Selecting collaboration partners for innovation projects
How can an organization determine, through selection models, with who to collaborate to create value for a successful new product development?
Author Annefleur Douglas Date 9th of May 2012
Master Business Administration - Business Development
Master thesis
Title of master thesis
Selecting collaboration partners for innovation projects
Author
Name: Annefleur Douglas
Email: annefleur_douglas@hotmail.com Student number: s1924788
Institution University of Groningen Faculty of Economics and Business
Master of Science Business Administration – Business Development
Supervisors of master thesis First university supervisor: Eelko Huizingh Second university supervisor: Hans van der Bij
Place & date
Amsterdam, 9th of May 2012
Preface
This master thesis is the end product of my graduation project for the master Business Administration – Business Development. During my master I became interested in all the aspects involved in product development. As a result I decided to apply for an internship at Organization X which allowed me to experience how an organization selects a collaboration partner for an innovation project. Intrigued by this process I decided to write my master thesis about this topic to learn more about the different possibilities to carry out this process and to identify what is important during a partner selection process to enlarge the chance of selecting the most suitable partner for a particular innovation project.
I have found my years at the University of Groningen challenging, instructive and inspiring. The different courses and teachers contributed to my own development as I have gained a lot of knowledge, learned several skills and in addition, I have been challenged to perform to get the best out of myself.
Of course I would like to thank all the people involved in my graduation project for their cooperation and support. However special attention should be given to certain people. First, I would like to thank Eelko Huizingh for his supervision. Through his quick, clear, comprehensive and critical feedback he challenged me to get the best out of my master thesis. Second, I would like to thank my second supervisor Hans van der Bij for taking the time to assess the end result. Third, I would like to thank my interviewees for their cooperation, motivation and flexible attitude to help me to obtain the data needed to carry out this research. In particular, I would like to thank my company supervisor, who gave me the opportunity to experience and learn from the processes and activities that take place in an organization. Finally, I would like to thank my parents, friends and boyfriend Joris who supported me during the writing of my master thesis.
The end of my study is also the start of something new I am looking forward beginning a period of new opportunities and challenges. I am sure that my study and the experiences I have gained from my internship will be helpful along the way.
Annefleur Douglas Amsterdam, 2012
Table of contents
Page number
Introduction 6
Chapter 1 The selection of collaboration partners 7
1.1 The benefits of collaboration 7
1.2 The bottlenecks of collaboration 8
1.3 Considering collaboration 9
1.4 Research question 10
Chapter 2 Partner selection models 12
2.1 Model of the technological, strategic and relational aspects of partner 12 selection
2.2 Method for partner selection of codevelopment alliances 14
2.3 Procedure for partner selection 16
2.4 Comparison of the partner selection models defined by literature 17
2.5 Merging of the partner selection models 18
2.6 Additional variables for partner selection 19
2.6.1 Phase 2 - Strategic alignment 19
2.6.2 Phase 3 – Relational alignment 20
2.7 Adjusted partner selection model of Emden (2006) 20
Chapter 3 Case study 22
3.1 The research method and structure 22
3.2 A 23
3.2.1 The organization’s opportunity 23
3.2.2 A project 24
3.2.3 Results 24
3.3 B 25
3.3.1 The organization’s opportunity 26
3.3.2 B project 26
3.3.3 Results 27
3.4 C 28
3.4.1 The organization’s opportunity 28
3.4.2 C project 28
3.4.3 Results 29
3.5 Importance of the project context 30
3.5.1 Variables of the partner selection literature 30
3.5.2 Importance of the variables 31
3.5.3 Occurrence of the variables 33
3.5.4 Conclusion 34
Page number
Chapter 4 Results 36
4.1 Comparison partner selection models of the cases 36 4.1.1 The phases of the partner selection models 36 4.1.2 The variables of the partner selection models 37 4.1.3 Outcome of the partner selection process 38
4.1.4 Integrated partner selection model 39
4.2 Comparison partner selection model defined by literature and case study 40 4.2.1 The phases and variables of the partner selection models 40
4.2.2 Content of the partner selection model 41
4.2.3 Conclusion 42
Chapter 5 Conclusion 43
5.1 Improvements for the partner selection literature based on the case study 44 5.2 Improvements for the partner selection of Organization X 45
5.3 Further research and limitations 45
5.3.1. Further research 45
5.3.2 Limitations 47
References 49
Appendices 56
Appendix 1 56
Description of the selection variables
Appendix 2 59
Collected data 59
A 59
B 61
C 63
Selecting collaboration partners for innovation projects
How can an organization determine, through selection models, with who to collaborate to create value for a successful new product development?
A case study By Annefleur Douglas
Introduction
Today many organizations collaborate to develop and introduce new products on the market. Due to the fast changing external environment, which is characterized by various difficulties:
environmental dynamics (McCann & Selsky, 1984), increasing technological complexity (Hagedoorn & Duysters, 2002), shorter product life cycles (Chen & Li, 1999) and increasing global competition (Backwell & Eilon, 1991), it can be difficult or even impossible for an organization to introduce its product on a particular market. Therefore, it could be an opportunity to enter the market with another organization by dispersing skills and knowledge (Das & Teng, 2000), receiving access to resources (Hitt, Dacin,, Levitas, Arregle & Borza, 2000), gaining organizational learning (Mothe & Quelin, 2001) and mobilizing highly experienced and skilled people (Chesbrough, 2003) which enhances a focal firm’s capabilities and enables it to launch products faster on the market.
