Building internal consulting alliances: A case study. April 4, 2002

Transcription

1 Building internal consulting alliances: A case study April 4, 2002

2 Presentation overview Who we are: About BCBS Florida & Vantage Partners Context: BCBS Florida needed to build alliance management capability Approach: The BCBS Florida Alliance Group & Vantage Partners form an alliance Key lessons: Challenges we encountered and how we addressed them Q&A

3 About BCBSF Provide members with practical, caring solutions by focusing on choice and affordability Independent, tax-paying mutual company Major market share in Florida (+6 Million individual covered) 13 consecutive years of positive financial performance and enrollment gains Continuously working with our members and other consumers to ensure that America s health care system evolves in a positive direction

4 About Vantage Partners Harvard Negotiation Project Expertise in building corporate negotiation and relationship management capability Over twenty years of experience Recognized thought leaders Three-year study on Alliance Management Partnering Handbook Harvard Business Review Getting to YES, Difficult Conversations Conflict Management Group South Africa El Salvador Former Soviet States

5 What is BCBS Florida trying to achieve through our alliance strategy? Build close, collaborative relationships between companies in order to share the risk and rewards of pursuing mutually compatible goals that are difficult to achieve alone. Reduced costs Increased revenue by creating new products and services Preserved and enhanced capital by sharing the cost of R&D Accelerated introduction of innovative solutions and services Enhanced continuous learning Increased support within the Blue system for local, community focus and non-investor owned status

6 Alliances are specialized arrangements that require unique organizational capabilities Mergers & Acquisitions Generally work best when one party is dominant Integration is a discrete, one-time transaction Post integration, management reverts to normal operating systems and procedures Most conflict occurs during integration, and diminishes over time Do not require renegotiation, and are usually permanent (disacquisitions and spin-offs are relatively rare) Alliances Generally work best when neither partner is dominant Integration is partial, dynamic, and ongoing On-going collaboration between two or more independent organizations requires specialized management systems Minimal (visible) conflict occurs during initial honeymoon period, but usually becomes more pervasive and severe over time Usually require periodic renegotiation, and are rarely permanent (termination/unwinding is standard)

7 Most alliances fail Observed Failure Rate (%) % Partnership Failure Rate 70% 50% 61% 60% Spekmen, et al. KPMG PWC Andersen Larriane (1996) (1996) (1998) Consulting Segil (1999) (2000) Sources of Partnership Research

8 Alliances most often fail because partners are unable to work together As the word spreads and more companies seek alliances as a growth vehicle, the differentiator will shift from being able to form an alliance to being able to manage one. Foremost cause of alliance failure among companies that have participated in Foremost more Cause than of 20 Alliance alliances Failure Poor Strategy and Business Planning Poor or Damaged Relationships Between Firms 64% 52% 37% 30% Harbison, et al., The Allianced Enterprise: Breakout Strategy for the New Millennium Booz-Allen & Hamilton, % 11% Bad Legal and Financial Terms and Conditions Ertel, Weiss & Visioni. Managing Alliance Relationships: Ten Key Corporate Capabilities Vantage Partners, 2001.

9 Relationship issues need as much attention as substantive ones Strategic Competitive positioning Business targets, plans and strategies Financial Prices, fees and rates Financing and equity Legal Substantive Issues Technology transfer & licensing terms Consequences of default Relationship Issues Degree of trust Ease of working together Capacity for joint problemsolving Ability to leverage and learn from differences Capacity to resolve conflicts Openness and quality of communication Capacity for taking a what is best for the venture perspective Companies often invest heavily on the substance... but many don t take the time to focus on the relationship

10 A common assumption about relationships Relationship Substance

11 Successful alliances require a way to solve problems without damaging relationships Two models of interaction Classic Positional Bargaining Joint Problem Solving Extreme Offer (Commitment) Fallback (Concession) No Deal (Go to BATNA) Relationship Communication Threat Counter Threat Final Offer That s my bottom line Just for you (Relationship) A reasonable price of Last Final Offer Take it or leave it Split-the-difference compromise No Deal (Go to BATNA) Adversarial and zero-sum If No Alternatives Interests Options Legitimacy Commitment If Yes Collaborative and joint-gain

