The “Us versus Them” Culture

Some organizations create such a strong sense of identity that anyone outside is perceived as the enemy. Of course, a healthy rivalry, coupled with a strong dose of self-pride, can help spur people to higher performance.³ But some organizations and their leaders take it too far. There’s a big difference between relishing competition and demonizing your competitors.

One major retailer was notorious, for example, for treating vendors as foes to be conquered. “I dreaded my flight to [that city],” said one technology consultant, “because even the receptionist seemed to regard me as an enemy. It was a constant battle that ended up feeling quite personal. They didn’t just want a better price and service; they wanted to score points in arguments.”

This wasn’t a problem with just that individual consultant, or with the company’s IT department. On a fairly regular basis, the company’s CEO publicly derided his competitors, suppliers, and regulators—basically, anyone outside the company that his people competed or even interacted with. The tone was set on high, and across the company, people took their cue.

The “Do It Ourselves” Culture

Organizations pride themselves on the capabilities they’ve developed and the talent they’ve recruited. Past a certain point, however, a “do it ourselves” culture inhibits collaboration—either by fostering a fallacy of uniqueness or by fostering risk aversion.

In the latter category, some people may fear losing control of intellectual assets: They’ll just take our intellectual property and build a competitive product. Managers may not understand the value of a particular alliance, and may feel that their roles are threatened if they give up elements of control to another organization. Comments like, “Our process is unique,” and “We are much too complex for someone else to do what we do,” are commonly heard.

Similarly, many IT teams prefer to develop capabilities in-house. But that only makes sense for the (relatively rare) capability that is truly a strategic differentiator. By declining to partner with an industry provider, you may end up with a load of custom software that lacks both functionalities and scale.

The “Laissez-Faire” Culture

Yes, external partnerships can bring enormous value. But if they are managed in a highly decentralized, laissez-faire way, the result may be conflict and wasted effort. For example, in one global technology company, the mergers and acquisitions team, the product teams, and the partnerships team had been left to their own devices. The almost inevitable result? The mergers and acquisitions group was confidentially working on an acquisition that, if successful, would bring in more or less the same capabilities that the IT team was then spending serious money to build. Meanwhile, the partnerships team was out in the marketplace actively wooing potential partners in the same realm.

Inefficient, confusing, and frustrating for all concerned? Yes, especially as all these internal (and potentially external) overlaps began to surface. In this complex realm, laissez-faire doesn’t work. Organizations need strong internal alignment around their approach to managing partnerships. In most cases, only the executive team has a clear enough vantage point to see across all of these activities, many of which are necessarily confidential.

1. Smarter Collaboration as Part of Due Diligence

In Chapter 5, we discussed the importance of assessing the degree of smart collaboration in a company you’re hoping to acquire. For example, how much cross-silo work is going on? Is it an inclusive organization? Are ideas sourced and used from people across the organization, regardless of their position?

This type of diligence is even more essential in a potential partnership. Why? Because while an acquiring company has a high degree of control over the culture and leadership in its acquired entity, in a partnership that’s not the case. In the absence of direct control over each other, the two partners have to rely on a high degree of strategic alignment, organic collaboration among individuals and teams, and strong coordination by the leaders on both sides.

So how do you develop a clear-eyed understanding of the degree of collaborative behaviors in the potential partner? Steve Twait, vice president for alliance and integration management at pharma giant AstraZeneca, explains how he tackles this challenge:

We conduct a face-to-face diligence as part of our “cultural diligence.” I want to know not just how they make decisions, but who makes them? Are they consensus-based? How do they staff their teams? How are people incentivized? How broadly do they communicate across the company? What’s their work philosophy? How casual or formal are they? I’m thinking about the corporate culture, as well as the geographic cultural aspects.

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What I learn informs AstraZeneca about which leaders to assign to this particular project. I think about the people’s styles. We need to understand the human elements of what it takes to work together and how to complement the skills and styles of your counterparts.⁴

These in-depth discussions on strategy, operations, and culture can provide necessary assurances—or they can raise red flags that need to be assessed. Again, in Twait’s words,

I listen for their views on the time horizon. Do they have a long-term commitment and passion, versus just concern about getting to the next important milestone? Some of these collaborations can go on for ten-plus years, so you really have to think about the very long-term potential. I look for warning signs that they may not have a similar level of commitment. I’m also looking for transparency around what a company’s strengths are, and areas that they want to grow and develop in.

