Lambert, D. y Knemeyer, M. (diciembre,2004). We’re in this together. Harvard Business Review, 82 (12) pp. 1-10. (AR48789)

1

~ls.,Dentu

114

lfyour latest so-ca lled supply chai n partnersh ip failed to live up to expectations, as so many do, it's probably beca use you never stated yo u r expectations in t he fi rst place.

by Dougla.s M. Lambert andA. Michael Knemeyer

When managers from Wendy's International and 1Y on Foods at down together in December 2003 to craft a upply chain part­

nership, each side arrived at the table with misgivings. Th re were those on the Wendy's side who remembered all too well the di -

agreement they'd had with TYson in the past. In fact, ju t a few years earlier, Wendy' had made a formaJ d ci i n not to buy from 1Y on again. On the 1Y on si de, s me people were wary of cu tomer whose demand had prevented the busi­ness frorn meeting its profit goa1s.

A fewthing had changed in the meantime, orthe companies wouldn't have been at the table at all. First, the menu at Wendy's had shifted with con umer tastes - chicken had become ju t as important as beef. The restaw·ant chain hada large-volwne chicken supplier, but it wanted to find yet anotber. Second, 1Y on had acquired leading beef supplier IBP, with whicb Wendy' had a trong relati nship. IBP' pre ident and COO, Richard Bond, now held the positions of pre ident and COO of th combined organization, o Wendy's felt it bad omeone it could work with at 1Y on.

One ther thing had changed, too. The companies hada new to 1, caJJed the part­n r hip model, to help tart the re lationship off on the right foot. Developed under the au pices of Ohio Sta te University's GlobaJ Supply Chain Forum, the model in­corp rated le on learned froro the be t partnering experience of that group' 15 m mber companie . Tt offered a proce for aligning expectations and determining the leve! of cooperation that would be mo t productive.

With thi article, we put that too! in your hands. We'll explain how, over the course of a day anda half, it illuminates the driver behind each company's de­sire for partner hip, allows managers to examine tbe conditions that facilitate or

HARVARD BU IN E REVI W

DECEM BER 2004

hamper cooperation, and specifie which activities man­ager in the two companies mu t perform, and at what leve!, to implement the partner hip. The model - proveo at Wendy's nd in dozen of ther partnership fforts ­rapidly e tabli h the mutual understa.nd.ing a.nd com­mitment required for success and provide a tructure for measuring outcomes.

No Partnership for Its Own Sa.ke

Why do so maoy partner hip faj} to deliver value? Often it' becau e they shouldn't have existed tn the fir t place. Partnership are costly

t implement - they reqture extra c01nmw1kation, coor­dtnati n, and ri k haring. They are ju tified oniy if they tand t yield ub tantially better results than the firms

cou ld achi ve without partnering. Thi point was driven home for us early in our re earch

with th Global upply Chain .Forum when its members id ntified ucces ful partner hips for study. One was an arra.ngement b tween a package delivery company and a manufacturer. The delivery company got the revenue it had beeo promi ed, and the manufacturer got tbe cost and service level that had b en stipulated. But it wasn't a partner h.ip; it was a ingle- ource contract with vol­ume guaranteed. The point ís that it's often possible to get th re ult you want without a partner hip. lf that's the ca e, don't e reate one. J u t write a good contract. Yo u im­ply don't ha ve en ugh hwnan re ource to form tight re­lation hip with every uppUer or customer.

At Wendy', managers di tingui h between high- and low-value part:ner bip opportunities using a two-by-two matrix with axe lab led "complexity to Wendy's" and "v lum of the buy:' upplie such a drinking straw might be purcha ed in huge volume , but they pre ent n e mplex.itie in term ofta te, texture, or safety. OnJy if both volume and complexity are high - as with key in­gredients - does Wendy's eek a part:nershi p. Colgate­Pa l.molive simílarly plots supplier on a matrix according to "potential for co t reductioo "and "potentiaJ for inno­vation" and explores partnering opportunities with those that rank high in both.