12 Challenge #1 How to institutionalize news ways of doing business across myriad internal groups

13 BCBSF alliance management process and key activities Plan Examine alliance opportunity in light of corporate strategy Define alliance objectives Build understanding and commitment Negotiate Structure Manage Unwind Evaluate and Select Identify and evaluate potential partners Identify negotiation team Prepare for negotiations Conduct negotiations Refine business plan Craft implementation plan Design business processes to support critical capabilities Agree on distribution of costs and resource contributions Execute day-to-day operations Manage conflict Monitor performance Engage in regular joint planning Form internal termination team Negotiate and finalize termination agreements collaboratively Manage final commitments Select best partner Create business plan Build internal support Detail individual roles and responsibilities Create governance structure Agree to performance metrics

14 BCBSF alliance management process tools and frameworks Plan 4 Cs of strategic positioning Strategic questions and drivers Value-migration maps Alliance-stratagem models Breakthrough value proposition Evaluate and Select Preconditions for success checklist Due diligence checklist 3 Dimensional fit Business case analysis Risk analysis 7 Element Framework Negotiate Structure Manage Negotiating team model Memorandum of Understanding and Principles (MOUP) Legal guidelines Operational business planning framework Detailed operational fit Responsibility chart 120-day launch plan Board structure model Governance and control systems Resource planning checklist Win-win business case analysis Operational team model Role and skill descriptions Governance roles Performance metrics Alliance shift checklist Alliance-management issues checklist Alliance relationship management tools Unwind Commitment management framework Decision making buckets tool Four-step problem solving tool

15 Enterprise Alliance Group functions Alignment of corporate strategy & alliance portfolio Identify opportunities for partnering Work with CSC, Corp Dev, and M&A to determine best vehicles for strategy execution Assist with partner evaluation In house expertise Coach and advise BU alliance teams Conduct joint launches & relationship audits Help fix broken relationships Update alliance mgmt methodology & tools Coordinated alliance portfolio management Coordinate portfolio governance Identify and exploit synergies across alliances Help avoid/manage conflicts across alliances Analyze portfolio performance Knowledge management Capture learning about alliance deals and partners Identify and disseminate alliance management best practices Capture and disseminate strategic organizational lessons gained through alliances

16 Challenge #2 Measuring the value of alliances and demonstrating the value of the alliance group

17 The 3D performance framework Dimensions of Value Strategic Operational Relationship Financial Business Process Market position Competitive Learning Innovation Revenue Direct and indirect costs Profitability Processing efficiency Achievement of milestones Customer satisfaction Level of commitment Quality & efficiency of interactions Ability to manage conflict & change

18 Recommended approach to implementing performance metrics Joint Relationship Scorecard Our Goals Performance and success of a relationship as a shared endeavor Sector Scorecard Individual Team Member Scorecard Shared Goals Their Goals Enterprise Scorecard Performance and success of a relationship in terms of value delivered to a particular sector For evaluation of dedicated staff or individuals who work with key stakeholders Performance of a relationship in terms of value delivered to the enterprise

19 Challenge #3 Building organizational buy-in

20 A community of practice Improving day-to-day work productivity by making experts easier to locate Creating larger personal networks (social capital) Providing career development opportunities and exposure to senior executives Creating additional opportunities to learn new skills Transferring best practices through anecdotes and personal relationships, live coaching sessions, and teaching stories Creating opportunities for skill development by connecting people to coaches and mentors Receiving real time advice from other practitioners Learning Mode (internal & external sources) Teaching Mode Practitioner has a problem but doesn t know who can help Practitioner has a novel solution but doesn t know who might benefit

21 Challenge #4 Balancing decision-making inclusiveness with efficiency

22 Clarifying consultation and decision-making roles enables governance that is inclusive and efficient Person to manage the process of getting to the decision and ensure that the decision gets made. The interested and/or affected parties: those who need to be informed about the decision (often because they will need to implement it or will be impacted by it). Decision/Activity Driver Negotiate Consult Inform Complex issues, actions, or decisions that have been disaggregated into specific sub-issues that are likely to require consulting and/or negotiating with different parties to determine what to do. The decision-makers: those people who have formal authority to actually make the decision. The parties who may act as advisors to the decision-maker(s) and whose views ought to be considered before taking action, but who do not have authority to vote on the decision or reject whatever decision is made.

23 Other lessons for building internal consulting alliances Make sure you have a committed, executive sponsor for any major change efforts. If you use external consultants, create clear expectations and a plan for knowledge and skill transfer. Gain alignment at the outset around goals and clear measures of value and success. Be wary of selling your services or new ideas to internal clients or partners. Involve internal partners or clients in design and development efforts. Make an efforts to understand any resistance before trying to persuade.