To dig deeper, particularly on large opportunities, the two potential partners can use a third party to help. This neutral party can run focus groups, interviews, and cultural dynamics surveys—not necessarily with an eye toward surfacing a deal-breaker, but perhaps to provide insights that may help get the relationship off on the right foot. We have played this role, and the smart collaboration diagnostic introduced in Chapter 3 shows how we use surveys and interviews (internal, with clients, and with existing partners) to paint a clear-eyed picture of the degree to which smart collaboration is happening in the organization today, as well as potential barriers to collaboration. This data not only provides an honest assessment of the current state of play; it also provides guideposts regarding constructive steps the two partners might take to set the stage for effective collaboration.

Third parties are only one useful source of information; there are many others. Additional assessment can be conducted through independent research, which might include, for example, a collaboration-focused review of publicly available data (annual reports, LinkedIn, Glassdoor) and targeted interviews with former employees.

2. Agreeing on the Goals and Extent of Collaboration

Explicit upfront agreement is critical: Why are we in the relationship, and what are both parties trying to achieve with it? Which teams need to work directly together, and which just need to be informed? For example, in the automotive industry, supplier partnerships often involve joint R&D and product development, but not marketing and sales. In pharma, a partnership may cover every element of the development-through-distribution lifecycle, although the nature of the collaboration is likely to change as the companies evolve over time.

How do you reach this level of agreement right at the beginning, when the two parties are still pretty unfamiliar with each other? Twait explains AstraZeneca’s approach:

At the very beginning of a startup, we conduct what we call the Strategic Futures Exercise. We bring the leaders together and say to them, “Let’s fast-forward three, five years, and someone’s writing a book about this. What do we want this collaboration known for?” This forces people to be visionary.

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I ask each side their ideas ahead of time, and also ask about the obstacles. Because those responses come back to me confidentially, oftentimes you have team members being quite transparent. As in, “I’m not convinced that the other side has the right capabilities.” Or even, “I’m not sure my leaders have committed enough resources.” During that startup meeting, I play back to them some of what I’ve heard. “It doesn’t matter which side this came from,” I say. “Someone in this room thinks this is an obstacle. What do we need to do to overcome that?”

This kind of structured dialogue helps both parties see who needs to be involved, at which stages, and how intensively. From there, the challenge becomes one of establishing the guiding principles for the ways to engage.

3. Setting Collaboration Ground Rules

A good first step is to hold a workshop solely dedicated to setting (or refreshing) expectations and agreeing on how to address differences in preferred ways of working. By being proactive in this way, partners can help minimize conflicts that might arise along the way.

For example, teams need to agree on a set of specific but simple guidelines, such as, “If I’m upset with you about something, I’ll pick up the phone and call you instead of blasting an email to the whole team.” Eventually, these conventions can serve as the foundations for a collaboratively built culture. Take, for example, the approach that dominates in the relevant consulting practices at Accenture. As Stuart Henderson, leader of that firm’s global Life Sciences practice, explains,

With some of our clients, we have a joint training program for both Accenture colleagues and clients to talk about the ways of working together, like how we’re going to deal with conflicts and issues.

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We bring two small model cars—one red and the other green. We explain that the power of positive language, as represented by the green car, always achieves more than the negative. But we also recognize the human need to have a red-car moment, as in, “I’m angry. This deliverable was a week late. Unacceptable!”

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Meanwhile, everybody knows what’s coming next: “Hey, in a second, the green car’s coming, and we’re going to talk about this rationally.” So the group doesn’t have to deal with that immediate rush of adrenaline, which gives us a chance to listen and process.

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To be honest, by the time I’ve heard the red-car complaint, I’m often agreeing: “Yeah; this really isn’t good enough. How did we let that happen?” But then comes the green car: “OK, how could we make this change?” All of a sudden, you have the power of positivity. It’s much more motivating.

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If a new person joins the group without training, they may start ranting. And everyone says, “When’s the green car coming in?!” Having those metaphors takes the heat out of it.⁵

This approach is consistent with neuroscience, which recognizes that different parts of our brains do different things. The amygdala is a nerve center near the base of the brain that tends to take over when we’re under stress, triggering the fight-or-flight response. This is the red-car zone, in the terminology of the preceding anecdote. The frontal lobes of our brains are where more rational thinking goes on. By lowering the heat of the moment, the “green car” allows our frontal lobes to retain control—avoiding what’s sometimes called “amygdala hijack”—so that we can choose a more reasoned approach and preserve the relationship.⁶

4. Building Sufficient Trust between Organizations

How do I know I can trust the other party?