1 e erving part:nership for situations where they're ju -tified is one way to en ure they deliver value. Even then, however, they can fail if partner enter into them with '1

Douglas M. Lambert (lambert.119 @o u.edu) hold the Ray­mond E. Mason Chair in Transportation and Logi tic at Ohio tate University' Fisher ollege oj Bu ines in Co­lumbus and directs the Global Supply Chain Forum there. A. Michael Knemeyer (knemeyer.4@0 u.edu) i an a istant proje or ojlogistics at Fisher Col/ege oj Bu iness.

116

The Partnership Model

Decisionto ~ ___.. createor ad)ust.._

rusens f>l partnershlp

Dfivers set expectations of

outcomes

When the member companies ofthe Global Supply Chain

Forum first convened in 1992, they agreed they needed

insights on how to build effective partnerships. Research

on their experiences formed the basis of a model that has

been refined through dozens of partnership facilitation

sessions. Managers state the drivers behind their desire to

partner and examine the cond itions that would facl l itate

cooperation. The model helps them decide on a partner­

ship type and boost the needed managerial components.

Later, ifthe partners aren't happy with the relationship,

they determine whether drivers or facilitators have

changed or components are atan appropriate level .

Dlagram source: Douglas M. Lambert, Margaret A. Emmelha>nz, and John T. Gardner, "So You Thlnk You want a Partner?" Morket.ng Monogemem, Su m· mer 1996.

mismatched expectations. Like the word "cornmitment" in a marriage, "partnership" can be interpreted quite differ­ently by the parties in volved - and both si de often are o certaio that tbeir ioterpr tation ar shared that their a -sumption are never articulated or que ti n d.

Wbat' n ded, then, for upply chain partn rship to ucceed is a way of targeting high-potentiaJ relati n hip

and aligning expectation around them. Thi is what the partnership model i designed t do. It is n t design d to be a upplier- election tool. At Wendy' , for instance, the model was employed onJy after the company's enior vice president of upply chain management, Judy Holli , had reduced the company' supplier ba e, con olidating t 225

supplier . At that point, Wendy' could say: "N w the de­cision's been made. You're a supplier. Your bu in s i n't

HARVARD BU IN E S REVI W

at risk. Wbat we're trying to do here is structure the relationship so we get tbe most out of it for tbe least amount of effort.' That assurance helped people to speak more frankJy about tbeir hopes for the partnership-an absolute necessity for the partnersrup-buiJding process to succeed.

A Forum for Frank Discussion

guessed, and middle managers, operations people, and staff personnel from departments such as HR, finance, and marketing can provide valuable perspectives on the companjes' expected day-to-day interaction .

Goals in the Cold Light ofDay

A fter introduction and an overview, the moming of the first day is con umed by the "drivers e -sion;• in which eacb side's team considers a po­

tential partner hip in terms of"What's in it for us?" (See tbe idebar"How to Commit in 28 Hour :')

The team are separated in two rooms, and each i asked to di cu and tben list tbe compelling reason , from it point of view, for a partner hip. lt' vital that partici­pant feeJ free to speak frankly about wbether and how their own company could benefit from such a reJation llip.

O EMBER 2004 11 7

are added (the highe t po ible score is 24) to produce a total driver core for eacb side.

This i the point at which the day gets interesting. The teams reassemble in one room and present their drivers and core to each oth r. The rules of the game are m a de clear. [f one si de doesn't under tand bow tbe other' goal w uld be roet, it must push for clarification. Failure to challenge a driver implie agreement and oblígate the partner t e perate on it. The drivers listed by a Wendy's supplier, for instance, included the prospect of doing m re bu in s with the Canadian ubsidia.ry of Wendy's, Tim Hort n . The Wendy's tearn rejected the driver, ex­plaining that the ub idiary's management made deci-

, candor of the ubsequent di cussion allowed the two sides to refocus on what they could gain by working to­gether. As Judy Hollis told us about the Wendy' -lY on session, "What they presented to us during the sharing of drivers confirmed that we could have a deeper re lation-

i ns aut nomously. Thi i just the ort of exp ctation that i left unstated in most partner hips and later be­e me a ource of di appointment.

But expectati ns are adjusted upward as often as they are lowered. On everal occasions, manager reacting to a driver pre entation have been pleasantly urpri ed to di -cover a shared g al that hadn't been rai ed earlier because botb ides had assumed it wouldn't fly with the other.

