Multiple levels of bureaucracy and organizational silos make communication and quick action difficult, and can slow the introduction of new products and services.
New ideas may also threaten to cannibalize existing business, even though they offer more opportunity in the long run. Often, "the long run" plays a less important role in strategic planning when top executives' careers are riding on the next quarterly or annual results.
It's tempting to look for innovative partners: small, nimble, imaginative companies that aren't hobbled by corporate history, entrenched positions, and infrastructure, but need the help of established organizations to make their products and services take off and achieve scale. However, both sides must be open to change and be prepared to collaborate in ways that may not feel natural to their internal cultures. Many such partnerships are announced with great fanfare only to sink without a trace. In fact, it's rare to see one that has staying power and delivers the promised benefits to both sides.
Incumbents must be clear on the core problem they are trying to solve, or customer experience they are trying to enhance, so they can focus on the best partner for achieving that goal.
GETTING OFF THE GROUND
For these partnerships to even get off the ground, innovators have to figure out a way to break through the noise with flexible partnership options that reduce the risk for incumbents while still offering high potential value. At the same time, incumbents must be clear on the core problem they are trying to solve, or customer experience they are trying to enhance, so they can focus on the best partner for achieving that goal.
EXHIBIT 1: THE NEW RULES OF JOINT VENTURE MATCHMAKING
Source: Oliver Wyman analysis
Based on our experience at Oliver Wyman, those that do succeed tend to share certain characteristics and strengths that can serve as inspiration for aspiring ventures:
Build a strategic partnership. A successful partnership that addresses a strategic need – one that drives change – must involve the highest level of leadership in the incumbent's organization in order to break through historic entrenched positions. Both parties should feel that the risk is shared. Partnerships work best with innovations that rock the boat, because those require fundamental changes in the way people – whether staff or patients – relate to the organization. If a project doesn't rock the boat – if a department head can make a purchasing decision or slide a proven product or service right into the existing workflow – then maybe this is not the stuff of a partnership and should be handled as a typical vendor relationship.
Innovations intended to drive robust change need C-suite buy-in. This signals to the innovator that the partnership is being taken seriously, and the incumbent will devote real resources to helping develop and test the innovator's solution. It also signals to the lower levels of the incumbent organization that all options are on the table – even those that might cannibalize existing business lines or take resources from shorter-term projects.
Assess organizational infrastructure strengths and potential roadblocks. Incumbents should analyze how well their organization dovetails with the proposed partner. What resources can be borrowed from the existing organization’s infrastructure, and which ones must be purpose-built for the innovation? What constraints or barriers need to be removed? It is critical to evaluate what components of the incumbent’s business can best enable the new partnership without reducing the innovator’s ability to be nimble.
Pilot purposefully. It's important to remember the fundamental principle of pilot projects: Aim small, miss small. Establishing near-term goals and feasible pilots can not only test the solution, but strengthen the relationship between the innovator and the incumbent. Using the incumbent's employees or employed physicians as the test population is a good way to minimize risk. While an innovation may reasonably take time to show a return on investment, interim metrics can signal whether it's on the right track.
Co-manage adversity. An incumbent organization and an innovator are not likely to fit together seamlessly and accomplish every goal exactly as planned. Manage accordingly. Build tight communication into the whole process. Bring both sides together frequently and regularly – every couple of weeks – to go through the nitty-gritty. Forget the notion of plug and play even if it's one of the innovation's putative selling points. Both parties need to be committed to helping manage through each other's pain points, and strong alignment on common goals will help the partnership push through problems.
Scale sensibly. The true test of a solid partnership is extending a successful pilot into larger markets. Follow pilot successes with a feasible plan to scale, finding common ground across target markets or clients as natural places for initial extensions.
A strategic partnership between an incumbent and an innovator requires working in new ways – for both sides. But disruptive scalable innovations are within reach if the parties can align their incentives and apply these five partnership tactics.
About the Author
Marcia Macphearson is a Chicago-based partner in Oliver Wyman’s Health & Life Sciences practice.