By GARY M. STERN, FOR INVESTOR’S BUSINESS DAILY
Posted 10/11/2013 04:16 PM ET

In the pre-Internet days, companies rarely partnered with rivals. But in the post-Internet days, striking alliances with competitors has become a trend. Increasingly, competitors have become business partners rather than foes.

MasterCard (MA), for example, joined with foreign exchange provider Travelex in August to create a multi-currency prepaid overseas credit card in a win-win tie-up for both companies. Consumers can travel overseas with a credit card available in five currencies including euros, British pounds, Australian dollars and Japanese yen.

In the past, not all retailers accepted credit cards globally and sometimes clients were charged high conversion fees. But the new cards are easily reloadable and replaceable overseas, says MasterCard.

Travelex serves as the retail outlet selling the travel cards to consumers while MasterCard is the network where the transactions for these cards flow, says Seth Eisen, a MasterCard spokesperson.

In the fast-changing markets created by the Internet and digital technology, forming alliances with competitors can increasingly boost revenue and help lure clients. However, players must sidestep certain traps to ensure these deals don’t fall apart and terminate abruptly.

Partnerships for MasterCard make good business sense because “we believe financially it can be greater than the sum of its parts,” said Michael Weitzman, group executive of products and solutions for U.S. markets at Purchase, N.Y.-based MasterCard. “MasterCard wouldn’t have the reach, and Travelex wouldn’t have the access” without the team-up, he said.

A Bigger Whole
By combining forces, it strengthens the product and benefits customers. “We have 35.9 million MasterCard locations, and they bring distribution in 23 countries around the world including major airports,” Weitzman said. Customers arrive at an airport, deposit value on their prepaid cards in specific currencies, and get the ability to buy goods and services overseas.

Weitzman says that these prepaid cards operate like traveler’s checks and yield security and peace of mind. They carry anywhere from $25 to a maximum of $8,500. The card can be reloaded, and consumers can add up to $5,000 in any 24-hour time period.

“The problem in the past with charging overseas was currency conversion fees, which can add anywhere from 1% to 3% to the cost of doing business with your U.S. credit card,” said Christopher Elliott, author of “How to Be the World’s Smartest Traveler.” Foreign exchange conversion fees still apply with the new prepaid cards, but fees are lower. Consumers, moreover, don’t have to pay reload or transaction fees, though there are ATM fees.

For MasterCard, the prepaid card strengthens the brand globally. “Our secret sauce is to authorize, clear and settle transactions between 23,000 financial institutions and 3,500 merchants,” Weitzman said.

Travelex declined to answer questions about the benefits it reaps from the partnership. But Weitzman says it extends MasterCard’s reach to more customers overseas. And the alliance enables Travelex to extend revenue on conversions and partner with a global brand like MasterCard.

MasterCard not only strengthens bonds with customers through the partnership, it also boosts revenue. It earns fees from these transactions and spikes overseas revenue.

While some experts point out how these partnerships can go awry when parties try to end them, Weitzman doesn’t see many pitfalls in these agreements. MasterCard operates in a thriving business-to-business network, and this deal is one of many, he says.

MasterCard encourages alliances with a variety of partners. “By definition, we’re not a credit card, we’re not a debit card, we’re a network and we do valued-added processing. This partnership makes travel safer for our consumers, both in the U.S. and abroad, and provides value to merchants,” Weitzman said.

Partnerships between competitors are on the rise. “If companies can expand the market for both firms rather than taking away market share, you’re looking at a win-win,” said Larraine Segil, author of “Intellligent Business Alliances.”

Transparency Helps
The Internet is spurring these partnerships with rivals. “It’s hard to keep things secret and easier to know what competitors are doing,” Segil said. Hence, business alliances make more sense.

One partnership that worked effectively from 1998 until 2011 was Kraft Foods (KRFT) and Starbucks (SBUX). In 1998, Kraft, which sells Maxwell House coffee, agreed to distribute Starbucks’ premium blend in grocery aisles.

Segil says both companies prospered from the pact. Starbucks strengthened its reputation and gained supermarket distribution from Kraft Foods.