Organizations focus on their core assets and search for collaborative partners that can provide the required, missing, resources to be competitive in certain markets or to develop new products. Dacin, Hitt and Levitas (1997) stated that identifying the right partner is the first step of a successful collaboration after that an effective trust-worthy relationship has to be developed by the organizations. However, it can be difficult for organizations to determine which organization to select to collaborate with as the context between the organizations is important to be successfu l (Hitt et al. 2000). Therefore, it is an interesting topic to further investigate to increase the chance of success. Various authors have introduced partner selection models, however, these models are inconsistent which leads to incompleteness of the partner selection literature. The question is how an organization should select their collaboration partners for their innovation projects? Three collaborative product development processes at Organization X will be used to determine what the
differences and similarities are between theory and these cases. Furthermore, there will be defined how the partner selection literature can be improved and how the execution of the cases could have been done better by Organization X.
1 The selection of collaboration partners
Some organizations decide to collaborate with another organization, because they are not able to develop a new product or introduce a product on a competitive business market by themselves.
Hamel, Doz and Prahalad (1989) explain that it costs so much money to develop new products and to penetrate new markets that only a few organizations are able to do that alone in every situation.
Furthermore, it takes much less time to introduce a new product on the market when organizations use knowledge, resources and strengths of both organizations (Hamel et al., 1989; Reinartz &
Kumar, 2005). Depending on the innovation project a certain contribution is expected from the collaboration partner. Three approaches of partner involvement during collaboration can be identified which emerge in three models (Bonaccorsi & Lipparini, 1994): (1) Traditional model, suppliers are involved after the design has been completed and technical specifications issued;
(2) Japanese model, the suppliers are involved in the concept stage before the design of the new product; (3) Advanced model, suppliers are supposed to invest in the pre-selection development work to provide solutions. In addition to the expectations of the collaboration partner, requirements can be defined which the proposed partner should meet. Formulating the required resources assist the creation of the right mix of internal and external resources that, according to the open innovation paradigm of Chesbrough (2003), contribute to product success. By literature organizations that are willing to collaborate with other organizations are defined as open innovators (Lazzarotti &
Manzinni, 2009). While (cross-functional) collaborations have been defined as a type of cross- organizational linkage, which is characterized by high levels of integration and transparency, mindfulness and synergies in participant’s interactions (Jassawalla & Sashittal, 1998).
1.1 The benefits of collaboration
Collaborations can offer several benefits for the development of new products. First of all, firms can be more successful when they look beyond their internal organization. When the right skills, capabilities and resources of the customer, the competitors and their channel partners can be combined, the organization will enlarge the chance to deliver superior customer solutions.
Therefore, the organization should identify what the company is good at and should leverage these core competences. The missing assets which are needed to introduce the product on the market can be provided by collaborating with a competitor or a channel partner (Berggren & Nacher, 2001).
The channel partner can provide access to new skills and technologies (Mohr & Spekman, 1994), the means to create and/or exploit a new market (Littler, Leverick & Bruce, 1995) or cross- disciplinary integration which might be essential for creating new products (Chesbrough, 2003).
Second, collaboration creates a situation of mutuality of benefit, in which organizations share the rewards and risks with exchange of information as the foundation of collaboration (Barratt, 2004).
By sharing information and knowledge, economies of scale in joint research, access to technology and markets and complementary skills, involved parties can improve their performance and can create competitive advantages that meet the demands and interests of customers or create ways to enter new markets (Powell, 1987; Dacin et al., 1997; Perks, 2000; Corswant & Tunalv, 2002;
Trkman, Stemberger, Jaklic, Groznik, 2007). Third, collaborating through a strategic alliance is a low cost route for new competitors to gain technology and market access on the market which creates opportunities and strengthens the position of both organizations (Hamel et al., 1989). By utilizing the benefits of collaboration, organizations may be able to increase the speed to market of the new developed product (Bronder & Pritzl, 1992; Deck & Strom, 2002).
1.2 The bottlenecks of collaboration
Besides the benefits there are some bottlenecks and risks concerning collaboration with another organization. First, Brouthers, Brouthers and Wilkinson (1995) state that strategic alliances are risky and should be prevented unless there is a lack of resources in terms of technology, skills, specific equipment, marketing capability or finance. Second, Barratt (2004) emphasizes that an organization, due to the resource intensive nature of collaboration, should not try to collaborate with everyone but should focus on a small number of close relationships. Third, it is difficult to implement collaboration (Sabath & Fontanella 2002). Research has shown that it is hard to identify the most profitable customers and that there often exists a lack of trust between the partners. Furthermore, differences in organizational cultures, mindsets, expectations and behaviour can make building relational capital and managing alliances extremely costly (Hanson & Lackman, 1998; Tse, Francis
& Walls, 1994). Fourth, a collaborative new product development (NPD) arrangement is that there may be a highly competitive overlap between the organizations which creates the risk of knowledge spillover in which competitive organizations can enhance their internal skills, technologies and knowledge (Hamel et al., 1989; Yan, Luo & Child, 2000). Partners can become protective about their resources especially when their competitive advantage relies on these resources (Hamel, 1991).
