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December 31, 2008

Succeeding with Alliances and Joint Ventures

While meeting with a friend from a prior company, we found ourselves trying to figure out why a previously vibrant and productive joint venture relationship had turned sour.  We reviewed the history of this overseas JV – noting that the relationship had gone through at least 3 phases – a period of misunderstanding and frustration early on, a mid-life where communication and partnership were excellent, followed by a period of decaying relationships and loss of all the information sharing and joint product development enjoyed in phase 2.  I have since concluded that there were 4 essential elements that enabled the highly successful phase:

1.       Common Objectives – shared within both organizations.  In spite of ambiguity in the JV agreement, phase 2 started with acceptance of the JV as a fully capable partner rather than just an overseas distribution branch.  There was a common enemy and an opportunity to partner to share resources and ingenuity.


2.       Leadership - key operational executives working as partners.  Phase 2 was also marked by the appointment of a new JV president that recognized weaknesses in management – replacing key personnel with those who had US work or education experience.  The US parent also made adjustments in the leadership, training and recognition system to emphasize the need for partnership.


3.       Leverage Differences - in culture and skills to gain competitive advantage.  It became evident in phase 2 that the JV had unique skills in terms their customer relationships and automation design capability.  These were complemented by understanding of long term technology trends and good process and controls design in the US.


4.       Working Level Relationships - based on mutual respect and direct communication.  Peers within each company met face to face at least quarterly for both technical and social interaction.  Phase 2 was characterized by a very high degree of trust and shared information.


Upon reflection, it’s evident that the single most critical factor was leadership.  The relationship between operational managers, their vision of how the partnership benefited both companies and their investment of energy to make it work ensured that we could resolve any conflicting objectives, discover the synergies between groups and foster the peer to peer relationships. 


 You can read a white paper on this topic at:

http://www.strat-edg.com/files/Successful_Alliances_and_Joint_Ventures2.pdf

Posted by rlkbeemer at 09:24 AM | | Comments (0) | TrackBacks (0)

December 27, 2008

Import Compliance

I recently completed a US Customs Import Compliance project.  As part of establishing the organization and processes to ensure compliance, we needed to get a large number of offshore parts categorized according to the Harmonized Tariff Schedule or HTS.  While this might sound simple, the HTS structure is rather complex and you often need to verify correct interpretation by referencing notes within the document, US Customs explanatory notes and US Customs Rulings.  We initially reviewed several commercially available "Global Trade Management" software packages but found that these are more focused on managing import/export transactions and typically have limited tools for part classification.


I did uncover two excellent software / database tools that directly solve the classification problem and are reasonably priced.  The more general purpose tool is from Global Data Mining (GDM) and may be found at www.gdmllc.com.  GDM maintains an extensive database under their sister company name of Customs Info.  These include US Import/Export classifications, Explanatory Notes, Rulings, Foreign Import/Export classifications and rulings from Other Government Agencies.  Their service can either provide look-up access to these databases or a Global Trade Desktop that provides a customized database to search, create and maintain part classification data.  The desktop automatically cross references the various databases - providing an audit trail for how the classification was determined.  It can also be setup to populate export data fields and as many foreign import data fields as desired.  Beyond the product, they are also great people to work with and I highly recommend them.


If your needs are restricted to high tech products, there is another company with a very unique tool.  Urusan Consulting (www.urusan-consulting.com) provides an expert system for determining HTS classifications.  They have effectively coded the HTS structure, notes and rulings into a series of questions.  This allows a person with reasonable product knowledge but almost no US Customs experience to effectively classify products.  For the situation I encountered, this was very useful since it allowed for delegation of the classification task to individual product groups in multiple locations.  The system is easy to use and has proven very effective.  Here again, you are also dealing with exceptional people who are dedicated to providing a quality product and exceptional service.