“Kraft gained an entrepreneurial kicker for an old-fashioned brand without pizazz and access to a younger, hipper market,” Segil said.
Segil describes MasterCard’s alliance with Travelex as another win-win. If customers face hurdles using their MasterCard overseas, it can damage its reputation and erode market share. Travelex, by smoothing the way for MasterCard users, boosts its cachet by its association with a larger competitor and expands revenue as well.

MasterCard’s customers also benefit by having an easier time using their credit card overseas. For customers, “It’s a seamless transaction; no denial of service and they can charge in francs,” said Segil.

But these alliances also carry some traps. Partners need to be fully explicit about what is being agreed to, what is being shared, and whether any information must be withheld. “If there are unmet expectations, it’s a formula for failure,” Segil said.

Hence, these agreements need to include a clear exit strategy describing when and how the partnership will end.

Dr. Robert G. Ridley, Director of the TDR, stated, “I am confident Ms. Segil’s expertise in developing and enhancing strategic alliances and partnerships will be of immense benefit to the new advisory group. During this global economic crisis it is especially important that we not lose sight of our moral and economic obligations to those in need.” Dr. Ridley added, “I look forward to her contributions and know they will help our organization improve stewardship, empowerment and research in neglected priorities.”

Larraine Segil joined the Frontier Communications Corporation Board of Directors in March 2005. She also serves on the Entrepreneurs Board of Advisors for the UCLA Anderson School of Management and on the Board of the Committee of 200, a global network of Women CEOs.

Ms. Segil holds the position of Partner Emeritus at Vantage Partners, a business strategy consulting firm with expertise in helping companies manage critical business relationships. From 2003 to 2006, Ms. Segil was a Partner of that firm. She has been a Senior Research Fellow at the IC2 Institute at the University of Texas at Austin since 1991.

Ms. Segil has authored seven business books including Intelligent Business Alliances, Fast Alliance, Dynamic Leader, Adaptive Organization and Measuring the Value of Partnering. Business Week and The Corporate Strategy Board have recognized her as an expert in Alliances. She is a regular commentator for CNN and CNBC on alliances, mergers and acquisitions.

Previously, Ms. Segil was Chief Executive Officer of an advanced materials company providing products and services to aerospace and electronics manufacturers. She has co-founded and run companies in mortgage banking and medical services, and previously practiced international corporate law.

Click below to read this article on Reuters

http://www.irc.caltech.edu/courses/Strategic_Partnerships_Business_Alliances.htm (course)

http://www.irc.caltech.edu/leaders/segil.htm (bio)

http://www.irc.caltech.edu/courses/critical-business-discussion-series.htm (critical business discussions web page)

Success is measured…

“by culturally and environmentally driven metrics. That which is rewarded or punished by group approbation, psychological, emotional, or monetary reward or punishment will drive behavior. Those who understand this will have alignment between what they expect people to do, and what they actually do. Alas, too often, that which we want is what we punish, thus compelling the opposite behavior—e.g. penalties in contracts with suppliers cause suppliers not to alert their customers of potential problems until it’s too late to remediate them.” –Larraine Segil

Segil will Present “Lee“by culturally and environmentally driven metrics. That which is rewarded or punished by group approbation, psychological, emotional, or monetary reward or punishment will drive behavior. Those who understand this will have alignment between what they expect people to do, and what they actually do. Alas, too often, that which we want is what we punish, thus compelling the opposite behavior—e.g. penalties in contracts with suppliers cause suppliers not to alert their customers of potential problems until it’s too late to remediate them.” –Larraine Segil

Segil will Present “Leveraging Critical Internal and External Business Relationships,” one of today’s thought leader super sessions, from 2 to 3 P.M. in room S106AB.