Th driver se sion is invaluable in getti.ng everyone's motivation onto the table and calibrating the two sides' expectations. lt also offers a legitimate forum for dis­cus ing contentious issues or clearing the air on past grievances. During one Wendy's ses ion, the discussion veered off on a very useful tangent about wby the com­pany's pecitications were costly to meet. In another ¡l memorable ses ion, we beard a manager on the buying ide of a relationship say, 'T feel like tbis is a marriage

that's reached the point where you don't think I'm as beautiful a 1 u ed to be:'Hi counterpart snapped:"Well, maybe you're not the woman I married anymore." Tbe

. HowtoCommitin28Hours

bip witb them. If we bad seen thing that were there just to please us, we wou ldn't have been willing to go forward with a deeper relationship:'

The Search for Compatibility

Once the two ide have reached agreement on the business results they hope to achieve, the focus shifts tothe organizational environ.rnent in which

the partnersbip would function.ln a new e ion, the tw ides jointly consider the extent to which they be lleve cer.­

tain key factor that we call "faciUtators ' are in place to support the venture. The four most important are com­patibility of corporate cultures, compatibility of manage­ment philo opby and technique , a strong sense ofmutu­ality, and symmetry between the two partie . The group, as a whole, is a ked to core-again, na five-point cale ­the facilitators' perceived strengths. (This imp)je , f course, that the participants have a history of interaction on wbich to draw. Ifthe relationsbip is n w, manager will need to spend ome time working on joint projects befare they can attempt this as essment.)

For culture and for management philo ophy and tech­nique , the point is n t to look for sarnenes . Pa.rtners needn't have ideotical culture or management ap­proaches; sorne differences are benign. Lnstead, partici­pants are asked to con ider difference that are bound to create problems. o e one company' management pu h decision making down into tbe organization while the other' executive i sue arder from on high? ls one ide committed to continuous improvement and the other

Before the lleetlna A cross..functional, multilevel tea m from

each company is identifled and commits

toa meeting time. A location is found,

preferably off-site for both parties.

D ay One Morning

lnt roduct ions and an Overview. The

session leader explains the rationale for

using the model.

Articu lation of Drivers. The two teams

meet separately to discuss why they are

seeking a partnership and to list spe­

cific, selfish reasons in four categories:

asset and cost efficiencies, customer

service improvements, marketing ad­

vantages, and profit growth or stability.

A score is assigned to each category, in­

dicating the likelihood that the partner­

ship would serve those goals.

Aftarnoon Presentatlon of Drivers. The groups

present their drivers to each other. Each

tea m must challenge every driver it

considers unsupportable or unaccept­

able. Failure to challenge a goal implies

agreement and obligates the organiza­

tion to help the potential partner

achieve the aim. The teams also com­

pare driver scores. The lower ofthe two

becomes the driver score for the pro-

118 HARVARD BU IN E REVI EW

not? Are people compensated in contlicting ways? The session leader must counter the groups' natural tendency to paint too rosy a picture of how well the organizations would mesh. He or she can accomplish tbis by asking for an example to illustrate any cultural or management sim.ilarity participants may cite. Once the example is on tbe table, someone in tbe room will often counter it by saying, "Yea.h, but tbey also do this ... "

A sense of mutuality - of shared purpose and perspec­tive - is vital. It helps the organizations move beyond a zero-sum mentality and respect the spirit of partnership, even if the eamings of one partner are under pressure. lt

11

are present, they deepen the connection. Think of the extra clo eness it must have given the McDonald 's and Cake partnership in tbe 19905 that both companie lov d to hate Pepsi (which at t.he time woed Kentucky Fried Chicken, Taco Bell , and Pizza Hut franchises, giving it more locations than McDonald' ). Phy ical prox:imity e r­tainly adds a dimension to the partner hip Wendy' has with sauce supplier T. Marzetti. With both headquarter in Columbus, Ohio, the two companies' R&D taffs can collaborate easily. We saw the benefit of proximity, t o, in 3M and Target's partnership. Twin Cities- ba d man­agers accustomed to interacting tbrough local charities,

Like the word "commitment" in a marriag , "partn rship" can be interpr ted quite differently by the parties involved.

may extend toa wiUingness to integrate systems or share certain :financial information. Syrnmetry often means comparable scale, industry position, or brand irnage. But even if two companies are quite dissimilar in t.hese re­spects, they rnight assign themselve a high core on syrn­metry ifthey hold equal power over each other's market­place success- perhaps beca use the smalle r company supplies a component that is ·unique, in scarce supply, or critica] to the larger company's competitive advantage.