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December 15, 2008

Beyond Due Diligence

It’s amazing how easily an acquiring company can be fooled when performing due diligence on an acquisition candidate.  I saw this first hand when I was asked to take over a $100M+ acquisition at a former company.  I had not taken part in the assessment but was now responsible for the turnaround.  The companies in question manufactured industrial subsystems that were integrated into semiconductor manufacturing tools by our customers.  There were two principle issues:


1.       During customer interviews, the target company was portrayed as having sustainable market share (true), good products (partially true) and an excellent reputation (false).  Within days of the acquisition taking place, the customers were all asking to meet with senior management in order to layout all the problems and demand our action plan.  An important point here is that the acquiring company had a superior record for product quality and customer responsiveness.  It was in the customer’s best interest to ensure that the acquisition took place and their feedback had been biased toward the positive.  Conclusion – always understand the biases and motivation of people interviewed – they can be expected to act in accordance with self-interest.


2.       During on-site reviews with the target company, R&D status of the next generation product was investigated.  The specifications, design concepts, business plan, prototypes and testing data all looked fine.  Months later when the product first shipped, the division CFO informed me that the product had a huge NEGATIVE margin.  Even better, a few months into use, the failures and re-design efforts began.  All in all, the product was an anchor on the newly acquired division - consuming resources from every function to stem the financial, customer relationship and operational bleeding.  Intelligent technologists missed warning signs during due diligence – including the absence of new but proven design methods for lower cost and higher reliability and extremely dense (hard to manufacture) layout.  The team also accepted the cost estimates at face value without validating quotes and assumptions.  Conclusion – when technology is a core element of the acquisition, be sure the team has the expertise, time and motivation to dig deeply.  This can’t be a two day side project and must include a cross section of experienced technical, operations and financial experts.  If the expertise isn’t available internally – bring in the right consultants.


In addition to these specific issues, there is an overwhelming tendency to see what you want to see.  In general, both parties want to make the deal happen and the investment banker certainly has only one agenda.  Don’t let this euphoria blind you to the reality.  Force the team to search for the exceptions, the inconsistent information and the objective evidence to support assumptions.  It pays to be a polite skeptic in order to establish the real value and integration challenges.

Posted by rlkbeemer at 11:36 AM | | Comments (0) | TrackBacks (0)

December 11, 2008

Strategic Thinking

Have you ever been confused by the multitude of concepts (and buzzwords) that have been proposed as essential elements of strategy development?  These include Mission Statements, Values, Vision, Strategic Intent, BHAG’s (Big Hairy Audacious Goals), SWOT Analysis, Core Competence, KRA’s (Key Result Areas), etc.  To the extent that these are a bit ambiguous and intimidating – many companies don’t even engage in strategic planning.  And if they do attempt to apply these concepts, they can fall victim to long debate and meaningless jargon – much like the mission statement crafted by Dilbert’s pointy hair boss – “We enhance stockholder value through strategic business initiatives by empowered employees working in new team paradigms.”  Oh! Now I understand.


Another barrier is the negative experience of execs who have participated in formal strategic planning.  Weeks of staff analysis and days of executive off-sites often result in little new knowledge or change in corporate behavior.  This is generally attributed to the fact that strategy is based on insight into customers, markets, competitors and your own organization.  Insight is gained from experience, learning, recognition of patterns / relationships and synthesis of this information to find points of competitive leverage.  The limited scope, participation and timeframe for annual planning is not conducive to developing this insight.  Quoting the pointy hair boss from Dilbert again – “I’m putting you on the strategic planning team.  It’s like work but without the satisfaction of accomplishing anything.”  All this has led to an ongoing debate between the “planning” approach to strategy creation versus the “organizational learning” approach.


In order to make sense out of all this, I’m in the process of developing a model of strategic thinking that simplifies and integrates these concepts into something that will hopefully clarify and help guide strategy formation.  I’ve been doing a lot of research and came across an excellent Harvard Business Review article by Gary Hamel titled “Strategy as Revolution.”  Gary manages to avoid the buzzwords and debate on approach while outlining 10 principles to help companies find revolutionary new strategies.  In spite of being published in 1996, the conclusions are as insightful and relevant as ever.  You can get an electronic download from Harvard Business Publishing at:


http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml;jsessionid=FVS0L4P2CKPFAAKRGWDSELQBKE0YIISW?id=96405&referral=2340


I’ll be publishing my paper, “The Elements of Strategic Thinking – An Integrated Model” later this month on my website at:


www.strat-edg.com


Happy Strategizing and Happy Holidays!

Posted by rlkbeemer at 04:34 PM | | Comments (0) | TrackBacks (0)


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