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Innovating through alliances: Expectations and limitations
474
J PROD INNOV MANAG 1994; 11:464-475
Ingersoll Rand, and others focus on increasing quality if it simultaneously decreases manufacturing costs. Quality will continue to be very important, and managements will increasingly integrate it into their overall strategic operations. Focusing on customerdefined quality means a global view, not looking to Japan. And right now, the author feels global buyers want responsiveness and adaptability, capabilities that many firms have lots of. In a way, this is still quality, but it means the quality of the seller's overall operation and customer dedication, not just quality of a measurable product.
Timing Is Everything in a Product Rollout, Kristin Zhivago, Business Marketing (March 1994), p. 36 This brief article is written for the telecommunications/computer fields, and spells out a specific set of steps to follow in announcing a product. Phase 1: Nondisclosure. Early period, no disclosure except to vendors and a few other outsiders who are working on the project and who sign nondisclosure agreements. Phase 2: Product testing. Alpha testing in company facilities and Beta testing at customer sites goes on now. No public announcements (usually) and Beta site people sign nondisclosure agreements. Phase 3: Anticipation. This is the first of two controversial stages. The product is not ready, but the firm will release "position" pieces that talk about the problem that the firm's new product will solve. They offer technical solutions based on architecture, but the product itself is not preannounced. Phase 4: Influentials. Now the product's availability is known--not hoped for, but almost certain, but because it will still be some weeks or months in the future there is still uncertainty about how much to say. Last minute changes have been stopped, and the firm will introduce a "sufficient" product if necessary, as Windows was. It is time to tell analysts, editors, industry researchers, and some customers, about the specific product and when it will be available. This is the time for press kits, actual product, and savvy spokespersons. Phase 5: Broadcast PR. This is the time for product shipment, final press releases, and
ABSTRACTS
providing of final product for reviews. Manage the review process carefully to get the best articles. Phase 6: Promo pieces. This is the start of advertising and distribution brochures, videos, CD, and the like. Start preparing post-release announcements, testimonials, technical guides, and upgrades.
Innovating Through Alliances: Expectations and Limitations, Francis Bidault and Thomas Cummings, R&D Management (January 1994), pp. 33-45 Given the importance of innovation and the generally agreed value of alliances, the authors have studied a total of seventeen alliances in the information technology industry. They reasoned that if partnerships were to fail, it would perhaps be because they did not achieve the necessary requirements of successful innovation (the success factors), of which they feel there are seven--understanding the user's needs, knowledge of marketing and distribution, having a champion, having a sponsor, having a process that was controllable yet flexible, having fast and easy communication between the players, and an opportunity for the innovator to retain control over the innovation (for example, with patents). They then selected five partnerships for intensive study against those seven success factors. They quickly found that the alliances did offer the first two requirements--user and marketing understanding. In each partnership, such knowledge was brought by at least one of the partners and no problems arose. However, the other five offered difficulties. The champion, to be effective, must reach a certain level of acceptance in both parents' organizations. This requires an intimate knowledge of cultures and political situations, perhaps unattainable. In one of their five cases, the top managers of both firms were supportive, and the one that supplied the basic technology appointed a senior engineer as the champion. He and his group of people were excited and confident. However, in the partner firm, software development was a huge task (around 8000 person-years) and was scattered over four regional sites. Some of the software developers were simply unable to accept this outsider as their champion; they began developing their own technologies, and drifted away from the partnership. For good reasons or bad, the champion failed, and the partnership failed. The sponsor arrangement also does not fit partnerships very well. Sponsors are senior-level managers
ABSTRACTS