This may be the most commonly asked question in the early stages of a collaborative partnership with an external party. Unfortunately, it’s usually the wrong question. Why? Because the only thing that’s in your control is your own actions. Your job is to work from your side of the partnership to build trust. This entails two kinds of actions: sending loud, clear, consistent signals of your own trustworthiness and making yourself transparent to the point of vulnerability.

AstraZeneca’s Twait explains,

You can build trust by being open and honest—as in, “Hey, this is a particular area where we really need your help.” Companies aren’t always transparent about their weaknesses, because they see that as a problem when they’re trying to get into a new partnership.

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Having a really strong champion involved on both sides who actually shares vulnerabilities really sets the tone for others. If I’m not hearing that from our potential partner, that’s a red flag for me.

Trust is earned. It’s built on a shared understanding of expectations. As a rule, the best way to build trust is through repeated, small, reinforcing steps—in other words, providing recurring evidence. Another way to build trust is to “audition” for it by finding opportunities to work with your counterparts on low-risk tasks, which gives you a chance to demonstrate your organization’s competence and integrity.⁷

The alliance management teams need to create a framework to make sure that strategies, goals, and incentives are sufficiently aligned to help the parties avoid misunderstanding, in which trust can erode quickly.

5. Communicating the Value

We’ve already discussed the notion of creating a culture that embraces external relationships. This is a prerequisite, but more is needed. For each alliance, it’s important to get everyone on board internally—especially during the prelaunch and launch phases. In particular, you need to take the time early on to identify specific people and departments that could feel exposed by a new external relationship, and keep them apprised.

Leaders need to be especially thoughtful when they set up partnerships with businesses that are thought of as competitors.⁸ Iberdrola, Europe’s largest private utility, supplies energy to one hundred million people. The company set out to create an ecosystem of employees, technology collaborators, industrial organizations, and public institutions aimed at ensuring universal access to energy services.⁹ “Rather than competing against each other, we compete against the issue,” says Ignacio Galán, Iberdrola’s CEO. “Working in alliances implies a great commitment, and the sharing of results and resources—not an easy task. However, when everyone’s investment in time and energy is correct, the added value of these relationships between different actors translates into an exponential increase in the possibilities of producing positive change.”¹⁰

Insulate against Key-Person Risk

An IBM study on partnering in the biotech sector concludes that the biggest contributor to alliance failures is changes in senior management at the companies within an alliance.¹¹ “A great relationship between two companies typically has two senior executives who are utterly committed to making that happen,” says Accenture’s Henderson. “And they shake hands on that commitment on a regular basis. So if one of those sponsors leaves, that starts to destroy trust, and the relationship starts to wane.”

Organizations change. People get promoted, change roles, leave jobs. If a relationship is centered on one person on either side, that turnover can have immediate consequences for the partnership—interrupting momentum and forcing new leaders to get up to speed with the dynamics of the alliance. At worst, they may even lose sight of the strategic rationale behind it.

To address this challenge of continuity, you need broad-based engagement across multiple functions and areas, rather than a relationship that’s single-threaded through the alliance manager of each party. As AstraZeneca’s Twait says,

When we create a governance structure, we normally have people from different silos across the company—commercial, development, operation—all engaged in the relationship to help break down silos and ensure continuity over time.

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We’re not only trying to build a team with diversity of style and thought, but also a diversity of professional backgrounds. That’s important because the issues in a relationship can vary. It could be a human-resources issue today, and then a regulatory one, and the next day a manufacturing snafu.

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And finally, it’s really valuable to have people who understand the human aspects of a relationship. We can manage the business risk, the legal risk, the contractual risk. Those are the easy aspects. But understanding and managing the human interaction—that is the real challenge.

It also requires active succession planning. “As an executive, you have to be a steward of a partnering relationship, handing it on to the next person,” says Accenture’s Henderson. “When I took over a client from my predecessor, who had built this multidecade trust-based relationship, we did a six-month handover. The client wanted to see if I could be trusted the same way my predecessor was, before he was going to trust me to continue the relationship.”