Beyond these four majar fac ititators, five others remain to be assessed: shared competitors, physical proxllni.ty, po­tential for exclusivity, prior relationship experience, and shared end user . Ea eh can add one point to tbe total, for a maximum facilitator score of 25. These factor won't cripple a partnership if they are absent, but wbere they

arts organizations, and community-building effort found it easy to collaborate in their work.

Asses ing these issues carefuJly and accurately is worth the sometimes con iderable effort, becau tb core on facilitators and on drivers in th first e ion yield a pre­

l cription for partnering. The exhibit "The Propensity-to-1, Partner Matrix"sbows howtbe core indicate which type

of association wou:ld be best- a Type 1, Ll, or m partnership or simply an arm's-length relationship. The types entail

1

varying leve! ofmanagerial comp.lex:ity and re ource use. In Type 1, the organizations recognize each other as part-

1

ners and coordinate activities and planning on a limited basis. ln 1YPe LI, the companies integrate activitie involv-ing multiple divisions and function . In Type m, they har a significant leve! of integration, with eacb vi wing the

posed partnership (that's because the

less motivated tea m is the relation­

ship's limiting factor).

partner matrix, wh ich yields a prescrip- partnership prescribed by the matrix

Evaluation of Facilitators. The teams

jointly examine the features ofthe

shared organizational environment

that would help or hinder cooperation.

Scores are assigned to four baslc and

five additional factors.

Prescription of Partnership Level. The group consults the propensity-to-

DECEMBER 2004

tion based on the scores. The ideal rela- and considers to what extent those

tionship looks like a Type 1, 11 , or 111 components currently exist on both

partnership or simply an arm's-length sides. A plan is made for developing

association. needed components. The plans include

speciftc actions, responsible parties,

Day Two and due dates.

Morning Review. The drivers articu lated on

Exa mination of Components. The day one are reviewed to ensure that

group exam ines the management each has been targeted with specific

components required for the level of action plans.

119

th r as an exten ion of itself. l)lpe rn partnerships are equivalent, in aUiance tennlnology, to strategic alliances, but we are careful to avoid such vaJue-Laden language be­ca u th re hould be no implication that more integra­tion i better than less integration.

put this in perspective, recall that Wendy' began. by consolidating its buying to 225 suppliers. Of these, only the top 4 are being taken through tbe partner hip­model pr ce . And it appear that onJy a few of the part­n r hips will end up being Type m. Perhaps 12 or 15 wiU be Type U, aod ab ut 20 will be TYpe T. Thi feel like an appropriate distribution. We don't want participants as­piring to Type 111 partner bip . We simply want them to fit the type of relation hip to th bus in e s situation and the organizational environment.

NaturaUy, the managers in the room do not have to sim­ply accept the pre cription. If the outcome surprises them in any way, it may well be time for a reality check. They hould ask themselves: "I it rea onable to commit the re­ourc ti rthi typeofpartner hip,givenwbatweknowof ur driver and. the facilitators?" lfthe answer i in doubt,

th final ion of the pr cess, ti cusing on the managerial r quir m nts ofthe partnersh.ip, wiJl clarify matters.

Actton Items and Time Frames

In the third i n, the group rec nvene as a whole to focu on management compon nts-the joint ac­tivitie and proce e required to launch and sustain

the partnersbip. Whi le drivers and facilitators determine which type f relation hip would be be t, management

1 componeots are the building blocks ofpartnership. Th y

1

1 include capabilities for planning,joint perating contr l , communication, and risk/reward haring. They are uni-

1 ver aJ acro s firms and acro busine environments and, ¡ unUke drivers and facilitator , are under the dir ct ntrol

of the manager involved. The two team jointly develop action plan to put these

components in place at a leve! that i appropria:te for the partner hip type. Participants are provided witb a tabl of component , li ted in arder of importan (a p rtion f such a table i shown in the exhibit "Management Com­ponents for Partoerships"). The fi:rst task is for tbe team to detennine fu degree t wbich the component are J­ready in place. Thi is a quick proce ¡ the participant run through the components in tbe table, noting wh ther ach type of acti\dty is performed ata bigh, medium, or low Jevel. Generally peaking, the component sh uld b ata high level for 'JYpe ITI partnerships, a medium leve] for 1Ype II, and a low 1 vel for "fYpe l.

