Collaboration can bring cost effective benefits

Investment in new resources or arranging a possible take-over can prove expensive and potentially risky, but the opportunity to collaborate by sharing resources with suitable partners may have considerable benefits for all parties.

Commercial mangers have the responsibility of maximising profitable income while minimising costs and the use of assets. However, new opportunities to maximize profitable income may require additional resources in people, skills, knowledge and finance which the organisation may not currently have. Collaboration with a suitable partner may provide a cost effective solution to maximizing profitable income while minimizing costs and investments.

Collaboration can take many forms, allowing all parties to maintain their independence while cooperating to mutual advantage. One option might be to agree to co-operate with another business in a limited and specific way, perhaps by pooling the resources of their respective distribution networks, while another option might be to set up a joint owned company, or a limited liability partnership. Such collaboration may provide access to new markets and distribution networks, increased capacity, or give access to specialised staff, technology and finance as well as the sharing of costs and risks.

There are many examples of successful collaboration. Aircraft manufacturers have cooperated to dilute the investment in expensive aircraft development, while Microsoft cooperated with Nokia on the development of mobile platforms, and on a different scale, many small breweries cooperate to centralize their bottling requirements.

Before considering the possibilities that might ensue from a collaboration project, the commercial manager, needs to ensure that the business objective is clearly identified and the benefits of any collaboration for all potential parties understood .

Collaboration and joint ventures are not without risk, because the necessary organisation may be complex. Commercial managers need to select suitable partners that have the necessary complementary resources skills and assets, and to ensure that the specific business objectives of all the collaborators are clearly understood by all involved. They also need to recognise that in any collaborative venture, there is likely to be an imbalance in the levels of expertise, investment or assets provided by the different collaborators, who are also likely to have differing management styles and culture which may be problematic for good integration and co-operation. In addition the respective partners need to provide sufficient leadership and support especially in the early stages of the venture, in order for collaboration to be successful.

Suitable collaborative partners may initially be sought amongst existing customers or suppliers, where there may be already be an established long-term relationship providing a good understanding of their objectives and operations. Once identified, Commercial managers will need to consider the overall business performance of the potential partner regarding their attitude and level of commitment to the collaboration, their business objectives, their potential contribution and general business reputation. Some limited “due diligence” should then be undertaken regarding the prospective partner’s financial security and credit rating, the compatibility of their management team, overall business performance, reputation with customers and suppliers, and history of previous or current collaboration.

Assuming that a suitable collaborative partner has been identified, and a successful approach made, it is important that the terms and conditions of any such venture should be agreed and confirmed by both sides and a legal agreement drawn up, in order to prevent misunderstandings once the collaborative venture is in progress. Such an agreement should cover;

* The structure of the collaborative venture, – whether it is set up as a separate business where the collaborators are shareholders.
* The objectives of the collaboration.
* The contributions that each of the collaborators will make in terms of finance, assets, resources, management, skills and personnel.
* The ownership of any intellectual property created by the collaboration.
* The management and control of the operation concerning the respective processes and responsibilities to be followed.
* How profit, loss and liabilities are to be shared, and how disputes are to be resolved.

Any agreement should also include an exit process for all respective collaborators, which should include;
* Resolving the distribution of shared intellectual property.
* The protection of confidential information.
* The distribution of any future income arising from the collaboration activities.
* The administration of continuing liabilities such as debts, and guarantees to customers.
Producing income costs money. However, sharing resources and the necessary investment with suitable collaborators can produce additional profitable income at a lower cost than would be required for a solo venture. Collaboration ventures may provide profitable opportunities for the commercial manager at a lesser risk than would be involved in a conventional expansion or take over.

© N.C.Watkis, Contract Marketing Service 16 Jun. 14

June 24, 2014   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance management, business performance measurement, marketing management