M1 video 1 script.docx

So welcome to the first module and the first week of the course. - The core theme this week is the mastering of strategic into firm partnerships. - Essentially we will split this into four topics. I will introduce the concept of strategic alliances. - I will talk about how alliances...

So welcome to the first module and the first week of the course. - The core theme this week is the mastering of strategic into firm partnerships. - Essentially we will split this into four topics. I will introduce the concept of strategic alliances. - I will talk about how alliances can create value, and what you can do to ensure that you also capture some of the value that has been created. - We will talk about risk and the management of risk in strategic alliances. - And finally we will talk about partners. How do you identify and how do you select appropriate partners for your collaboration? - Good. Let\'s go into it. First video introducing strategic alliances. - Across different studies and also across over time. - It\'s evident that much of the value that firms create and engage in is actually tied up in strategic alliances. - So I dare say you will not find any multinational corporation or any established firms. - This does not have a number of strategic partnerships in operation. - 20% on average of a firm\'s value tend to be tied up in strategic alliances, and alliances are especially important for research and development. - So it is when firms look into innovation, when they look into the development of something novel that they more often than not turn to partnerships. - So a lion\'s share of R&D expenditure 30 to 50% on average. - However, there is always a big however, alliance failure rates are really, really high across different studies. - We point to about 30 to 60% of alliances that do not meet the initial expectations set up for them. - And it\'s kind of a paradox to think about it. On the one hand, there are so common. - On the one hand, firms have been engaging in strategic alliances for years and years. - On the other hand, more often or very often at least, they result in failure, so expectations are not met. - And throughout the course, I really want you to keep those two opposites in mind, - because the course is really about how can we create value and how can we mitigate the risk of failure. - But before we go into all of that, we need some sort of definition, right? - So what is really a strategic alliance? Well, we say that it\'s a cooperative agreement between two or more firms. - So it\'s based on cooperation. It does not just happen but it\'s actually an explicit agreement. - And there can be two partners or even more partners involved in that cooperative agreement. - The aim of this cooperative agreement, the aim of this alliance is can be many different things. - It can be development. It can be manufacture, it can be distribution, it can be other things. - But very often alliances are used as a source of learning. - So firms engage in strategic alliances not just to push down costs, but actually to learn and benefit something from it. - And the whole point of this is that you want to create future competitive advantage for your firm. - So an alliance is future oriented, and it\'s about ensuring that you have a relevant spot in the marketplace not only today, - not only tomorrow, but years from now. And we see alliances and all over the world. - Corona was a great example of this. - How all of a sudden the world managed to develop corona vaccines at a scale and at a pace that we have almost never seen before. - And what we also witnessed in the beginning of that development was an intense focus on collaboration, collaborative partnerships. - We also see we have an example of Uber and Spotify engaging in a collaborative agreement. - We have Starbucks Starbucks coffee that tested this all over the world, - collaborating with anything from gas providers to local coffee shops to sort of manufacture and sell their their products. - But why do firms do this? Well, first of all, it\'s important way to spread costs and spread the risk of innovation across different partners. - So if you and I collaborate on the same innovative project, - we can share the costs and we can also share the risk of that collaborative project failing. - We want to create knowledge synergies. So the whole idea behind collaboration is that if I bring value and you bring value, - that one plus one will actually equals three, or at least more than two. - So by collaborating, we can create value that no single firm can create on its own. - Collaboration is a great way of transferring knowledge. - Both codified knowledge. So the kind of knowledge that you can write down or that you can patent or that you can have in a manual. - But even more important, collaboration is a great way of transferring tacit knowledge from one organisation to the other. - The kind of implicit knowhow that is so important for innovation, - but is really difficult to write down and to be able to benefit from, from other firms tacit knowledge. - Typically, you need to have some sort of collaborative and great arrangement to make that work. - But then, you know, the however, remember we talked on the one hand, a lot of benefits. - On the other hand, a lot of risks. Failure rates are really high. - It differs across studies, differs of course across Alliance forums. - But on average we tend to say 30 to 60% of alliances do not meet initial expectations. - Especially so when big corporations collaborate with small Start-Ups. - In almost 80% of the cases, the smaller partner, the less powerful partners feel unfairly exploited by the large firm partners. - So there is a power balance to to an alliance where the the more stronger - partner easily misappropriate or misuse the collaboration with weaker partners. - So independent if you and your firm represent the strong partner or the weak partner in a collaborative arrangement, - you want to somehow make sure that this does not happen. So what are the risks? - If we look into more detail about strategic alliances. Well, of course there\'s the risk of opportunistic behaviour. - Meaning the other party shirking, stealing knowledge, not withholding information from you, - uh, sending a larger bill than what you initially agreed on. - A lot of the time, the high failure rates actually has to do with unrealistic expectations. - So a failure is a failure in relation to what we expected from the alliance from the outset. - If we have two high two inflated expectations, chances are also higher that we will actually perceive the alliance as a failure. - So when engaging in collaborations, it\'s important to understand what can I expect and what can I reasonably expect from this collaboration? - Typically, there\'s a lack of investments in partner selection, - so selecting the right partner for the right collaborative arrangement is usually important. - Yet we see and I\'ve seen it over and over again in the studies that I have done, - how firms jump into bed with partners that they should not have initiated a collaboration with from the beginning, - because you\'re in a rush to to get to a new market, you\'re in a rush to develop new technology. - But investing time in the early phases, finding the right partner is a great way of mitigating the risk of strategic alliances. - And then, of course, even if both parties really have the best intentions, - reasonable expectations and, you know, have done a decent job in selecting the right partners, - there is always the cultural differences that can make it more complicated to coordinate action by cultural difference. - That could be difference across national cultures, but it can also be differences across different organisational cultures. - Some firms are more bureaucratic than others. - Some firms take longer times to make decisions than others, and these kind of firm cross cultural differences can really screw up a relationship. - Even though if you had the best intentions from the start.