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Strategic Collaboration for New Product and Service Development

  • ID: 42814
  • Report
  • November 1998
  • 100 pages
  • American Productivity & Quality Center, APQC
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While companies must cut costs and focus on core competencies to remain viable, they cannot survive without continually producing new products
and developing new strengths to stay ahead of the competition. Alliances
allow companies to protect competency areas, maintain low costs, and develop new products and services. A recent benchmarking study, Managing Innovation for New Product Development, identified and documented best practices in two areas of product development: idea generation and innovation for sustainable success. From that research we learned that companies must experiment with new and different means to identify and develop new business concepts. Many companies do this through strategic alliances—jointly managed partnerships with
customers, suppliers, competitors, and universities. For example, one best-practice company set a goal to conduct 25 percent of its discovery research through managed partnerships with selected universities.

This study began in January 1998 with an organizing meeting, during which the
study team and the sponsor companies agreed upon the following study scope.
Planning the alliance: What should it accomplish?
- How can you best recognize and assess alliance opportunities?
- What is the value proposition for your alliance?
- How can you set goals for the alliance?

Selecting partners: How do you find the right match?
- What type of alliance will work best for your organization?
- What is the best way to define fields of interest?
- What are the criteria for a good partner?
- How can you ensure that your core competencies are complementary?

Implementing the alliance: What issues are most important?
- What formal agreements are necessary to create smooth alliance relationships?
- How can you best define each partner’s roles and responsibilities?
- How can you determine who maintains ownership of intellectual property rights?
- What is the best way to manage the alliance on an ongoing basis?
Measuring results: How do you know if your alliance has been successful?
- At what points in the alliance relationship should you measure results?
- How do you know what to measure?

KEY FINDINGS OVERVIEW

This study showed how collaborative alliances are used to develop new products
and services. Published data are not available in the literature, and this is the first benchmarking consortium study about the subject matter. The findings are based upon the experiences of five companies in different industries with a mix of products and services. For this study, a framework was developed to:
- describe the critical success factors for each phase of the alliance process,
- show the iterative nature of the knowledge transfer, and
- define attributes of companies with successful alliance approaches for new product and service development.

Following are the key study findings about the new product and service development alliance process presented within this framework.
Alliance Strategy

1. Best-practice companies have a strong “sense of self ” that contributes
to the identification and development of successful alliances.

2. Successful alliance strategies for new product and service development
are supported by rigorous new product development
systems.

3. Best-practice companies create successful alliances by combining strengths—not by compensating for specific problems or weaknesses. Alliance Planning

4. Front-end alliance planning is the most critical phase of the entire alliance process.

5. Written agreements are made to serve, not control, the alliance at best-practice companies. Strategy, vision, “agreements-in-principle,” and good-faith efforts— rather than a written agreement—are the primary alliance drivers.

6. Best-practice companies establish criteria for partner selection but recognize that there is no recipe for selecting partners.

Alliance Management

7. Alliances should be driven by business strategies, and management systems
developed and tailored to each alliance as it is formed.

8. Best-practice companies clearly define roles and responsibilities for all alliance activities.

9. Communication mechanisms between alliance partners need to be carefully
managed.

Alliance Analysis

10. Successful alliances yield both financial and relationship results. Key measures include meeting project milestones, commercializing the new product or service, and building brand equity as well as financial measures.

11. Best-practice companies emphasize the importance of establishing clear, mutually beneficial outcomes for all alliances. They seek long-term relationships, not short-term alliances.

Organizational Learning

12. Best-practice companies have developed a flexible, systematic approach to
creating successful alliance development rather than a rigid alliance “process.”

13. At best-practice companies, alliance experience is generally shared informally among alliance team members and formally through guidelines and approval structures—training programs are rare.

METHODOLOGY

Benchmarking is the process of identifying, understanding, and adapting
outstanding practices from organizations anywhere in the world to help another
organization improve performance. Companies participating in benchmarking
activities report breakthrough improvements by directly and indirectly improving cost control, quality, cycle time, and profits.

The American Productivity & Quality Center conducted this benchmarking study using its benchmarking methodology, as described below.

Phase 1: Planning
Phase 2: Collecting
Phase 3: Analyzing and Reporting
Phase 4: Adapting
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- Sponsor and Partner Companies

A listing of the sponsor companies in this study, as well as the best-practice (“partner”) companies that were benchmarked for their innovation and advancement in new product or service development partnerships.

- Executive Summary

A bird’s-eye view of the study, presenting the key findings discovered and the methodology used throughout the course of the study. The findings are explored in detail in following sections.

- Key Findings

An in-depth look at the 13 key findings of this study. The findings are supported by quantitative data and qualitative examples of practices employed by the partner companies.

- Partner Company Profiles

Background information on the partner companies, as well as their innovative strategic partnership practices.

- Appendix

Additional background data on the consortium participants.

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