simpler to manage when they are narrow in scope and the partners remain at arm’s length, relationships like these yield fewer long-term benefits. Tighter control by one partner or development of a single command center might reduce conflicts and increase the manageability of a relationship. Many benefits, however, derive from flexibility and being open to new possibilities. Alliances benefit from establishing multiple, independent centers of competence and innovation. Each center can pursue different paths, creating in turn new networks that go off in new directions. Flexibility and openness bring particular advantages at business frontiers—in rapidly changing or new markets or in new technology fields.
The effective management of relationships to build collaborative advantage requires managers to be sensitive to political, cultural, organizational, and human issues. In the global economy today, companies are known by the company they keep. As the saying goes, success comes not just from what you know but from who you know. Intercompany relationships are a key business asset, and knowing how to nurture them is an essential managerial skill.
QUESTIONS
(All questions should be answered)
Question 1 (20 Marks)
Define collaborative advantage and collaborative inertia. Identify from the article, what may lead to collaborative advantage and what may lead to collaborative inertia. Discuss the importance of integrity and commitment in this process. Reflect in your discussion on a definition of aim ownerships and identify from the article how the inter-relation between these aims can help to achieve better results (400 words).
Question 2 (20 Marks)
Based on B325 material, identify the main bases for collaboration. Reflect on the bases for collaboration and the examples provided in the article and discuss these in relation to your identified collaboration bases (500 words).
Question 3 (15 Marks)
Having a positive outcome from a partnership is not always attainable. Individuals’ commitment and understanding of partnership aims always have an effect on the outcome of the collaboration. Refer to B325 material and discuss the various episodes that may affect a collaborative partnership. Refer to the article and provide examples about episodes that were found in various organizations that formed the study (400 words).
Question 4 (15 Marks)
Culture differences are always encountered when two or more organizations from different parts of the world collaborate together. Based on B325 material, identify and discuss the main challenges that face multicultural teams. Refer to the article, and provide examples about these challenges. Critically discuss, with reference to B325 material and article, what are the actions that can be taken to face these challenges (400 words).
Question 5 (15 Marks)
Embracing, empowering, involving, and monitoring members are very important aspects to lead a successful collaboration. Based on B325 course material, discuss what is meant by each phase. Reflect on the article and identify how these steps where followed (400 words).
Question 6 (15 Marks)
The formation and implementation of collaborative agenda is led by three media: structure, process and participants. Based on B325 material, discuss each media and identify which media was mostly used and how it was used by the organizations in the article to embrace, empower, involve and monitor members. Identify from the article the importance of the media to maintain the collaboration (400 words).
GENERAL INSTRUCTIONS FOR STUDENTS
Cut-off date: May 3, 2015
TMA weight: 20% of total course grade.
Course material:
- Chapter 1: Collaborative advantage: What? Why? How? And Why Not?; from “Managing to Collaborate” Book.
- Chapter 2: Goal setting: a five-step approach to behaviour change; from “Organizational Collaboration” Book; and
- Chapter 6: Managing Aims; from “Managing to Collaborate” Book.
- Chapter 7: Negotiating Purpose; from “Managing to Collaborate” Book.
- Chapter 13: Managing multicultural teams; from “Organizational Collaboration” Book.
- Chapter 13: Doing Leadership from “Managing to Collaborate” Book.
- Chapter 12: The Meaning of Leadership from “Managing to Collaborate” Book.
Format: The answer to each question should be shown clearly with the question number next to it. Failure to do so may result in deduction in presentation points of up to 4 marks. In addition, you are expected to write your answers in an essay format. However, you may use bulleted paragraphs, diagrams, tables, or any graphs to support your arguments. Failing to do so could result in the deduction of up to 4 marks from presentation marks.
Plagiarism: It’s imperative that you write your answers using your own words. Plagiarism will be penalized depending on its severity and according to AOU plagiarism policy.
Word count: your answers are expected to be within the specified word count. A 10% deviation from word count limit is acceptable. Not adhering to specified word count could result in the deduction of up to 4 marks of your word count marks.
Referencing: You are expected to use the Harvard referencing style for in-text referencing and list of reference at the end. Failing to do so could result in the deduction of up to 5 marks of referencing marks. In addition, although text books assigned in the course may be used freely as references, you are required to use a minimum of 2 external sources. It is recommended that you use scholarly articles found in the E-library link at LMS. Failing to do so could result in the deduction of up to 4 marks of your referencing marks.
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