Symposium: "A New Base for Corporate Relations: From Strategic Deceit to Trustworthy Action", Nokia House, Espoo Finland, Tuesday, June 3, 2003.
This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. These should not be viewed as official transcripts of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. These notes have been contributed by David Ing (daviding@systemicbusiness.org) at the IBM Advanced Business Institute ( http://www.ibm.com/abi ).
[Marianne Kosits]
Introducing why we're here today
IBM has looked at some of challenges and issues in
our organization, and how we want to work differently.
Came to the IBM Advanced Business Institute, where
Marianne was doing research into building more partnerships and alliances
Issue in the outsourcing arena at IBM
Great customer satisfaction, yet notice that there
wasn't a balance of efficiencies gained by outsourcing IT, and the
opportunities to be involved other projects, particularly more defining ones
Suspected that the way that we were forming
relationships probably had some flaws
Saw some potential in organizational strategic
alignment
Asked if we would form a practice on how
organizations built these practices
Not so much on why you choose to outsource, but more
on organization
Moving now into business consulting in organizational
process
Practice stays primarily in the IT arena.
1-1/2 years ago, hired consultants to come in
External consultants recognized an underutilization
of resources within the practice
Have funded continued research
Multinational inquiry: what are the foundations of good relations
How other companies are making sense
Some of this is terminology: how do we communicate?
Partnerships as the sharing of risk?
No good accepted vocabulary
Wanted to expanded out of North American view
Have started research in Finland
Had a community of interest around organizational
governance
Minna came, and was sitting in one of our salons
Usually when we presented idea, we got a reaction
of it being holy wisdom, without contest
Brought some ideas into the salon
Minna asked some questions that we didn't
understand
The way that many organizations in Finlandlook at alliances fundamentally different from North American corporations
Want to share ideas, share some debate on what's been working to date.
Hope that this is the beginning of an exchange.
Already see many similarity of thoughts
Business environment in Finland is similar, but on
different foundations
Would appreciate criticism on what is working and not working.
Research founded at the IBM Advanced Business Institute
Founded on research into technology
Worked with Steve Haeckel, author of Adaptive
Enterprise
Also research with MIT and Boston University
Still have ties to Systems Research Center at Boston
University thorugh John Henderson and N. Venkatraman
Also Vantage Partners, which has roots in the Harvard Negotation Project
Although focusing right now on strategic outsourcing - technology, and how if forms the connections within the organization - are finding the same type of relations between enterprises or between functional units
Center to the work, in portfolio
Names and labels are unimportant, use these as a
means of discussion (and clients will change the names)
Concepts are important
Four stops in our portfolio
Transactional
Value-added: product plus some expertise that
the client attributes merit to
Specialize relationship: innovation is needed,
something different must occur
Unique: sometimes labelled partnering, one-of-a-kind, can only be created by these specific partners
Two ends of the spectrum
The degree to which you do thing shift, depending on
what you need to do.
Simple, but allows us to frame the differences
Portfolio management isn't very new
A portfolio of value exchanges - this is new
A lot of people attribute value to the amount of revenue to be produced
The more revenue, then the higher up
Or the less revenue, the lower the impact
This is fundamentally flawed
Revenue itself doesn't reflect the required
behavioural change to influence the potential of the relationship.
This is a difficult concept for many organizations to grasp.
Many things in transactional:
Goods and services exchanged for money
Can express needs, know what you need and when
Place order
Fulfill order
That's the exchange of value
In Unique:
More on innovation and collaboration
Very foreign to people in technology organizations to understand what collaboration is.
In technology, we tend to be rational,
project-oriented
If there's no order, something is wrong
At the same time, we're asked to innovate and
create
This requires some disorder, chaos or flow, in
order to be successful
Many individuals are very unsettled and
uncomfortable with their own performance and the performance of others
They're used to the mechanistic world
It was what do you need, and when do you need it.
How to you make "it" more efficient
More line-of-business: reengineering as making the know more routine - there's a need to do this.
The additional money released can be applied to innovation.
Money released can be applied with partners
Transparency is required when outsiders are brought into the family.
In the past, all business was done within the family.
Then trend towards outsourcing
Then still understand business as inside the
family
Now, innovation as understood in the marketplace.
When business is done outside the family, it has to be done differently.
Transactionally-based is not always bad, innovation-based is not always good.
Need to find the appropriate value exchange, and building effective governance and management structures.
When talking about relationship alignment, what is the outcome, and then what is the organizational mechanisms required
Order / routine / chaos
Trust
Won't talk about relational determinants, but trust is one of the important factors
The aspect of trust, as you look at it, is very important across the portfolio
Trust is an emergent property.
Right now, in the transactional side, built on the attributes
Know the order, did you give it? Very
tangible
I trust that they'll deliver when they said there were going to be delivered.
Trust is a more ambiguous attribute on the innovation side
Human behaviour: I am an honourable person,
but discomfort
What has changed? Think it's the other
person.
Label this as distruct.
Part of this is because we like order. This is a natural state.
Working with organzations, need to get companies to understand that the state of chaos is necessary, and a part of innovation.
How can they use this idea as touchstone?
Attibutes of trust on innovative side:
Other things are appropriate
People need to feel more comfortable, connect
Found these governance foundations
Have we collaborated well? Did we learn together? Did we communicate? Do I feel that there is an appropriate level of transparency? Do I feel included or excluded on decisions that are made.
One someone says this about trust, get "I knew that".
But when companies understand that order is not
appropriate here, because of the need for innovation, it's something new.
