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August 18, 2019Cart

Business

by Fairfield County Business Journal
by FCBJ

Candice M. Hughes: One big reason alliances and partnerships fail

How do you feel on days when you have meetings or teleconferences with your corporate partner? Are those the days when your muscles clench up in your neck or a tight knot forms in your stomach?

Partnerships often start off with glowing press releases, handshakes and sharp PowerPoint presentations laden with the black ink of money saved or revenue earned. After the flashing lights dim from the photo ops, reality may appear far less optimistic and pleasant than expected during the champagne celebrations. The after-the-buzz reality is that 60 percent of strategic business alliances fail, according to the CMO Council Report.

You expected a partner who would lift the heavy burden you are shouldering each day; instead they are adding to your overfilled plate and raising your stress levels too. Besides your daily stress, your company could experience cost overruns, poor quality work, disrupted operations or even public embarrassment.

The main reason so many partnerships and alliances fail or flounder is because the partners did not assess compatibility in soft factors before signing on the dotted line. The risk of partnership stress and disruption can be greatly reduced if you investigate not only the hard facts, such as financials and technology innovativeness for offered products and services, or co-promoted product, but go deeper than these to human factors and
future projections.

While companies may consider soft targets during high-profile mergers and acquisitions, they rarely consider them for partnerships that may be less newsworthy yet are equally impactful on the firm when they go awry.

GETTING TO KNOW YOUR PARTNER

While it is relatively straightforward to collect financial data from an alliance partner or vendor, to ask for references, to assess the fit, technical specifications and likely success of their offered products and services, it is much harder and more time-consuming to assess soft targets and projections. In the first case, vendors or partners usually provide hard target information in pitches, request for proposals, online vendor databases or upon request by the partner or supply officer. In the second case, soft targets are harder to define, not often considered and hard to obtain.

Not many firms have an established process for collecting and evaluating information on culture, personnel compatibility or how goals could change over time. Vendors or partners may not even know the answer to these sorts of questions when asked.

Think about if you were entering a new personal relationship and someone asked you if you were messy. Would you tell them? Would you even know? Would you think, messy in relationship to what? Even when partners want to answer these questions, they often can’t or don’t know how.

Even if your firm visits the partner or vendor, you may not discover the answers to these soft target questions because it is human nature to put one’s best face forward early in a relationship and to downplay differences. Consequently, alliance managers, vendor managers or supply officers may not pursue the investigation due to time constraints and difficulty of the task.

Besides the human factor fit, consider goal alignment. Your potential partner may seem to have perfectly aligned goals with you today, but what about in a year? In five years? Will their market change during this time? Will that affect their goals and direction? Change is one of the most common causes of partnership failure.

Have they done this type of scenario planning and are they willing to tell you? Have you done this type of planning and analysis on their market? If not, you can’t be sure whether or not your goals will remain aligned throughout the partnership. In reality, changes could lead to you and your partner becoming competitors or operating in totally disconnected marketspaces with no overlapping interests.

In six months or a year, these soft factors are exactly the ones most likely to cause partnership failure.

RISK MITIGATION: YOUR CHOICES FOR SOFT FACTOR ASSESSMENT

What can your firm do to investigate, assess and mitigate soft factors? There are two options. The first is to dedicate time and staff to this crucial examination of cultural fit, projected goals of each firm, projected interests and market shifts.

The second is to hire a third party, experienced in assessing and managing multiple vendors and partnerships, to perform the soft target assessment and projections.

The advantage of a third party is that they are not involved directly in the partnership, thus, they are not invested in whether or not the partnership moves forward, giving them clearer insights as well as appearing more neutral to the other partner. Additionally, they have observed, managed and assessed multiple partnerships, giving them benchmarking insights.

While these options may seem like an extra cost upfront, the result will be fewer white-knuckle days, sleepless nights and piles of rework in your inbox. The cost will be far less than the cost of staff time for rework, disruption of operations, even regulatory fines or brand devaluing that could occur from a failed high-profile partnership or alliance.

Vendors with a partnering mindset will embrace collaborative partnerships as win/win situations. As the need for alliances, partnerships and vendors increases in today’s ultra-collaborative business world, soft factor assessment and mitigation is becoming a critical necessity rather than a luxury.

Candice M. Hughes is principal of Hughes BioPharma Advisers in Darien, a serial entrepreneur, strategy and management consultant and author of the “Small Business Rocket Fuel” e-book series. She can be reached at admin@hughesbiopharma.com; 347-997-4212; or @candicemhughes.