LEADERSHIP
PARTNERSHIPS
DIVERSITY

LEADERSHIP
Touch a life. That is the important thing you can do as a leader, says Lieutenant General James L. Campbell, director of the Army staff. In yesterday’s Thought Leader Super Session, “Your Army in Support of the Long War,” Campbell told the story of his red “Hero of the Day” folder on his desk. The left pocket contains the names and phone numbers of every person on the Army staff. Each day Campbell dials a different number to say, “Thank you for what you do, and I am very proud of you.”
Campbell also offered up some other keys to leadership:
The number-one leadership trait is humility. “Always get your own coffee,” Campbell says.
Recognize how you are viewed as a leader. “I consider myself Jim Campbell, not Lieutenant General James Campbell,” he says.
Show those you work with that you want to be right there with them and nowhere else. “If you want to be somewhere else, you’re in the wrong job,” he says.
Remember that you’re on display 24/7. “You have no luxury to go out and do something stupid,” Campbell says.
You need a sense of humor. “If things get so bad that you can’t laugh, you have to take a step back,” he says.

PARTNERSHIPS
The counterintuitive definition of partnering. In her session “Leveraging Critical Internal and External Business Relationships,” Larraine Segil defined the necessary components of businesses partnerships. The author of Measuring the Value of Partnering: How to Use Metrics to Plan, Deliver and Implement Successful Alliances defines partnering as a business relationship for mutual benefit between two or more parties with compatible or complementary business interests or goals.
In parsing this definition, she made a couple of interesting distinctions.
Looking at the term “business relationship,” people tend to think they will like their partners. “The chances are, if you’re in a very strategic relationship, you likely will not like your partners,” she says. “You could dislike them quite a bit if you are partnering with someone who is a major competitor.”
Trust is of course critical for a partnership to succeed. The question then becomes, how do you trust your competitors who you do not like? The answer is simple: “If they do what they say they are going to do, then you can trust them,” she says. So as you plan this partnership, it is important to have short, measurable milestones that build up over time.
Another factor to consider, Segil says, is mutual benefit. The definition does not say the benefit has to be equal to both parties. In fact, it won’t be, she says. Organizations should go into partnerships realizing the goal of mutual benefit—and resist the inclination to make the benefits equally distributed.

DIVERSITY
Diversity is imperative. Ethnic, gender, and racial equality and diversity are facts of modern life, and every organization needs to embrace them to better serve customers and members in the global economy.
That message came from Ted Childs in yesterday’s Thought Leader Session on “The Diversity Imperative: Strategies for Success in the Global Marketplace.” Childs is the former vice president of global workforce diversity at IBM and currently principal in his own diversity consulting company, Ted Childs LLC, South Salem, New York.
The global diversity imperatives he described included the advancement of women, the diversity of the leadership team, multicultural awareness and acceptance, and work/life balance.
Childs identified four goals of a diversity strategy:
• Identify, attract, and retain the best people from every ethnic, gender, and racial group.
• Create a workplace where that talent can perform at its best.
• Assess and understand the diversity of customers as they are, and reflect that understanding in the workplace.
• Use external contributions to eliminate disadvantage and increase the diversity of the talent pool.

Most Requested Topics:

* Leading Knowledge Workers for the Millennium: Larraine will present the “Ten Qualities to Make Managers into Leaders” and the organizational characteristics to attract and support them. She has created a formula that will enable an organization to bridge the gap between yesterday’s leadership models, and the mandates of the new contemporary market-space. She will explain her approach using a simple methodology so that the audience can examine their own characteristics, corporate structure and culture, to determine how they can enhance leadership skills and increase knowledge capital.

* The Seven Trends That Are Changing the Way Business Works: Larraine presents the “Power of 7.” These trends are like the Walls of Jericho and provide entrance into a world of opportunity. They include: Global Security, Knowledge Transfer, Alliances, New Leadership and others. Like Joshua, persistence and determination to understand and excel in all 7 areas means that the walls will fall revealing the treasures inside–only the brave and focused will prevail.

* Strategic Alliances: Why do our alliances seem to start off well and then lose momentum? How can we ensure that every manager understands the risks and advantages in an alliance? Whose responsibility is the alliance? Does our company have the culture to create and manage valuable ongoing alliances? Sixty percent of all alliances fail at 3.5 years. In order to make them successful, alliance participants need a clear understanding of the success and failure factors covered in this presentation. The audience will leave with a set of tools that will allow them to create and add value to their roles in all kinds of alliances, whether between different divisions or functions of their company or externally with alliance partners.

