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The Partnership Advantage

Advancing the state of automotive technology these days can require a breadth of expertise that may be difficult for one company to obtain.

Advancing the state of automotive technology these days can require a breadth of expertise that may be difficult for one company to obtain. Fortunately, there is ample precedent for collaboration by companies willing to look outside their walls in pursuit of innovation. A well-conceived, properly constructed alliance can accelerate the timing and results of product development in a cost-effective way.

There are plenty of partnerships in progress. The ones that make it into the public eye are usually the largest firms, suggesting that no matter the extent of your core competencies, it is hard to always be your own one-stop shop for research and development. These alliances can be grouped into four categories, depen-ding on the source of the future innovation: (1) technology, (2) materials, (3) process, and (4) deliverable. The categories are not mutually exclusive; a combination can factor into the input to the alliance. A closer look at these categories might give suppliers some ideas on how to enhance their “sphere of influence.”

TECHNOLOGY. Two companies might get together if they have complementary expertise in different technologies. Many of the initiatives in the last few years have involved systems integrators lining up partners such as Motorola, Ericsson, and Qualcomm to help integrate electronics and wireless communications into vehicle functions. Safety-driven product categories can spark a flurry of alliances: Visteon and SmarTire Systems, Michelin and Bosch, Siemens and Goodyear, to name a few.

MATERIALS. Commercialization of new materials into new applications has been a long-term source of change in the industry. Suppliers partner with producers of plastics, powder metal, etc., to be the first to marry application requirements and material characteristics. DuPont Engineering Polymers recently announced its collaboration with a team from Ford, Carlisle Engineered Products, and Valeo to design the industry’s first injection-molded thermoplastic windshield wiper bracket system, 10% lighter than a previous SMC variant. There are many similar instances where the quest for part consolidation, weight reduction, or other improvements has traveled the materials partner route.

PROCESS. The better way to achieve an end result might reside in a different manufacturing technology. There is enough art and science such that, if you want to gain the benefits of fineblanking, for example, a partnership to introduce the process might be a safer approach than doing it yourself. Some companies have chosen alliances to extend their casting capabilities with machining to deliver a more finished component.

DELIVERABLE. Market acceptance of modules has, in some cases, created an opportunity for two companies to make a combined offering that yields a better product, supply chain efficiencies, or both. Hella (lighting, electronics) and Behr (HVAC, cockpit modules) of Germany teamed up to supply front-end modules to Volkswagen and added a Korean joint venture with Samlip Industrial last year for a different type of alliance: geographic and/or customer diversification.

Not every alliance is fruitful, and can fall short through lack of success in the substantive work of the partnership, organizational issues, or market conditions. Dana Corp. and GKN plc discontinued their joint venture last year when it became clear there was not sufficient market demand for complete driveline systems. There can be a life cycle pattern here as well, so news of dissolution of a partnership is not necessarily evidence of failure, it may just mean that the purpose has run its course.

Alliances can also run in the opposite direction and be sufficiently valued by at least one party to be a precursor to an acquisition. Autoliv has been a major practitioner of this as a method of building up internal capabilities, i.e., setting up joint efforts with companies like Nokia, Sagem, SNPE, and then buying out its partners once the collaboration is well underway.

There is a body of knowledge that can help suppliers who want to maximize their partnership results. Rosabeth Moss Kanter of Harvard Business School has studied organizational behavior in the context of business alliances. She maintains that the ability to create and sustain successful partnerships is a corporate asset in and of itself, which she terms “collaborative advantage.” Some observations from her research include the point that alliances are more likely to be rated a success by the participants if the focus is on creating new value together rather than simply exchanging existing expertise. Also, interpersonal integration is key to a productive alliance, because a web of good relationships with counterparts and internal infrastructures that support the alliance are more effective than formal “control systems.”

A deliberate review of your own business to see where you could launch off and potentially achieve a significant competitive advantage through a product-related partnership would be time well spent. Suppliers with a sense of what’s next in their product area can identify the parties who have the missing ingredients and set out to combine them through a productive partnership.

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