In the globalised world, partnering is becoming more important - but partnering requires an investment in managing change effectively.

1. Partnering RelationshipsThe Case for Investing in the Relationship 10 January 2011

2. Table of Contents Value of Effective Partnering Relationships Framework for Effective Partnering The Partnering Journey References 13 January 2011 2 A case study is available and published as a separate document

4. Simplify whenever possible: Simplify interactions with customers, simplify products and services by masking complexity, simplify for the organization and partners.

5. Manage systemic complexity: Put complexity to work for your stakeholders, take advantage of the benefits of analytics.

8. Delivery of value added projects on time and budget

9. Quick response time to requests

10. Innovation and thought leadership

12. Over 50% of public sector buyers

14. Greater need to monitor and audit

15. Frequent conflict escalation

16. Low customer satisfaction

17. Ineffective execution and follow up

18. Lack of clarity in roles & responsibilities

19. Decisions based on limited information-15% 13 January 2011 4 Source: Vantage Partners

21. Business model innovation, including building strategic partnerships, matters

22. External collaboration for innovation is essential

23. Collaboration is recognised as indispensable to innovation - “Without collaboration, innovation would be impossible.”Extent of Fundamental Change Needed Over the Next Two Years Moderate change 22% Fundamental change 65% Little or no change 13% Source: IBM Global CEO Study 2006

24. However, the gap between the capability and the challenge ahead is growing The Change Gap* Triples 2008 2006 22 8 % % CHANGE GAP* CHANGE GAP* 6% 19% 13% 12% “We have seen more change in the last ten years than in the previous 90.” Ad J. Scheepbouwer, CEO, KPN Telecom 11% 31% 22% 83% 20% 65% 61% 57% Change Needed Past Change Success No/limited Change Moderate Change Substantial Change No/limited Success Moderate Success Successful * Difference or ‘gap’ between expected level of change needed and past success in managing change Source: IBM Global CEO Study 2008; n (2006) = 709, n (2008) = 1104 6 13 January 2011

26. Breakdown in trust

27. Negative partisan perceptions

28. Festering conflicts

29. “Fingerpointing”

30. Disrespect/coercion

31. Stress …Poor or Damaged Relationships Between Firms Poor Strategyand Business Planning 52% 30% 37% 64% 11% 6% Bad Legal and Financial Terms and Conditions * Source: Ertel, Danny, Jeff Weiss, and Laura Judy Visioni. Managing Alliance Relationships - Ten Key Corporate Capabilities:A Cross-Industry Study of How to Build and Manage Successful Alliances. Cambridge, MA: Vantage Partners, 2001. 13 January 2011 7

33. Technology Management

34. Processing new service requests

35. Reporting and billing

36. Prices, fees, rates

37. Management, Operation, Security of IT assets ….

38. Trust and mutual respect

39. Ease of working together

40. Bridging cultural diversity

41. Openness and quality of communication

42. Collaborative decision making

43. Fairness… Operational Performance Impacts Relationship Characteristics Issues are often seen as performance related, but root causes are more often relationship related 13 January 2011 8

44. Table of Contents Value of Effective Partnering Relationships Framework for Effective Partnering The Partnering Journey References 13 January 2011 9 A case study is available and published as a separate document

45. Effective partnering depends on alignment of long-term and every-day relationship aspects Partnering Framework Communication Roles & Responsibilities Culture-in-action Financial Risk Sharing Innovation SharedKnowledge Mutual Benefits Skills Decision-making Problem-solving DistinctiveCompetencies Commitment Shared Goals Motivation Measurements Linkage Pre-disposition Trust Attitudes Assumptions Process Governance Social Relationship in Action Operational Day-to-Day Relationship over Time Strategic Long-Term 13 January 2011 10