* How to Create Global Competency in Your People–Managing Across Cultures: Larraine Segil has created a systems approach that will prepare participants for effective business management in any culture. Applied by companies such as Oracle and Dupont Agrichemical/Pioneer Hybrid This approach works no matter your job function–research and development, sales and marketing or senior management.

* Shift Your Mind Into a new Way of Looking at Alliances…Larraine Segil’s Mindshift Methodology: Successfully managing an alliance or corporate partnership requires not only a strategic business justification, but also the compatibility of the corporate cultures of the alliance partners. Although appropriate planning, preparation, implementation, and change strategies are integral to the achievement of alliance success, the importance of the cultural elements between organizations is often underestimated.

Global strategy, local presence: These are the yin and yang of business abroad. Today, global strategy is associated with the Internet and e-commerce, but local presence means exactly what it did 50 years ago: real people on-site who can manage the complexities of an international business.

Although you can establish local presence in many ways, one recommendation is to form a local alliance. Larraine Segil, author of Fast Alliances: Power Your E-Business (John Wiley and Sons), believes these alliances are not only a fast way to establish local presence, but also an economical way to add operational capacity. It’s more cost-efficient for an entrepreneur who sells manufacturing parts to form an alliance with a local delivery company than to make delivery service an integral part of his or her overseas business.

Another benefit of alliances is flexibility. “Alliances can change as market conditions or technologies change,” Segil says. “You may need an alliance with a particular company for three to six months during the market-entry phase, and then a [different] alliance for longer-term purposes.”

When entrepreneurs need individualized help in a foreign market, Segil recommends subcontracting. “A subcontractor is more likely to see you as a client to serve rather than as a manager to obey,” she says, adding that the financial and legal advantages are also important. “For example, some countries require an employer to continue paying a dismissed employee for a year or more.”

Your first stop in the search for subcontractors is the embassy or consulate of the country you’re interested in. Also try binational chambers or committees, such as the United States-Mexico Chamber of Com-merce or the National Committee on United States-China Relations.

Face-to-face interviews with subcontractors aren’t always necessary, says Segil. If the person has strong references, a phone interview may be sufficient. But make sure you hire an interpreter with business experience if you need one.

A third option is hiring full-time overseas employees. Virginia Kamsky has hired employees in China for 21 years. The chair and CEO of Kamsky Associates Inc., an advisory and investment company based in New York City, Kamsky finds candidates through networking with businesses and universities and via word-of-mouth referrals.

E-mail is another resource. “I don’t have time for extra phone calls,” Kamsky notes, “but at day’s end, I can review e-mails from job seekers fairly quickly.”

What should you look for in full-time employees? “Relationships matter more than mere contacts,” says Kamsky, 47. “Don’t assume that hiring the son of a government official will automatically get you business. It’s more important to hire a person with a good attitude and strong relationship-building skills.” Language skills are also important-Kamsky makes it a point to conduct in-person interviews in Chinese and English.

Kamsky’s advice is to trust your instincts when assessing personalities, but to always put business essentials in writing prior to hiring. “Confidentiality is of utmost importance to our clients. All our employees sign legally binding confidentiality agreements before starting work.”

As businesses both large and small enter international markets with increasing speed, it’s more important than ever to remember that success depends on both halves of the circle: To achieve global reach, your business must have a local touch.

Ysabel de la Rosa is a freelance writer in Madrid, Spain, who specializes in international business.

Would there be an Internet economy without dotcom deals? Business has always had its share of technology alliances, marketing partnerships, and R&D consortia, of course. But there’s something about the Web — the speed with which products get launched, the size of the opportunities facing so many small firms, the risks of coming in second in a fast-growing market — that provokes deals to get made in, well, Internet time. But is there a point to these deals? Does it matter that whatzit.com and whozit.net have announced a “strategic e-commerce alliance”? How can you tell when an Internet partnership is a lot of hot air — and when it’s the real deal?

