Metrics Matter
By Larraine Segil
Financial Executives International, December 2004
It’s an unfortunate fact that 70 percent of alliances fail, yet, ‘going it
alone’ doesn’t make financial sense. Forging successful partnerships is critical
for giving companies a strategic advantage, and the way to ensure they work is
expressed in one word: METRICS.
Large companies say they’re looking to alliances to provide up to 70% of their growth. So why are we still so bad at business marriages?
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Financial Executive magazine & Business Week Online – February 2004
“The Eight Golden Rules of Alliances” by Larraine Segil
Because today’s attractive rates of internal growth are hard to sustain, and fluctuating share prices make acquisition valuations a challenge, savvy companies are increasingly turning to strategic alliances for competitive advantage. Despite the proliferation of strategic alliances, one alarming fact remains true: most business alliances fail. Research at Vantage Partners found that 60% of alliances fail halfway through the expected lifetime of the alliance.
“There are steps companies can and should take to increase the likelihood of alliance success,” says Larraine Segil, a partner at Vantage Partners and an alliance expert. Segil offers these Eight Golden Rules of Alliances.
Rule #1: The first partner is not always the best partner. Even if you are approached by a partner who appears to be appropriate, move from reactive to proactive mode. Perform due diligence on the strategic fit of this and other potential candidates, and create an alliance implementation strategy. Too often, alliances are created without equal thought being given to both strategic purpose and ultimate implementation. Execution of alliance intent is far more difficult than the deal making, partner identification, and wooing that precedes deal closure.
Rule #2: Always consider the partners of your partner. When evaluating alliance opportunities, savvy organizations strive to build a network of partners rather than bilateral relationships. Every partner an organization brings in has its own interlocking relationships with other partners, stakeholders, and players in the value chain. Creating a successful network of partners requires the disciplined approach of ranking each network member for risk and value, allocating appropriate resources to manage the risks, and leveraging the value derived from integrated relationships.
Rule #3: Be sure that there is an executive sponsor in both your organization and in your partner’s. Identification of the executive sponsor emphasizes that the alliance concept is not just the idea of one visionary manager, but resulted from the collaborative ideas of others within the partner organization. This prevents the alliance from becoming dependent on the personality of a single champion within either organization. Executive sponsors must be kept informed of alliance activities (good and bad) and pulled into the discussion only when needed to show priority for the alliance relationship, or to emphasize corporate commitment and resource allocation.
Rule #4: Analyze the priority of the alliance for yourself and your partner. Partnering companies must take into account what we call the Project Personality Type – which is the level of priority for the alliance. The alliance will require active management of resource allocation and conflict resolution if organizations assign different levels of importance to the project. An alliance that is of fundamental–perhaps even survival–importance to one company may be just a sideshow to the other. This will affect the resources–staff, money, and time– committed to the project.
Rule #5: Create an alliance implementation plan that has legs. A critical phase in creating the alliance implementation and operating plan is scenario building in which the partners participate in simulations of what-ifs that could happen during the partnership. The importance of the scenario building process is that it is risk-free, since none of the scenario conditions and events have happened yet.
Rule #6: Identify the leadership characteristics that alliance team leaders must have. Nothing will ruin a good alliance faster than a lack of leadership. If you have the wrong person at the helm, you will have challenges. In researching and writing the book, ‘Dynamic Leader, Adaptive Organizations: Ten Essential Traits for Managers’, Segil identified the ten personal and organizational characteristics that drive alliance success: fearlessness, completion, commitment, inspiration, assuredness, penetration, intelligence, energy, integrity, and being in the customer’s head.
Rule #7: Create metrics that take into account the different stakeholders who are interested in them. All stakeholder group — traditional and not — can be clearly identified by conducting a stakeholder analysis. Stakeholders include each partner organization, the senior management of each partner, the alliance function itself as well as the other alliance managers, the other functions in each partner (such as Legal, Finance Marketing etc), and external stakeholders, such as like analysts, competitors and the market as a whole. Stakeholder analysis will help you determine which entities could sabotage or benefit the alliance as well as those who might be tracking its results. You will then be able to create and implement a plan to leverage or diffuse, report to or manage these people as required.