47. Value derived from low price and convenience

48. Relationship not really a differentiator

49. Eg. Utilities, fast food

50. Customized goods and services

51. Value derived from stability and economies of scale

52. Some customer-supplier intimacy and knowledge

53. Expertise will overcome unexpected contingencies

54. Eg. Tax Consultant, Doctor

55. Complex or innovative goods and services

56. Value derived from optimization across organizations

57. High degree of customer-supplier intimacy and knowledge

58. Eg. Auto value chain

59. High complexity or one of a kind goods and services

60. Value derived from creating a new organization

61. One Team – conscience seamless integration of capabilities

62. Eg. Formula 1 teamSource: Prof. Henderson, Vantage Partners 13 January 2011 11

63. Think of relationships as a continuum, with a series of steps required to achieve the ‘ideal’ state We are one organisation, value is totally derived from our inter-dependence 5 Unique Value is enhanced for both of us through innovation and continuous improvement 4 Special We share risks and rewards and our key people have relationship-oriented incentives 3 Cross-company teams are formed to enhance value 2 Value Add IBM is able to leverage its expertise to drive value and resolve contingencies 1 Transactional Self interest is predominant 0 13 January 2011 12

64. By looking at each dimension we can build up a matrix, serving as both Shared Intent (Vision) and Roadmap Mutual Benefits Commitment Pre-Disposition Shared Knowledge Distinctive Competencies Linkage Horizontal consistency Level 5 - Unique Vertical Progression Level 4 – Mutual Value Creation Level 3 - Special Level 2 – Value Add Level 1 – Building Capability Level 0 - Transactional 13 January 2011 13

65. Example of a Roadmap / Maturity Model 13 January 2011 14

66. The Roadmap can also be used to measure progress or relationship ‘maturity’ 13 January 2011 15

68. Identify emerging weaknesses / pain points

70. Average, median and mode scores with standard deviations and gaps

72. Participants selected by IBM and partner

73. Takes 15-20 minutes to fill in

75. Strategic partner / outsourcing deals almost always involve a handover from deal makers to implementers Strategic Partner / Outsourcing Program Lifecycle Opportunity Development Deal Signing Solution Design Transition Continuous Improvement Growth The Artefact IBM Focus of Activity Contract Stabilise Operations Continuous Improvement of Operations Partner ‘Expected’ Activity The Intent Relationship Goals and Governance Innovation Value Add Relationship Charter 13 January 2011 18

77. Provides effective handover to implementation teams

79. Usually after a number of failed initiatives to improve

81. Usually address symptoms

82. Initiatives burn out quicklyExecute Plan & Measure Outcomes

83. Each company brings their own set of business practices, many of which will be in conflict with those of the other company Partner A: “client” Partner B: “outsourcer” “adherence to process produces consistent results, decreases risk” “we are a family” “achieving schedule is most important” “minimizing and reducing costs is high priority” “achieving results is more important than following consistent procedures” “we identify and present the best option for achieving desired results” ? “broad involvement in decision making” “business controls, policies and measures are important management tools” “customer service orientation, even to point of heroics” “a single approach is most efficient and effective” 20 People will respond to business scenarios with what is “right” in the culture of their company

84. Situation: A leader from Partner A has requested a due date on a project that a leader from Partner B believes it significantly aggressive and is likely to be missed. How is each leader viewing the situation? Partner A should be open to an alternative date or be willing to change the requirements Partner A should understand that processes cannot be compromised since it will increase cost and risk It is vital that we follow “tried and true” approaches since this environment is complex Due date is vital due to its impact on customers so Partner B should do whatever it takes Partner B should be willing to forgo certain steps of its processes to make this happen To change this decision, we need to involve a broad group of stakeholders and run the risk of unacceptable further delays ? Partner A: “client” Partner B: “outsourcer” 21 Reconciling “right Vs right” responses is critical so people know how to respond to business scenarios

86. Include intangible, subtle and difficult to define aspects of how the work is undertaken that may be driven by underlying mindsets, assumptions, beliefs, norms, styles, and customs

87. Are more often “caught” than “taught”

89. Map out the response that both partners agree should be the standard business practice

90. Describe the business scenario and business practice response in narrative form

91. Describe how the business practice is different to a partners normal culture and why the changed business practice is important