One way is to ask Larraine Segil. In her 30-year career as an entrepreneur, attorney, and adviser to such companies as Compaq, Sun Microsystems, and Synopsys Inc., the flamboyant native South African has seen (and brokered) more than a few high-tech deals. Indeed, Segil, 52, is something of a one-woman industry on the topic. She is cofounder of the Lared Group, a Los Angeles- based consulting firm with offices from Chile to China that develops strategic alliances. She lectures on the topic to thousands of executives around the world each year, and she teaches a course on the subject at the California Institute of Technology. Her forthcoming book, Fastalliances – ”Power Your E-Business (Wiley Publishers), will be out in January.

So what’s the deal with Internet deals? The Web has changed the way that business alliances are made, and the changes apply just as much to brick-and-mortar companies as they do to small dotcoms, Segil argues. The reasons for partnering and the capabilities needed to execute those deals are very different from the motivations and skills behind traditional alliances. “E-customers want information and access,” says Segil.

“They want to understand their problem better and find a solution. Traditional companies tend to provide information only as it relates to what they are selling. So the need for alliances is greater than ever before. Your company alone cannot fulfill the needs of a customer in the e-business environment.” In an interview, Larraine Segil explained the art of the dotcom deal.

How are Internet alliances different from traditional alliances?

Internet alliances are any partnerships formed around e-business strategy. They can be between dotcoms and brick-and-mortar companies, between pure dotcoms, or even between two traditional companies. They are much faster and more flexible than traditional alliances, and the depth of the relationships varies greatly, ranging from what I call a “press-release relationship” to an all-out merger.

They tend not to last as long as traditional alliances; they’re often as brief as three to six months. The life span of the agreement is not the central criterion anymore, whereas in traditional alliances, that’s always a big negotiating point. The rules truly have changed. Nobody in their right mind would look at a 10- or 15-year relationship anymore. Your current e-business partner could be exactly the wrong partner for you 2 years from now because of changes in the competitive landscape.

But how does a press release constitute an alliance? Isn’t that just a bid for attention?

It’s what you’re doing with it that counts. Call it an alliance, call it a press release. Semantics don’t matter. But a press release causes a reaction. And the reaction may not just be that the stock goes up. It may be that people begin to link companies that have issued press releases. So if you happen to follow the press release with some cobannering activity on your Web site, you’re now in the pyramid of relationships. And you’re beginning to migrate upwards toward a deal with more skin in the game for both players.

All you’re saying with that press release is that you have an alliance that hasn’t been properly implemented yet. But there is some aligning going on. And press releases can actually create preemptive alliances, because your competitor sees a press release and says, “Oh my God, we’ve got to find someone to acquire.” And before you know it, the whole dynamic of the industry players has changed. So it’s not an insignificant thing.

How can a company get the most out of its Internet alliances?

The most successful companies look at their partnerships as a cluster, or what I call a “spider network.” The network includes direct partnerships with suppliers, corporate partners, and portals, as well as indirect partner-ships such as those with your suppliers’ suppliers, your partners’ partners, and the other companies that your venture capitalists have invested in. The idea is to look beyond the most obvious alliances to see where value lies. Once you’ve identified all of the alliances that you have, you should rate them for added value and added risk, and allocate resources accordingly. Too many companies pour vast amounts of resources into projects that won’t make a big difference in the success of their e-strategy, or they underfund projects that are absolutely critical.

Softbank Inc. is a great example of a spider network. It started out as a Japanese software company, and now it’s essentially a holding corporation for 300 companies. It has positioned itself as the central intelligence of the spider network. It leverages every style of relationship that it has among the companies that it invests in. Softbank brings together all of its companies to share information and best practices. It is always looking for new ways for its network players to benefit.

Are there times when an Internet deal can hurt a company, instead of helping it?

Definitely. The capabilities of the spider network are limited by the portability of its least portable member, the flexibility of its least flexible member, and the speed of its slowest member. In other words, when you partner with a company, you get the burden of all of its weaknesses, as well as the benefit of its strengths.