Under the h ad.ing of joint operating contr 1 , for e -ample, a 'JYpe lii partner hip wouJd. caJJ fi r d veloping performance mea ure jointly and focu ing tho e mea­sures on the companies combined performance. A Type rr partnersh:ip, by contra t, would involve performance measures that focus on each company' individuaJ per­formance, regardless fhow well the partner perform .ln a Type r partner hip, the e mpanie wouJd n t w rk t gether to develop mutually a ti factory p rformance mea­sures, th ugh they might hare their re uJt .

For each management component, the gr up must out­line what, if anything, needs to be done to move from tbe

': - _...,.._ .-:--_-• ""~"""'! ,..-,--'7-~--... . ._---~~~..- ~"""'9-~.A___.,IIIr-.._~-~-____.

: The Propensity-to-Partner Matrix .:. - - ....... -~ 4....1.._~~=-~ ~~"-- - - ...... - -

120

What type of partnership would be best? Once t hey have meas u red their desire to partner and determi ned how easily they could coordinate activities, companies considering worki ng together can use this matrix to decide whetherto form a partnership and, if so, at what leve l.

Companies' desire for partnership (meas u red by "driver points")

8-11

1~2D

Best partnership type: 1, 12- 115 in which coordlnation ls

limited

8-11

12- US

Best partnership type: 11 , in whlch activities of mu ltl ple divisions are integrated

1~24

Best partnershlp type: 111, in whlch each company vlews the other as an exten· sion of itself

HARVARD BU IN ES R VI EW

Plannl.ng: > Style

> Level -----> Content

Joint Opera.ttng COntrols:

> Measurement

Í, on ad hoc basis

> focus is on projects or tasks

> sharing of existing

plans

> regu larly scheduled

> focus is on process -----!

> performed jointly,

el iminating conflicts in

strategies

>performance measures > measures arejointly

are developed developed and sha red; independently, but focus is on Ind ividual

results might be shared firms' performance -------------+--- ----r-----

> Ability to make changes

COmmunlcatlon: NONROUTINE

DAY-TQ-DAY

> Organization

>Balance

> Electronic

Rtsk/ Rewa.rd Shartng; > Loss tolerance

> Gain commitment

> Commitment to fairness

> parties m ay suggest > part ies may make changes to other's changes to other's system

system after getting approval

> very limited, usually just

critica! issues at the task or project level

> conducted on ad hoc

basis, between individuals

> primarily one-way

>use ofindividual systems

> very low tolerance for loss

> limited willingness to help

the other ga in

> fa i rness is eva 1 u ated by transaction

> conducted more regularly,

done at multiple levels; generally open and honest

> limited number of

schedu led communica­tions; sorne routinization

> two-way but unbalanced

> joint modification of

individua l systems

>so me tolerance for short-term loss

> wi llingness to help the f other gain

>fa i rness is tracked year to year

> systematic: both scheduled

andad hoc

> focus is on relationship

> performed jointly and

at mu ltiple levels,

including top manage­ment; each party partici­

pates in other's business planning

> measures are jointly

developed and shared;

focus is on relationship

and joint performance

> parties may make

changes to other's system

without getting approval

> planned as part of the relationship; occurs at all

levels; sharing of praise and criticism; parties "speak the

same language"

> systematized method

of communication; communication systems

are linked

> balanced two-way

communication tiow

> joint development of

customized electronic communications

> high tolerance for short-term loss

> desire to help other

party gain

> fairness is measured over life of relatíonship

In general, Type 11 1 pa rtnerships require high leveis ofmost ofthese components, Type 11 partnerships require medium levels, and Type 1 relationships requlre low lewls. (This is jusl a partiallist of manageria l components.)

