Monday, 29 April 2013

Partnerships for Business Success

By Mark Mulcahey
Visiting Fellow to Northampton Business School

In my view the oldest forms of partnership structure, built on trust and the open exchange of information, are the most suitable for our modern business environment.

Over the last few decades companies have increasingly played lip service to the concept of genuine partnership and generally use one of three models:

Transactional partnerships involve a clear position of power for one party based on a contractual relationship between the two parties involving goods or services. A closed approach to information sharing and the implicit (and sometimes explicit) desire to create a deal that is unfavourable to one party. An example of this type of partnership would be between Samsung and Apple, with Samsung providing components to Apple for its products.  Neither side sees the other as equal, and their have been complex legal battles between the two parties.

Strategic partnerships often involve cross-ownership to support the creation of a new business enterprise or delivery of a service. Both sides are committed as a result of the ownership and (in the best) both sides bring particular skills and capabilities.  The relationship between Virgin and T-Mobile in the UK to create Virgin Mobile was a classic application of a strategic partnership.

Open partnerships are often for particular projects or to launch new products; companies seek out relationship that involves companies working together in a looser arrangement. Often there is no cross-ownership but there may be shared rewards in a positive outcome. An example of this would be Samsung and Phones4u working together in the UK to launch an innovative retail concept, the Samsung PIN store. Both sides shared a common vision and worked together for its achievement, but they did not engage directly in a long term or strategic partnership.

Unfortunately all these structures struggle in the new reality of a business world enabled by social technology. In my view this new reality is characterised by three principle components all of which directly impact on the partnership structures companies need to apply:

Business model disruption is the new reality with customers directly accessing  suppliers; the digitisation of all information and the emergence of new generic platforms such as Facebook, allow new routes to trading relationships. These can directly impact on the need for strategic partnerships.
Access to everyone – traditional connections are breaking down and it is easy for companies to make connections with multiple potential partners and transfer and share information immediately and at no cost.

Everyone knows everything – The bass of traditional partnerships is the sharing of information and the focus of that sharing on achieving a particular outcome. Sharing information is now easy and commonplace. Not only can any one reach anyone but they can share information easily – for example: CAD/CAM data between designers and machines (across continents) or integrating launch teams across continents.

All of these elements place significant strain on the current partnership models being used across business.

In my view businesses need to embrace a form of partnership that has not only been in existence for centuries, but also provides the essential tools to allow a business to survive and prosper in today’s environment.  

The mutual partnership is founded on an open, honest and trusting relationship. The desire is to build a much more effective approach to the market than either business could achieve alone. Both parties accept and acknowledge their strengths and limitations and both parties work together to achieve success. The conversations between the parties do not start with contract discussions but with shared aspirations and mutual respect.

How do you establish a mutual partnership?

There are six principal steps:
  1. Understand your own strengths and weaknesses
  2. Identify a small number of key partners that could help you and that you could help (Think about customers – these are crucial partners)
  3. Meet with these partners and work on developing a shared vision
  4. Start small and quickly – identify something that can be done collaboratively and that will breed a positive commitment  - and do it quickly
  5. Constantly and mutually monitor the relationship. Don’t look for formal measures but constantly check – is this working for us? Is this working for them?
  6. If it feels wrong – kill the project

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Thursday, 25 April 2013

Ego, Ethics and High Finance: Debating the Moral Vacuum

By Tom Lloyd
Visiting Fellow to Northampton Business School

The departure in mid-April from Barclays Capital of Rich Ricci, his pockets bulging with £18m of deferred remuneration, marked the end of the Diamond age at Barclays, and the beginning of … what exactly? Normalisation; retrenchment? What was it that Barclays was putting behind it with its ejection of the last of BarCap’s notorious ‘three musketeers’ (the other two, Bob Diamond and Jerry del Missier, left last year, with similarly bulging pockets, in the wake of the LIBOR scandal)?

The official answer is that with the Augean stables of ego and greed cleared out, Barclays can get back to ‘normal’ – to an appropriate allocation of risk and reward between employees and shareholders, and to incentive systems designed to encourage staff to deliver high quality customer service, rather than high sales.

The normalisation programme launched by the new Barclays CEO Antony Jenkins is billed as a strategic review, and called ‘Transform’. It is very likely to implement the recommendations of the Salz Review commissioned in July 2012, and published in April 2013.

Although sceptics could be forgiven for dismissing the Salz Review as a whitewash job, on the grounds that Anthony Salz is executive vice-chairman of Rothschild, and thus can be expected to have a vested interest in the investment banking status quo, the review is well worth a read.

It suggests that BarCap’s extraordinarily generous bonus policy was an important contributor to the bank’s woefully unethical culture, as evidenced by the mis-selling of Payment Protection Insurance (PPI), and by attempts to manipulate the London Interbank Offer Rate (LIBOR). It comes close to suggesting that there’s an inverse causal correlation between levels of executive pay and ethical standards.

This conjecture is worth thinking about. Is it intuitively plausible for one thing; does it seem likely that extremely well paid people tend to be less ethical than average? Do extremely high levels of pay overwhelm or weaken ethical norms? Does the exaggerated sense of entitlement of Rich Ricci and his fellow ‘musketeers’ free them from  ethical standards that constrain normal behaviour? If any of these conjectures seem plausible, what can be done about it?

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Wednesday, 24 April 2013

Enlightenment Blog

By Tom Lloyd
Visiting Fellow to Northampton Business School

The launch of Northampton University Business School’s ‘Centre for Citizenship, Enterprise and Governance’(CCEG) has been inspired in part by the conviction that there is an urgent need, particularly in the West, for a new contract between business, individuals, and society at large.

We have reached the end of an era - a fin de si├Ęcle. The financial and economic traumas of recent years have been a wake up call. The post-war liberal capitalist consensus has been undermined by the manifest incompetence of those to whom ordinary people have relied on hitherto for economic, financial, and corporate governance, and by the huge rewards those same incompetents have appropriated, and continue to appropriate.

The value-creating power of business consists of people and people everywhere are rejecting a vision of business in which the company is merely an engine for creating shareholder value.

It will take a lot of time and thought to reach a consensus on the new contract. It is a challenge comparable in scale and radicalism to the great 18th century enlightenment that replaced the medieval era of all-powerful monarchs and their ‘divine rights’, with a new  secular age of science and reason.

The design and specification of this new contract is a job for the heirs of the enlightenment philosophers (Newton, Leibniz, Spinoza, Smith, Descartes, Voltaire, Locke, Diderot, Montesquieu, Franklin, Jefferson and Paine). The CCEG is committed to and wants to play a part in this hugely important enterprise.

Quite what form the ‘new contract’ will take is not yet clear, but it is certain to emerge from interactions between the CCEG’s three themes; Citizenship, Enterprise and Governance.

The mission of this blog is to apply new enlightenment thinking to the political, social, economic and corporate topics and issues of the day, to identify and criticise pre-enlightenment thinking, and to challenge traditional assumptions and conventional wisdoms.

We welcome feedback, the more the better, and we will offer ‘guest slots’ to those who have strong views about what we write here and others write elsewhere.

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