Some of that may not matter to you. But portability and mobility, for example, are very important to Ericsson, which has a set of systems in place that allows its employees to work from anywhere in the world and to network with virtually anyone. If Ericsson partners with a company that doesn’t know how to support telecommuting or videoconferencing, that’s a liability. It slows the company down. One classic deal is a big company partnering with lots of dotcoms. Is there one right way to structure such an alliance? How a big company’s e-business activity is structured is a very telling decision. It tells you how to go about setting up and managing Internet alliances. Sun Microsystems says, “We’re the dot in dot.com,” and its e-business initiatives permeate the entire company. Sun says that Internet strategy is everyone’s job. That means that the style of faster Internet deals affects the whole com-~ pany. But at General Motors, the e-GM project is a separate unit, in part because the company recognizes that this particular group is charged not only with devising an e-business strategy but also with changing the culture of the company. With e-GM, most of the deals being retooled and renegotiated are “fast alliances.”

What kinds of mistakes do companies tend to make when forming Internet alliances?

Deal making is relatively easy, but deal execution is not. Let me draw an analogy. In China, the signing of the contract is the be – ginning of the negotiation. In the United States, the signing of the contract is the beginning of the implementation. Many Internet alliances tend to fall into the China model. The deal is made; the deal is cut. And then it sort of backs up and starts all over again, because nobody really knows what to do next in terms of implementation. You actually have to start putting something into play, with metrics – and you’ve got to do it beforehand or on the run. A lot of companies also lack “adult supervision.” The person who provides adult supervision doesn’t have to be a senior executive who is older in terms of years. It just has to be somebody who has had corporate or managerial experience, because those are the people who know how to put together an organization and then run it effectively.

How do you measure the success of an Internet alliance?

With every alliance, the first question to ask is, What are you trying to achieve? Ask yourself what would make you consider this deal a success. This is a very important point, because the definition of success changes as the market changes. It changes as the partners change. But it also changes as the people change. A new team that comes in usually feels the need to redefine what the
alliance is all about. So keeping your eye on the definition of success is really fundamental. Once you have that in mind, there are many different kinds of success. There’s revenue growth. There’s brand, value, and exposure. You might measure page views, click throughs, or transactions.

Another critical question to ask is, Are you in the same mind-set as your partner? Let’s say that your goal is revenue growth, and your partner is a brand-oriented company. Your partner’s goal may be technology transfer. That means that it will approach things differently from you. Your partner is going to have its R&D people in there. It’s going to be examining every piece of software with a fine-tooth comb. Your partner is going to have people trying to find ways to integrate. Meanwhile, you’re thinking, “The hell with that. We’ve got to make some sales here.” You can get into trouble if your goals and your partner’s goals are not complementary.

IN THE INTERNET ENVIRONMENT, SPEED is key to survival. To move fast, you have to strike alliances and make decisions on the fly. In Fastalliances – Power Your E-Business, Larraine Segil refers to those attributes as “skinny process.” A classic example, she writes, is Flextronics International, a contract-electronics manufacturer with more than $8.5 billion in annual revenues and a growth rate of more than 60%. With customers including Cisco, Ericsson, and Lucent, the firm’s business is built on partnerships.

How does Flextronics manage to stay skinny? In Fastalliances, CEO Michael Marks explains.

Match your customers’ pace. ‘Our company is very responsive- We are a traditional brick and mortar company but we do operate with many of the principles of the click companies—– If it wasn’t for us, many of them could not fulfill what they promise.”

Delegate spending authority. “There is over $100 million of capital spending per quarter at Flextronics – and none of it gets to me. A plant manager can make a decision to spend $2 million—–My philosophy is that once you have more than one signature for signoff, there is no value added…So if I am not here, nothing changes, people still keep on making their own decisions.”

Meet less, do more. “We don’t believe in a lot of meetings either. People move fast and are not bogged down. My experience with meetings is that for the first 15 minutes everyone is talking about the project and the next 45 minutes are spent talking about how to get sign off to do it.”