92. Communicate to people and create an easy to access reference point, e.g. Intranet22

94. Joint Planning

95. Reconcile right Vs right business practices

96. Document & Improve Processes

97. Measurement

98. Communications Strategy

100. Deploy joint plans

101. Leadership

102. Roll out business scenarios

103. Integrate into BAU

105. Relationship intent & Vision

106. Joint Objectives

107. Define culture

109. Takes into account that there needs to be ‘horizontal consistency’ along with ‘vertical progression’

111. Measures current health and identifies issues requiring attention

113. Participate in planning

114. Support RM&G consultants

115. Contribute to workshop planning and preparation

116. Support relationship alignment surveys

117. Deploy relationship processes

118. Establish and maintain governance regime

119. Implement and monitor plan

121. Design program of work

122. Provide consulting support for IBM / partner teams

123. Facilitate workshops or joint IBM / partner meetings

124. Conduct surveys, analyse and report results

125. Review plans and materials

126. Education

127. Training

128. Coaching / mentoringLevel of involvement

129. Table of Contents Value of Effective Partnering Relationships Framework for Effective Partnering The Partnering Journey References 13 January 2011 26 A case study is available and published as a separate document

130. IBM’s Relationship Alignment Approach and Method itself evolved from a collaboration 27 13 January 2011 The IBM Institute for Business Value is the business research arm of IBM Global Business Services. It focuses on managerial and economic issues faced by companies and governments around the world, publishing between 35 and 50 major studies each year. http://www-935.ibm.com/services/us/gbs/thoughtleadership/ Vantage Partners is a global management consulting firm that specialise in helping companies achieve breakthrough business results by transforming the way they negotiate with, and manage relationships with, key business partners. http://vantagepartners.com/

132. Embody creative leadership

133. Reinvent customer relationships

134. Build operating dexterity

135. Hungry for change

136. Demanding customers as opportunity to differentiate

137. Extensive business model innovations

138. Moving towards global business designs

139. Business model innovation matters

140. External collaboration is indispensable

141. Innovation must be orchestrated from the top

142. Revenue growth is the number one priority

143. Responsiveness is a new key competence

144. Improving internal capabilities is a first step toward growth1,541 CEO interviews 1,130 CEO interviews 765 CEO interviews 456 CEO interviews 13 January 2011 The Global CEO Study 2010 can be downloaded at: http://www-935.ibm.com/services/c-suite/ceo/leadership_and_innovation.html

145. 29 IBM’s book on this new approach has just been published, and it contains a chapter devoted to outsourcing "This is an excellent book that provides a pragmatic approach to identifying and alleviating cultural issues created when two groups of people must work together. Effectively blending business cultures is a key requirement for successful outsourcing, and most companies lack the tools necessary to do this. Companies looking to reduce outsourcing risk should follow IBM's Tangible Culture approach.“ -Lance Travis, vice president, Outsourcing Strategies, AMR Research For more information about the book: http://www.tangibleculture.com/ For more information on Right vs. Right: http://www.research.ibm.com/thinkresearch/pages/2004/20040604_brain.shtml

146. About the author... Alan Williamson Alan Williamson is a Senior Managing Consultant in the Strategy and Transformation practice of IBM Global Business Services. Alan has 15 years experience in partnering relationships, business transformation and organisation change across a range of industries and Government in Australia, Asia and Europe. Alan is IBM’s lead in partnering relationships and Relationship Alignment for Australia, New Zealand and Asia Pacific Alan authored a number of papers on inter-company relationships and was a speaker at an international conference on business collaboration. Alan has also facilitated a post-graduate program for RMIT University and has acted as a mentor and coach, both within IBM and his wider professional network. Alan has a Masters of Applied Science in Innovation and Service Management. His thesis, titled “Unlocking the Potential of Inter-Company Relationships” draws from hands on experience in helping companies establishing productive and healthy partnering relationships. Alan’s partnering clients include: Alan can be contacted at: alanwill@au1.ibm.com 13 January 2011 30