Optimize Structures for Alliance Management

Over time, your organization may need to coordinate across a large number of partnerships. This requires resources dedicated at the right level of seniority. A five-year study of the inner workings of fifteen strategic alliances found that good design—alignment and concrete governance structures—allows those partnerships to reap significant benefits, such as broadening consumer choices and addressing significant gaps in the marketplace.¹²

This is in part a challenge of correctly assigning certain kinds of responsibility, an assignment that often reflects company- and sector-specific issues. In the bio-pharma industry, for example, a centrally run global alliance management department may handle the highest-profile third-party relationships—often in the range of eighty alliances—whereas the R&D function manages myriad academic and research collaborations, which are more focused on the earlier stage of the drug discovery and development process, and typically number in the hundreds.¹³

If your organization operates multiple alliances, you also need a central repository that captures standardized models, process frameworks, procedural documents, the business case for the partnership—the kinds of practices referred to earlier. This not only proves invaluable when you’re trying to unearth details about an alliance that may go back a decade or more; it also provides consistency and continuity for this and future alliances going forward.

For example, in a rapidly growing tech company, multiple partnerships had gone stale over the course of a decade—and yet the restrictive agreements underlying those partnerships lived on. When a long-quiet “partner” demanded, more or less out of the blue, that the two companies collaborate on a new opportunity, the tech company had to scramble to find the relevant agreements, and it discovered that it was bound to conform to those standing agreements.

All things considered, the tech company would have been far better served if it had maintained—and regularly consulted!—an institutional memory of its ongoing collaborative relationships.

Continually Validate Alignment with Your Business Strategy

It’s not only people that change over time. So do market dynamics and business strategies. Mergers, acquisitions, and divestitures can all help determine the continuing relevance of a collaboration. What was initially a strong partnership and relationship structure may be inappropriate for the business’s objectives five years down the road. Through the alliance management team and top-to-top discussions, the two parties need to communicate their strategic plans and transparently assess whether the partnership—in its current structure or some amended version of it—will remain relevant moving forward.

Earlier we talked about the visioning exercise AstraZeneca uses to kick off its new partnerships. We recommend repeating this exercise every three years to help both parties stay focused on mutual priorities, or to flag early if one side’s strategy starts to drift.

Fix Trust Breaches Fast

Problems will inevitably arise. When they do, you need the wide-open channels of communication described earlier to prevent those issues from lingering and destroying trust.

A divisional manager in a global consumer goods company recently underscored this point. “After a blowup, we held an hour-long debrief between the two teams,” he told us, “which turned out to be an immersion in each other’s cultures. This person from the Midwest said, ‘You know what? When I send you a presentation that I’ve worked my butt off on, you never send me an email thanking me!’ And his German counterpart responded, ‘Well, that’s your job. In Germany we don’t send emails back and forth thanking people just for doing what they were supposed to do.’ ”

The manager agreed that this exchange had come too late—but at least it sparked some process improvements. He explained that both teams had put in place a cultural liaison to bring newcomers up to speed on different ways of working and identify the first outlet for voicing (and ideally handling) frustrations before they intensified.

If things do go off the rails and trust breaks, you first have to decide if the relationship is worth saving. Assuming it is, you next have to figure out who’s committed and capable of doing the hard work of rebuilding trust. As the manager just quoted told us, “The rebuilding process requires serious transparency, honesty, and integrity—and more than a healthy dose of humility on all sides.”

Get Personal

This may be a surprising prescription, but we think it’s valid. When the partnership needs help, get personal—by which we mean, put yourself in your counterpart’s shoes. Imagine what the world looks like from the other side of the table, especially when everyone is away from the table. What are they thinking about? What pressures are they under as a result of their relationship with you?

One of our interviewees—we’ll call him Tom—tells of the time when his company’s CEO came face-to-face with this challenge. That CEO oversaw a far-flung pharma empire, WorldPharm, which included a number of joint ventures with much smaller companies, in which this CEO didn’t seem to have much interest beyond their bottom-line impact. Tom tried a novel way to get the CEO to focus on one of these collaborations. “Let’s listen in on that company’s quarterly update phone conference,” he suggested, “and see what’s on their minds.”

The CEO didn’t look particularly interested, but agreed to go along with it. They dialed in on the public line. The update was just getting started. After that company’s leaders made a brief presentation, the floor was opened to questions from investors—and the very first questions had to do with the company’s alliance with WorldPharm: “Is it turning out like you hoped it would? Are you going to be able to keep it going? Was this a good bet?”

Tom’s summary, after the fact: You have to seek out ways to see things from your partner company’s perspective. What’s keeping them up at night? The answer may not be one to which you can respond effectively—or it may translate into a request that’s an easy accommodation for you and your company.

Health Checks with Senior Leaders

For top leaders to jump in at difficult junctures, as we discussed earlier, they need a good sense of how the partnership is progressing. Moreover, by regularly reviewing key milestones, senior leaders can use those health checks to find opportunities to enhance the relationships between the two parties’ upper managements.