whose task is to protect the group working on a project, keep funds flowing, keep top management enthusiastic. However, in partnerships, there are two top managements, and two sponsors, two protectors. In one of the cases studied, one sponsor remained confident that the project would succeed whereas the other gradually became disillusioned. Soon operating people down the line fell into two camps those who had support and those who did not. Another project demonstrated how fragile the idea of tight-loose managerial control over a project can be. Almost by definition a partnership has a contract of some sort--an agreement about what will be spent, what will be accomplished, and when. And each partner is quite anxious to see that the other partner does not gain an advantage. But over the life of the project, as market conditions change, the project's direction and goals must be altered. Top managements were anxious to see that partner equality remained just that, so champions found themselves thwarted by lawyers; they no longer ran their projects. They lost flexibility. The sixth requirement is pretty obviously in danger--the free flow of information throughout the project. In one of their cases, the authors found that one partner noted how the other partner suddenly became far more sophisticated in integrated circuit design; in just a few months they had been able to adopt workstation design over hand-drawn wall diagrams, presumably by seeing how the first partner's people did the job. The partner immediately put clamps on visitors---designating sensitive areas from which partner personnel would be excluded. The seventh requirement (appropriability of innovation control) was also a problem in some situations. For example, in one case a chemical company was dedicated to obtaining patents while the partner
J PROD INNOV MANAG 1994;11:464-475
475
(formerly a state-owned firm) had people who saw their work as dedicated to science and who wanted to publish at every point. The authors decided that they could develop a checklist of situation characteristics which they could use to forecast the probability of problems on the key requirements. •
Nature of the innovation project: Technological discontinuity faced Technological familiarity Market/user familiarity Potential economic impact of the project Stage in the R&D process
•
Context of the project: Expectations of the partners Experience of the partners in partnering Risk aversion of the partners Economic costs to the partners
•
Project management: Management structure; degree of sharing/ dominance Degree of formality; the precision of the contract
With that information, the authors can first classify an alliance by its technological closure--the farther along it is, the easier it can meet the requirements. Then, given technical uncertainties, they can evaluate the context and the management, and predict the likelihood of severe problems. Lastly, given the problem set, managers can then address whether they see actions that would change the partnership to where success could be forecast. The article applies all of this to the five major case partnerships, showing how each of the key problems could have been anticipated.
J PROD INNOV MANAG 1994; 11:464-475
Ingersoll Rand, and others focus on increasing quality if it simultaneously decreases manufacturing costs. Quality will continue to be very important, and managements will increasingly integrate it into their overall strategic operations. Focusing on customerdefined quality means a global view, not looking to Japan. And right now, the author feels global buyers want responsiveness and adaptability, capabilities that many firms have lots of. In a way, this is still quality, but it means the quality of the seller's overall operation and customer dedication, not just quality of a measurable product.
Timing Is Everything in a Product Rollout, Kristin Zhivago, Business Marketing (March 1994), p. 36 This brief article is written for the telecommunications/computer fields, and spells out a specific set of steps to follow in announcing a product. Phase 1: Nondisclosure. Early period, no disclosure except to vendors and a few other outsiders who are working on the project and who sign nondisclosure agreements. Phase 2: Product testing. Alpha testing in company facilities and Beta testing at customer sites goes on now. No public announcements (usually) and Beta site people sign nondisclosure agreements. Phase 3: Anticipation. This is the first of two controversial stages. The product is not ready, but the firm will release "position" pieces that talk about the problem that the firm's new product will solve. They offer technical solutions based on architecture, but the product itself is not preannounced. Phase 4: Influentials. Now the product's availability is known--not hoped for, but almost certain, but because it will still be some weeks or months in the future there is still uncertainty about how much to say. Last minute changes have been stopped, and the firm will introduce a "sufficient" product if necessary, as Windows was. It is time to tell analysts, editors, industry researchers, and some customers, about the specific product and when it will be available. This is the time for press kits, actual product, and savvy spokespersons. Phase 5: Broadcast PR. This is the time for product shipment, final press releases, and
ABSTRACTS
providing of final product for reviews. Manage the review process carefully to get the best articles. Phase 6: Promo pieces. This is the start of advertising and distribution brochures, videos, CD, and the like. Start preparing post-release announcements, testimonials, technical guides, and upgrades.