The word "strategy", use a parallel of Ready- Aim-
Fire: comfortable with those familiar with management by objectives
Plans used to remain stable for 3 to 4 years.
Call this type of planning Ready - Fire - Steer.
Governance mechanisms need to allow for this
steering.
E.g. projects, want a phone that can take and send
pictures. What does this mean? How to do this? Can it all be
built in-house? May do this with alliances.
Mistakes will be made.
The way the success will be measured, and the way people work is going to be very different from placing and fulfilling orders.
If you only do innovative-time work, the way emerges: the will is there.
The complexity comes in when a supplier spans from
transactional side to innovative side.
Assumption is the organizational accommodation is
made where the revenue is.
Need a multi-tier governance structure to help build
the efficiencies where Ready-Aim-Fire is needed.
Also segment the value exchanges that need that
steering
Need to be able to steer together, and adjust.
Picture of a stream, seen as a flow
Need to allow for the adjustment
Trust is different.
Transparency: how much do you need to know if you're delivering an order, as compared to something that changes the value proposition of the organization
Speed: delivering next month versus can we deliver?
Risk: risk placed on person placing the order. Supply chain, there's some sharing. At innovation end of spectrum, call this partnering.
Concurrent reward is shared.
Not many organizations will have volumes of risk-reward sharing relations.
In Specialized Relationships, will pay the supplier, so that the customer owns the product to market.
The behaviour is same as for Unique, but there's a question on where the risk is borne.
Cultures mesh
Innovation side: Learning, collaboration
critical
Take pieces from ad home cultures
These are the ways we'll work together
Learning:
Innovation is about creation of new intellectual
capital
Feedback into risk.
Systems thinking
Steering brings in many different parties into
decision-making protocols.
Important that systems thinking happens here, due to
nature of types of value exchanges
Complexity requires systems thinking
Effectiveness versus efficiency
Make routine where it can be routine.
Feed the resources organizationally, to create the new
Also value migration, from Adrian Slywotsky and Ben Shapiro - although they use it differently.
Once we have something innovative, move into making
it routine
Ambiguity is reduced
One of mistakes that an organization makes is that a
project of innovation is always a project of innovation.
Portfolio view allows a robust, forward thinking attitude.
We do this through different foundations of governance
In each segment, what you do and how you it depends
We're wrestling the differences between the ideas of management and governance
In North America, these words are used
interchangeable, and for us, they're not interchangeable.
Management is an action, that you can tell people
want to do.
Governance is about creating a context so that decisions can be made coherently with the relation
This is only inter-organizational governance
Reflection on the joint purpose
Ability to make that purpose over time. It's not static
There will be movement, there should be movement.
Flow and ebb
Will there be a long-standing relationship, or is it a case where the supplier is replaceable.
First: relationship intent
Direction, done at an executive level.
Then: behavioural protocols
Cultural
Based on what we desire, what would be the ideal
behaviours
E.g. all problems will be seen as joint problems
Part of this is conflict resolution: when we disagree, this is how we handle it.
The idea of idealized design, in an intent
If a relationship exists, then it's already formed, and you can observe it
Decision protocols are emergent
When there are breakdowns in relationships, generally, there is an issue that the expertise of party A was not at the table when party B made the decision
This could be individuals, it could be organizations
Story: "expectation management" (a phrase Marianne dislikes): satisfaction of client's trust
Many organizations
E.g. IBM has so many relationships, we want mostly
specialized relationships. We'll buy some transactional things from
you, but we want innovation.
Important to be clear about this.
Intent is often not supported when it comes to decision-making.
If want innovation, need significant transparency
Does the organizational form allow for this?
Working with a multinational organization, one company said managers where stupid, need to get them to understand importance.
It turns out that the people weren't stupid; there
were a few blind spot
It turns out the critical decisions were made at the executive steering committee.
So, when are partners brought to the executive steering committee? Response, no, they don't go
If relying on special expertise of the partners,
it's a mistake not to include them in strategic/directional decisions.
Every time there's inclusion of the other party, I'll tell them on a "need to know" basis.
Executive started to have an anxiety attack: I need to get there, but I didn't realize that I needed to get there.
Decision-making equivalent to power, and the executive wasn't prepared to give it up.
His own people said that if the executive wasn't
willing to give up some of this decision-making power, it wasn't fair to hold
the other party to them.
Is the organization willing to make the
organizational accommodations.
Thus, what decisions, who makes them, and how?
Joint decisions, where both parties need to agree? I'll come and ask you
when I need you, and consult with you?
This is important in relationship perpetuation.
I had expertise, and you didn't even ask my
opinion.
Don't necessarily want joint, but at least want consultation.
They don't realize the amount and depth of
information.
Where the organization is going to share will become an issue.
Assumption that these decision protocols will
emege.
Directional / contextual / managerial / more trajectory or tactical.
Communication protocols
Committee structures
They have these structures, but the problem is
escalation path.
This is agenda
Relationship affirmation, or relationship audit
Is the relationship meeting is potential?
Are there new opportunities?
Are we adapting? Intended or emergent.
Challenges seen in practice
Clients love the idea of working on the relationship
Concept is very exciting.
When the real work of decision protocols, it's hard to sustain the excitement
Some leaders just understand this, and let's do it.
Others are rational economic thinkers: they think that everything is a transaction, therefore what's the ROI?
The executives see the potential and possibilities, but they can't convey the message to the organizations on what is different.
Would like to discuss the portfolio idea applied to value exchanges
Have done this between organizations, and between functions
Discuss things on relationship governance
We believe we have the foundations affirmed
Hope that there are more Minnas, who ask why you did this, and what's missing.
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