KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am delighted to speak to Andrew Shipilov from [international business school] Insead, just outside of Paris.
When you look at alliances, trust is really important. Tell us more about this.
ANDREW SHIPILOV – A lot of research shows that, in fact, what is important is to begin with small wins. So what is a small win? A small win is a goal which is achievable within the next six months, between the alliance partners.
There is a lot of talk about big, hairy, audacious goals that companies have to set. Well if you want to build trust, that is not the ones you want to achieve. You don't want to have big, hairy, audacious goals; you want to have small goals.
Let me give you an example. I was interviewing a company which is a part of the wine co-operative in Portugal. In fact, it is a co-operative which has five wineries. Five wineries. And Portuguese tend to be very independent business people. They are very entrepreneurial, but it is very hard for them, as they tell me, to work together.
So how did they build trust? What they did was actually quite interesting. They said, "Let's take some of our best wine, our really best wine, and let's make our joint wine together. In a sense, let's create a new wine, a wine that didn't exist before, and that wine would take the best wine and grapes from all of the five suppliers, and let's try to promote this wine as a new creation of our team and let's sell it at the auction."
This process actually helped them to produce very high-priced wine which they sold at the auction for €200-300 per bottle and, as a result, they actually understood how they could work better with one another.
Just a small win, make wine together, but that went a long way for them to learn how to collaborate together and how to work together in the future.
KARL MOORE – So a critical question is: How do you choose your partner?
ANDREW SHIPILOV – So you need to think about four different areas that would secure the fit between you and the partner.
The first one is strategy. To what extent are the strategies compatible? So, your long-term goals, your long-term visions, where you want to be; if they are compatible, that is a strategy fit.
The next one is the resource fit. To what extent are you complementary in terms of resources that you bring to the table? What do you bring which I don't have? That is another dimension which you want to think about the partner.
The third dimension is something which we call organizational fit. So, to what extent your organizational structures are compatible with another partner's organizational structure? Let me give you an example. So, you can have one [partner] in a matrix organization working with a hierarchical, bureaucratic organization. Would you anticipate problem in collaboration? Of course, so you need to think about whether these problems would be too big to bridge or if you are actually able to work across these problems.
The final point is the cultural fit. The cultural fit is basically, are the notions of success, the deep values and beliefs in the companies, are they compatible? Of course, that would play a big role when you have companies working across national cultures, but it would also play a big role when you have companies working within the same national cultures but just their [corporate] cultures are still different.
Think about a family-owned firm versus publicly owned firms. To succeed, from what my interviews and research shows is that, if you don't have a resource and strategy fit, then there is no point for collaboration. If you have a resource and strategy fit, but you are lacking cultural and organizational fit, you can actually work and build that. But if you forget about organizational and cultural fit, and just build your model off strategy and resources, it is not going to go anywhere.
So strategy, resource, and then culture and organization.