Creating Value from Innovation and the Role of Alliances
Posted: 12/3/2009 by Norma Watenpaugh
Innovation takes many forms. We often focus on innovation as technological breakthroughs and indeed those are important to fuel corporate growth. But there are other forms of innovation which can be just as powerful and just as disruptive to the status quo in creating strategic competitive advantage. Innovation in operations, in business processes and in business models can have transformational benefit for the companies that successfully implement these new ways of doing business.
Partnerships and alliances are among those transformational business model innovations. Yes, partnerships are not hardly new, but there are always interesting ways in which to combine two entities to create innovation and new value. Think peanut butter and chocolate. Innovation often springs up when you have differences in thinking, differences in business processes, differences in technology. This implies that partnerships and alliances are a natural breeding ground for innovation.
Differences often result in conflict and tension. This is true in alliances where conflict is resolved through mutual agreement and not through fiat.
Yet, it is a mistake to assume that all conflict is bad. It is an insightful alliance manager that understands that diversity is an opportunity to create value. When members of an alliance are invited to contribute their knowledge, their perspectives, their unique expertise, some amazing innovation can happen.
The Starfish Alliance is and example of business model and business process innovation. Starfish is a consortium of five logistics suppliers and Rolls Royce. Rolls Royce, jet engine division, took a radical approach to optimizing their global supply chain in 2003. They sought to partner. They invited their logistics suppliers to collaborate to increase value to the customer and to increase the value in their business relationship with not only Rolls but with each other. This was radical in that these suppliers had been locked into the traditional vendor/supplier relationship, where by the vendor relentlessly pressures suppliers for greater price concessions. They had also become locked into very hostile competition with each other, each hoping to gain a bigger piece of the logistics pie. But this model had become a game of inches. Pricing concessions could only yield incremental cost savings of a few percent a year.
What was needed was a different way of working together that would shift the focus of optimizing each silo of operation to optimizing the end result. The Starfish Alliance was met with distrust at first. A key operating principle for the alliance was that there was no limit to profit. In other words, Rolls was not in this to transfer margin from their partners’ balance sheet to theirs but to create greater profitability for everyone, even the customer. They began to see results in their collaboration by optimizing and automating their end to end business processes. Customer delivery rose to 99% on time. Costs were reduced 20% across the operations. The value of the alliance became a competitive differentiator and other customers began to take interest in forming similar operating alliances.
The very premise of alliances is to create new value that could not be achieved independently. In this sense alliances are a natural incubator for collaborative innovation.
To learn more please join the December 10, 9:00 am Pacific worldwide webcast:
Collaborative Innovation & Value Creation
Harnessing the diversity of alliances to create innovative value
PhoenixCG guests can take advantage of the ASAP member pricing of $25 for this 1-1/2 hour instructional session. The webinar will be recorded and will be made available to registrants. So no worries if you have a schedule conflict, you will be able to view the recording at your convenience.