DECEMBER 2004 121

current state to the capability level required by the part­ner hip.Here, it is helpfuJ torefocus on the drivers agreed to in e sion one and tart developing action plans around ea eh of t hem. lt is in th e action plans t hat the deficien­cies of the current management e mponents become ap­parent. Jt may be, for instance, that acbjeving a particular goal depends on systematic j int planning, but the group ha ju t aid planning is being performed at a low level.

1 arly, planning mu t be ratcheted up. One of the needs that became clear in the 'JYson­

Wendy' e ion wa for increased communication at the upper levels. People at the operationallevel in the two companie were communicating regularly and effectively, but t here was no parallel for that at the top. ]oe Gordon, a e mm dlty manager at Wendy's, explained why this was

Ex ctations that are 1 can later become sourc

a problem: "AJJ of us worker bees sometimes come to a p int where we have obstacles in our day-to-day re la­tion hip, and in the past we rnight have given up on try­ing to overcome t hem:' After an action plan was outli.ned for getting the top management teams together to talk, tho e problems became ea ier to addre s.

When the participants leave, they leave with action items, time frames for carrying them out, and a designa­tion f respon ible parties. The fact tbat so much is ac­complished in u eh a brief period is a source of continued motivation. Donnie King, who heads '!Yson's pouJtry op­eration , admitted that he bad been skeptical going into th meeting. "You tend to be lieve it i going to be a pro­ce s where you it around the campfire and bold hands and ing'Kumbaya' and nothing changes;'he said. But when he

left the meeting, h knew there would be change indeed.

A Versatile Tool

T he current quality of interaction and coopera­tion between 1Yson Food and Wendy's lntema­tional ugge ts that the partner hlp model is ef­

fective not only in de igning new relationshlps but aJso in turrung around tr ubled ones. Toda y, Wendy's buys heav­ily fro m 1)'son and believe the partnership produces value imílar to that ofthe other Wendy's key-ingreruent partner hip . Richard Bond of1Y on told u : "There i a greate r level of tru t between the two companie . We ha ve had a higher level of involvement in QA regulations

122

and how our plant are audit d [by Wendy' ], rather than having [ tho e pro ces es] dictated to us:'

The two companies' R&D and marketing groups have begun to explore new product that would allow Wendy's to expand its menu, witb 'fYson as a key upplier.ln a re­cent interview, we asked the director of supply chain man­agement for Wendy's, Tony Scherer, to recall the tense conver ations ofthe December 2003 partnersh.ip ses ion, an.d we wondered whether that history still colored the relationship. "No;' he said. "1 really do feel Uke we've dropped it now, and we can move on."

For other companies, the partnership model has paid off in different ways. Colgate-Palrnolive used it to belp achieve tretch financia! goal witb J<ey supplier ofinno­vative products. TaylorMade-adidas Golf G m:pany used

unstated in partner hips of disappointment.

ít to structure supplier relationships in China. At lnterna-1 tional Paper, the model helped to aUgn expectation be-

tween two ruvisions tbat upply each other and have dis-

1

tinct P&L . And it served cargill well when the company wanted severa! ofit divisions, all dealing eparately with

1 Masterfood USA, to presenta more unified faceto the customer. The se sion was unwieldy, with seven cargill gr ups interacting with three Masterfoods division , but the give-and-take yielded a wide range of benefits, from

11

better utilization of a CargiJl cocoa plant in Brazil to more effective hedging of commodity price risk at M a terfood .

But to focus only on the e success stories is to mi much of the point of the model. Just as valuable, we would argue, are the sessions in which partidpants dis­cover that their vision of partnership i not j ustified by th benefits it can re a onably be expected to yield. In matters of the heart, it m ay be better to have loved and lost, but in bu ines relation mp ' it's farbetterto have avoided the re ource sink and Lingering re entments of a failed part­nership. Study the relationshlp that have ended up a disappointments to one party or both, and yo u will find a common theme: mi matcbed and unreali tic expecta­tions. Executives in each firm were using the same word, "partnership;'but envisioning differeot relationships. The partnership model ensures that botb parties ee the op­portunity wholly and only for what it is. e Reprint R0412H

To order, see page 151.

HARVARO BUSINESS REV I W