Innovating Through Alliances: Expectations and Limitations, Francis Bidault and Thomas Cummings, R&D Management (January 1994), pp. 33-45 Given the importance of innovation and the generally agreed value of alliances, the authors have studied a total of seventeen alliances in the information technology industry. They reasoned that if partnerships were to fail, it would perhaps be because they did not achieve the necessary requirements of successful innovation (the success factors), of which they feel there are seven--understanding the user's needs, knowledge of marketing and distribution, having a champion, having a sponsor, having a process that was controllable yet flexible, having fast and easy communication between the players, and an opportunity for the innovator to retain control over the innovation (for example, with patents). They then selected five partnerships for intensive study against those seven success factors. They quickly found that the alliances did offer the first two requirements--user and marketing understanding. In each partnership, such knowledge was brought by at least one of the partners and no problems arose. However, the other five offered difficulties. The champion, to be effective, must reach a certain level of acceptance in both parents' organizations. This requires an intimate knowledge of cultures and political situations, perhaps unattainable. In one of their five cases, the top managers of both firms were supportive, and the one that supplied the basic technology appointed a senior engineer as the champion. He and his group of people were excited and confident. However, in the partner firm, software development was a huge task (around 8000 person-years) and was scattered over four regional sites. Some of the software developers were simply unable to accept this outsider as their champion; they began developing their own technologies, and drifted away from the partnership. For good reasons or bad, the champion failed, and the partnership failed. The sponsor arrangement also does not fit partnerships very well. Sponsors are senior-level managers
ABSTRACTS
whose task is to protect the group working on a project, keep funds flowing, keep top management enthusiastic. However, in partnerships, there are two top managements, and two sponsors, two protectors. In one of the cases studied, one sponsor remained confident that the project would succeed whereas the other gradually became disillusioned. Soon operating people down the line fell into two camps those who had support and those who did not. Another project demonstrated how fragile the idea of tight-loose managerial control over a project can be. Almost by definition a partnership has a contract of some sort--an agreement about what will be spent, what will be accomplished, and when. And each partner is quite anxious to see that the other partner does not gain an advantage. But over the life of the project, as market conditions change, the project's direction and goals must be altered. Top managements were anxious to see that partner equality remained just that, so champions found themselves thwarted by lawyers; they no longer ran their projects. They lost flexibility. The sixth requirement is pretty obviously in danger--the free flow of information throughout the project. In one of their cases, the authors found that one partner noted how the other partner suddenly became far more sophisticated in integrated circuit design; in just a few months they had been able to adopt workstation design over hand-drawn wall diagrams, presumably by seeing how the first partner's people did the job. The partner immediately put clamps on visitors---designating sensitive areas from which partner personnel would be excluded. The seventh requirement (appropriability of innovation control) was also a problem in some situations. For example, in one case a chemical company was dedicated to obtaining patents while the partner
J PROD INNOV MANAG 1994;11:464-475
475
(formerly a state-owned firm) had people who saw their work as dedicated to science and who wanted to publish at every point. The authors decided that they could develop a checklist of situation characteristics which they could use to forecast the probability of problems on the key requirements. •
Nature of the innovation project: Technological discontinuity faced Technological familiarity Market/user familiarity Potential economic impact of the project Stage in the R&D process
•
Context of the project: Expectations of the partners Experience of the partners in partnering Risk aversion of the partners Economic costs to the partners
•
Project management: Management structure; degree of sharing/ dominance Degree of formality; the precision of the contract
With that information, the authors can first classify an alliance by its technological closure--the farther along it is, the easier it can meet the requirements. Then, given technical uncertainties, they can evaluate the context and the management, and predict the likelihood of severe problems. Lastly, given the problem set, managers can then address whether they see actions that would change the partnership to where success could be forecast. The article applies all of this to the five major case partnerships, showing how each of the key problems could have been anticipated.