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Establishing Strategic Collaborations with US Business Partners

Establishing Strategic Collaborations with US Business Partners. Marc D. Coles Ohio-Israel Agricultural Initiative Presented at AgroMashov January 13, 2010. Shrinking Core, Expanding Periphery *.

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Establishing Strategic Collaborations with US Business Partners

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  1. Establishing Strategic Collaborations with US Business Partners Marc D. Coles Ohio-Israel Agricultural Initiative Presented at AgroMashov January 13, 2010

  2. Shrinking Core, Expanding Periphery* To reduce costs, companies must focus on what they do best and push other activities outside of their core business processes Companies access capabilities through their strategicrelationships with other firms – this network is greater than the sum of its parts *Prof. Ranjay Gulati, Kellogg School of Management

  3. Core Business Process • A process that generates a competitive advantage • Core process ≠ critical process • By definition, core process is critical, but a critical process is not necessarily core to the business • Increased outsourcing of critical functions

  4. Know Your Sandbox . . . • In order to determine your core business and strategy, you must know your sandbox • To do so, companies need to clearly define: • Target customers • Value Proposition • Place in the market

  5. Relationship Focus • Companies are increasingly relying on building and maintaining their network of strategic relationships: • Employees –“partners”, health care benefits, stock options • Customers – in the “people” business • Suppliers – long-term relationships with carefully selected suppliers who are not always the least expensive • Alliance Partners – licensing, joint ventures, M&A “An alliance is a marriage, not a one-night stand.” Vincent Lo, Chairman & CEO, Shui On Group

  6. Strategic Collaborations • Relationships between firms that involve significant amounts of shared information and decision making • May involve equity ownership (economic integration) • Organizational coordination mechanisms

  7. Motivation for Strategic Collaborations • Risk-reward sharing • Market entry or extension • Sharing technological and innovative activities • Response to regulatory constraints Most valuable when synergies exist between partner firms

  8. Synergy • “1+1 = 3” • “Whole is greater than sum of the parts” • Synergy between companies exists if something can make their joint inputs cheaper (cost synergies) or their joint outputs more valuable (revenue synergies)

  9. A Key Element: Trust • Initially based on: • Reputation • Interactions during negotiations • CEOs relationship

  10. A Key Element: Trust • Subsequently: • Tested in repeated interactions • Matched with performance outcomes

  11. A Key Element: Trust • When things get rough: • Inter-company trust goes first • Interpersonal trust keeps relationship alive “You never build a relationship between your organization and a company . . . You build it between individuals.” John Browne, CEO of BP

  12. Why Collaborations Fail • Environment • Failure to anticipate the changing conditions in tastes, technology, economy • Failure to consider differences in national culture, institutions, government regulations • Changes in legal and economic environment

  13. Why Collaborations Fail • Strategy • Poor partner selection • Changed partner goals and strategy • Achievement of partner’s strategic goals

  14. Why Collaborations Fail • Structure • Form of collaboration does not match purpose • Unbalanced control • Lack of flexibility in contract • Unclear goals

  15. Why Collaborations Fail • Behavior • Organizational or national cultures mismatched • Failure to adapt and adjust to changing circumstances • Poor implementation • Lack of top visible management commitment • Poor systems for information sharing • Lack of trust between companies

  16. Cultural Differences • Generally accepted that there are differences in US and Israeli business practices • Neither US nor Israel are uniform – differences between East and West coasts • Business practices in Israel are generally less formal than US – political, ethnic and male/female jokes are not appropriate

  17. Cultural Differences • In a “David and Goliath” relationship, you may want to adapt to other party’s culture • Israelis may view Americans as overly polite, hypocritical, or unduly diplomatic • Americans may see Israelis as too aggressive, confrontational and annoyingly persistent

  18. Marketing to US • Technological advantages do not mean a better product • Focus on solutions to real problems • Improved technology is not a value proposition • Consumers do not care about the underlying technology of a product

  19. Marketing to US • Product development teams need clear and highly defined problems to solve • Product developers should not assume customer demand based on their own limited experience • Products should be engineered for a carefully identified group of customers

  20. Marketing to US • The clearer your marketing strategy, the more effective will be your collaborative partner selection and interaction

  21. Thank You marc.coles@gmail.com

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