Rule # 8: Manage Compatibility Challenges. Partnering organizations often have differences in corporate culture or lifecycle stages. More often they are in differing stages of growth–some in high growth, others in decline. While managing these corporate differences is a significant challenge, it is possible to anticipate organizational and managerial behavior by tracking the lifecycle stages of each partner. This anticipatory knowledge gives all partners the opportunity to allocate resources and manage cultural differences without rancor. Realizing that different managerial personalities tend to thrive or struggle in different lifecycle stages also enables appropriate team selection in order to implement the alliance over time by changing team members and personalities to fit the circumstances. Cultural issues in cross-border alliances add another dimension of complexity which requires managers with multi-cultural management skills.
Larraine D. Segil, is a Partner at Vantage Partners, a consulting firm with expertise in building corporate relationship management capabilities. She is the author of “Measuring the Value of Partnering – How to use metrics to plan, develop and implement successful alliances,” “Intelligent Business Alliances;” “Fast Alliances.com: Power your E-Business;” “Dynamic Leader, Adaptive Organization: Ten Essential Traits for Managers;” and “Partnering – The New Face of Leadership.”
She can be reached directly at (310) 556-1778 or via email at lsegil@vantagepartners.com.
Media contact:
Cindy Kazan (414) 352-3535; cindy@communik-pr.com
Los Angeles Business Journal – February 16, 2004
Author: Biddle, RiShawn
“Comcast-Disney: A Clash Of Egos: Major Players Star In Takeover Drama”
In his letter to Michael Eisner proposing to acquire Walt Disney Co., Comcast Corp. Chief Executive Brian Roberts was the epitome of restraint. “The Comcast management team greatly appreciates and is highly respectful of the Disney heritage,” he wrote, also noting that “there are many talented executives at Disney who we envision would also play a key role in managing the combined company.”
The 44-year-old Roberts, with a management style that’s considered well-mannered and low-key, noted that the $51 billion takeover proposal presents “a wonderful opportunity.”
Roberts is based in Philadelphia, not Los Angeles. It shows.
Hollywood is not a place where restraint wears well. Here, it’s larger-than-life egos that dominate the proceedings–and members of the Roberts clan, while no strangers to big-money deals, are just getting the opening whiffs of what could turn into an extended and hard-fought battle for control of Disney.
For now, the star of the show is Chairman and Chief Executive Eisner, whose trail of broken relationships and public relations headaches may have set the stage for the cable giant’s unsolicited offer.
There’s Roy Disney, the yacht-racing nephew of the company’s namesake founder, and his confidant, Stanley Gold, who are working to oust Eisner two decades after installing him during a previous corporate crisis.
Also in the mix is Pixar Inc. Chief Executive Steve Jobs, whose animation house handed Eisner another defeat earlier this month when it broke off talks with Disney for a new production deal.
And consider what might happen if the bidding for Disney opens up to other parties, such as Barry Diller, chairman and chief executive of InterActive Corp., or John Malone, chairman of Liberty Media Corp. Only News Corp.’s Rupert Murdoch has said he would not go after Disney.
Not that Roberts is a shrinking violet when it comes to deal-making. In fact, he has already proven he can get the best of Eisner. In a deal back in 1997, he convinced Disney to buy a majority stake in cable network E!–but Comcast wound up controlling the operations.
“He is smart and very hardworking. More importantly, he doesn’t overpay for deals–just like his dad,” said Robert Clasen, an executive at Liberty Media’s Starz Encore networks and one of Roberts’ former bosses.
Helping him is former Disney executive Stephen Burke, brought to Comcast six years ago to become Roberts’ second-in-command–much to Eisner’s irritation at the time.
When egos collide
As of late last week, there was no telling where Comcast’s stunning overture would lead–and when. Beyond the basic and well-worn storyline of an out-of-town company seeking a piece of Hollywood, there were numerous subplots. They included the relentless campaign by Roy Disney and Gold to convince major shareholders that Eisner should resign; the unexpected recommendation by an investor advisory group that Disney shareholders oppose Eisner’s re-election in two weeks; and Disney’s strong first-quarter earnings results that had Wall Street wondering whether Eisner had, in fact, engineered a turnaround.
But not to be lost amid all those considerations are the personalities and–their incessant drive to win, even if “winning” a deal turns out to be the worst thing for their company.
“Technically, a company is supposed to consider the best interests of the shareholders in these cases. But there are more than one instance of this not being the case,” said Greif & Co. co-founder Lloyd Greif.
A decade ago, during Hollywood’s last hostile takeover battle, Sumner Redstone’s Viacom Inc. beat out Barry Diller’s QVC to buy Paramount Communications. Tipping the balance was then-Paramount Chairman Martin Davis, who wanted to prevent the studio from falling into the hands of Diller, his longtime nemesis. But just before the deal was completed, Redstone helped push Davis out the door.
