The Case for an Expert Cross-Border Partnership Practice

PARTNERING ACROSS CULTURES:  NEW KNOWLEDGE, ENHANCED SUCCESS

Strategic Partnerships are not just nice to have:  over the last few years, they have become an integral part of doing business, one of few truly mainstream practices.  Every year, well over 10,000 new alliances are formed with the expectation to generate transformational value, such as new offers and technologies, new business models, boosted performance, reduced and shared costs and risks, supply chain redesign and optimizations and enhanced customer base.

According to a 2016 KPMG survey the main factors that explain the appetite for reaching out – M&A, acquisition, partnerships etc. – are reported as:  fortify competitive position in the current market (58%), expand beyond current markets (26%), satisfy shareholder pressure to accelerate growth (26%).  The primary reasons for acquisitions are:  expand customer base (37%), enter into new lines of business (37%), expand geographic reach (36%), and enhance intellectual property or acquire new technologies (34%).

Today, “The World is even more flat!”

Perhaps we were all impressed when Thomas L Friedman published his book in 2005 and said:  “The world is flat”.  He meant to represent the 21st century world as a level playing field in terms of commerce, where all competitors have an equal opportunity.

Today “The world is even more flat”.  Everything is “one click away” and “accessible” with the enhanced technology, information systems and digitalization.  Hence, capability and competency sharing is more “usual” than ever.  And no day goes by without the announcement of new alliances, partnerships, mergers and acquisitions in same-sector, cross-sectors, and most commonly now, cross-border.

Uber Technologies, now the common language for disruptive and transformational businesses (the “uberisation”), has embedded partnering into most of its operations.  Examples on how they aim to create substantial value through collaborations are their strategic partnership agreement with Toyota in May 2016, and their partnership with the Zain Group, a leading innovator of mobile communications.  Among the many brands currently running partnerships with Uber is Starwood, which awards passengers hotel points for each ride they take.  There’s also Capital One, which gives Quicksilver cardholders 20% back on rides.  Other partners include Amex, Hilton, Shopify, PayPal etc.

Apple is also active in strategic partnering.  Among a myriad of other partnering initiatives, Apple announced in May 2016 a new partnership with SAP, in which SAP develops a custom business applications for IOS devices and in return Apple gets access to SAP’s worldwide sales force.  Apple also made combined technology and commercial agreements with IBM in 2014 and Cisco in 2015.

Chinese Alibaba Cloud signing a partnership deal with SAP and Accenture is another recent and major example of cross-border partnerships… among so many others.

If true Partnerships are challenging, cross-border ones are multiple times more so!

Partnering remains a “hit and miss” process that fails far more times than it succeeds, with over 70 per cent of business relationships reported to break off over time and less than 10 per cent meeting or delivering above original expectations (irrespective of their legal form).  As the book ‘Strategic Partnering, remove chance and deliver consistent successhttp://strategic-partnering.net was published at the end of 2013, his authors went around the world to discuss Strategic Partnering with multiple boards of a large variety of organizations.  There were consistently two key questions raised in the discussion and one of them was – unfortunately based on real experiences -: are we, are our culture and practices fit for partnerships?  Because their track record of partnering was far from satisfying, and even less so with organizations of different cultural backgrounds.

Indeed, it would be a miracle if cross-border partnerships operated very smoothly.  And my main point for today is that the cultural differences between organizations are the key limiting factors to the success of partnerships, M&A etc.  Not a new thought would you say?  Of course, but then why aren’t these differences systematically and scientifically analyzed?  And once deep understanding of the partner is developed, why aren’t changes of approach made in the successive steps of the partnering model?

Indeed, how two organizations whose cultures are polarized on key traits can progress their cross-border partnering successfully?  How do long-term focused Germany or Japan companies ensure satisfyingly accelerated performance when partnering with short-term biased USA organizations?  Or how to reduce the key challenges of a UK company when partnering with a Russian company (and vice versa), given that these two cultures are almost perfect opposites on many key traits and leadership styles, such as long term versus short term, ambiguity versus certainty, pyramidal versus diffuse etc.?

As said, such issues are usually undealt with by organizations when considering, entering or developing a partnership.  And when the partnership fails, they are ‘unspoken” in analyst presentations or company websites.  Rather, justifications fall under usual categories of:  “diverging interests“, “insufficient competitive edge” etc.

When things go wrong!

A striking $16bn case between Suntory and Beam in the beverage industry was well reported in a 2016 Financial Times article ‘Beam Suntory: A volatile Japanese-US Blend.  In the article, the author describes the dramatic effects of cultural differences, which led to major gaps in proactiveness, performance management and reporting, building trust (or rather not, as a climate of mistrust developed) etc. between the teams.  Consequences were of major scale including financial, so much making the case for a thorough cultural approach to the venture.

Mobileye, an Israeli self-driving technology company and Tesla, the California based automotive and energy storage company, ended their partnership in July 2016.  One wonders the depth of impact of this failed partnership on both companies.  But, reading through the lines and applying expert judgment on how best partnerships are managed, the gaps in the practice seemed very significant. And almost unavoidably, part of these gaps resulted from a lack of culture connectivity, notably on ambiguity management and leadership approaches, the effect of which shows in setting up mutual co-operating frameworks and processes, deploying best fit human capital in the partnership etc.

So, the big question is:  how can organizations assess and enhance their aptitude to partner cross-border?

Firstly, there is very limited science in Strategic Partnering.  The book ’Strategic Partnering’ attempts to address this issue in providing practical recipes, which, if applied consistently, radically transform the likelihood of success and bring it close to 100%.

But it became obvious that “culture” knowledge and science were a league in their own and required much deeper work.  Because nowhere have we been able to find research, literature or rationalized experience on cross-border Strategic Partnering frameworks.

In fact, there are a lot of extraordinary cultural models as such – e.g. Hofstede – that identify differences and communalities across cultures.  And also, many descriptives exist of different cultural codes and symbols such as “how to (not) handshake with Japanese“, or “importance of eye contact in certain cultures”, or “impact of Ramadan in Arab business world” or “time management and punctuality in Spanish culture” etc.

But what is deeply missing is a science based approach, a model that addresses “how to succeed with cross-border partnerships”.  This is, how do we bring all the existing knowledge on cultures into the knowledge on best partnering approaches, to tailor the later to the former and transform the mutual understanding and ability to cooperate of partnering parties.

Over the recent years, Strategic Partnering has initiated and developed such a cross-border strategic partnering model.  This completely differentiated framework includes practical insights and recommendations and, as such, is a massive endeavor.  Strategic Partnering has also applied this model to a number of Partnerships and experienced transformational success from it.

The effect of this work on real business cases is so dramatic that a major commitment has been made to further deepen the research and bring academic rigor to it.  But today is the first time to communicate on the first ever cross-border partnering model and make it available to all companies and organizations that want to succeed with partnering across cultures!

By Ozge Sumer

8 September 2016