Tinseltown long has been notorious for puffed-up egos. Legendary studio bosses like Louis B. Mayer and 20th-Century Fox’s Darryl Zanuck were renowned for their fist pounding and screaming fits. Gull + Western founder Charles Bludhorn. who bought Paramount Pictures as a way to hedge against cyclical periods in his other businesses, loved to pitch film ideas and date starlets. He even convinced John Travolta to do the sequel to “Saturday Night Fever.”
The music business has had its own cast of high-strung characters, including CBS Records’ Walter Yetnikoff and Motown’s Berry Gordy, who showered his favor over singer Diana Ross.
“[Ego] is never off, it’s always on. I think it’s a function of being a CEO. The job itself requires a competitive nature and these are highly competitive people,” said Santa Clara University professor Hersh Shefrin.
World of hit and miss
Larraine Segil, at Vantage Partners, points to the past efforts of non-entertainment companies that tried to make a splash in Hollywood–and wound up getting dunked. “Too many have come and expected to apply sound management and talent to the entertainment world with poor results,” she said. She describes the ways of show business as “not taught in business schools and not subject to profit and loss statements. It’s a world of hit and miss and public taste–the ephemeral non-metrics.”
Eisner tends to be a mix of the intuitive and the calculating.
He exhibited his competitiveness early at ABC when he would boast of his formal education in jousting with Diller, his mentor and rival, who had dropped out of UCLA after his freshman year. After mentioning a title by author Edith Wharton, Eisner later noticed Diller carrying a stack of her books, according to Kim Masters’ book on Disney, “Keys to the Kingdom.”
Eisner has built Disney from a floundering movie studio to an empire of theme parks, broadcast networks and cable operations since taking over the company in 1984. He is said to delve into even such mundane matters details as hiring decorators for Disney’s hotels–and picking the furniture.
“I met with every decorator [at Disney World’s Animal Kingdom Lodge], every designer. I hired Peter Dominick and I passed on four versions of what he did,” Eisner told Time Magazine last year.
But his style–and desire to retain control–has also led to a string of strained relationships within the past decade. Besides the recent battle with Disney and Gold, there has been a series of acrimonious departures, including those of onetime studio boss Joe Roth and Roth’s predecessor, DreamWorks SKG boss Jeffrey Katzenberg, who won a $270 million civil judgment against the company and his former mentor.
Schmoozing and hardball
By contrast, there is Roberts. Son of Comcast’s founder, he expanded the company from a regional outfit to the nation’s biggest cable operator with deals that include the 2002 acquisition of AT&T Corp.’s cable operations. His dealmaking style includes both schmoozing and hardball. Over dinner and drinks, he convinced Microsoft Chairman Bill Gates to invest $1 billion in Comcast.
“Brian always says that the best time to be negotiating a deal is when you’ve got a room booked for a conference at 4 o’clock and your competitors are racing to catch their train to the Poconos at five,” said Clasen.
Roberts has said he wants to do the deal in part to become an equal competitor of News Corp., whose acquisition of DirecTV makes it a powerhouse in both content and distribution. But he admits that becoming the biggest media company is a draw.
But with Disney’s recent string of earnings improvement, Eisner seems to have rebuilt goodwill with investors and bolstered support among a board that includes former U.S. Sen. George Mitchell.
Cloaking his combativeness behind a smile has served Eisner well in the past. He befriended Diller in order to get his first job as an underling at ABC. Later, he curried favor with Roy Disney and Gold for the Disney job, and in the process, relegated former Warner Bros. boss Frank Wells to the No. 2 spot.
Which ultimately makes the final outcome an open question. “In any other situation, you would say this would be a done deal.” said Masters. “But no one wants to say those words this time. A lot of bad things have happened and Eisner’s still survived.”
COPYRIGHT 2004 CBJ, L.P.
Cisco Systems IQ magazine – March, 2004 – Author: Howard Baldwin
Topic – Larraine’s newest book “Measuring the Value of Partnering” Jan ‘04
Business Finance magazine – March, 2004 – Author: Joanne Sammer http://www.businessfinancemag.com/magazine/archives/article.html?articleID=14163
CFO magazine – April 1, 2004 – Author: Kris Frieswick http://www.cfo.com/Article?article=12875
http://www.businessweek.com/smallbiz/content/feb2004/sb20040210_2316.htm
By Karen E. Klein in Los Angeles
A strategic partnership can make a lot of sense, but only after all parties agree on some basic rules and protocols
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