Finally, the collaboration promises benefits for both organizations. However, the execution is often different to that expected, because the interests of the organizations differ (Simatupang & Sridharan, 2002).
1.3 Considering collaboration
As the benefits and bottlenecks of collaboration have been identified it seems that in certain situations it can be useful for an organization to collaborate for new product development. Though , organizations find themselves in a double bind; a new product can provide increased sales, growth and competitive advantages but lots of new products introduced are unstable and fail (Gates, 2003).
Research done by Kalmbach and Roussel (1999) showed a failure rate of alliances as high as 70%.
Furthermore, a high level of dissatisfaction with the actual outcome of collaborations has been reported (Madhok & Tallman, 1998; Park & Russo, 1996). Therefore, it is a challenge for product success to create the perfect mix of internal and external resources. Instead of doing research, organizations can benefit from other organization’s resources or the way other organizations use other’s resources (Chesbrough, 2003). During the establishment of collaboration, organizations need to create cross-enterprise processes (Deck & Strom, 2002) and innovative ways to manage these processes (Jassawalla & Sashittal, 1998). Furthermore, knowledge integration is an important organizational capability (Grant, 1996). However, successful collaborating organizations should inform employees of all levels about what skills and technologies are available to the partner and by monitoring what the partner requests and receives (Hamel et al., 1989).
Authors have introduced various opinions about the decisive criteria’s for partner selection. Some of them have emphasized that partner selection was driven by the resources the other organization holds (Hitt et al., 2000). Others suggest that organizations select partners based on the possibility to hold on to or protect their own valuable resources (Eden, Hitt & Ireland, 2008). So how can an organization determine with whom to collaborate to create the required mix, as there are lots of organizations to collaborate with. Glaiser (1996) stated that the sustainability and viability of collaboration depends on the partner chosen. The right partner can yield important competitive advantages, while failing to compose compatible objectives or communicate effectively can create insurmountable problems (Dacin et al., 1997). Chen, Wang, Chen and Lee (2010) explain that once an organization has decided to collaborate with other organizations, it must first address its motivations as it affects the criteria weighted. Dacin et al. (1997) state that it is important to understand the similarities and differences between partners to ensure the success of the collaboration. Several researchers have even indicated that collaboration can be most successful when their skill sets and assets are complementary (Hill & Hellriegel, 1994; Dacin et al., 1997; Luo, 1999) which confirms the importance of understanding your partner.
These findings indicate that partner selection is important for the success of collaborative product development. As collaborations involve considerable risks and investments (Dacin et al., 1997), choosing the right collaboration partner should contribute to success by reducing the risks and maximizing the benefits (Littler et al., 1995).
1.4 Research question
This research tries to find out if the criteria and selection models suggested by the literature match the selection models that are used in practice to select collaboration partners for innovation projects.
The research question will be as follows:
How should an organization select collaboration partners for innovation projects?
To find the answers to this question the following sub questions should be answered:
1. How should the partner selection process be executed according to the literature?
2. To what extent does the executed selection processes in practice match with the partner selection literature? Based on what and why are there differences between practice and the literature?
3. Is it important to consider the context of an innovation project during partner selection?
4. How can the formulated partner selection model be improved based on the case study?
5. How could the cases have been executed more favourably based on the partner selection literature?
Several authors (Hartley, Zirger & Kamath (1997); Von Corswant & Tunalv (2002); Petroni &
Panciroli (2002); Walter (2003); Oliver, Dostaler & Dewberry (2004); Von Corswant (2008)) have investigated collaborations that consist of organizations that operate jointly to develop a product that meets the needs of the consumer market. Therefore the development of new consumption goods for the consumer market is interesting to investigate for this research, partly because those projects can be short, clear and easily pursued. To avoid organizational differences that could influence the partner selection process the research should be conducted at one organization that executes several innovation projects concerning collaborative product development. Based on these research requirements Organization X was suggested as an interesting organization to execute this research.
Organization X operates in the fast moving consumer goods sector and is therefore engaged in several innovation projects. The department Category management develops and offers consumption products for the hospitality market, but does not always want to invest in the production of a new product. Therefore, Category management often develops new products by means of collaboration allowing them to select a collaboration partner. Organization X, with its department Category management, agreed to contribute to this research by providing data and interviews of three innovation projects; A, B and C.
This study has been divided in five chapters with the aim to make the study accessible and clear to the reader. In Chapter 2, an overview of the partner selection literature will be provided to present the existing knowledge in terms of partner selection. In Chapter 3, a multicase study will be conducted that identifies the partner selection process in practice of three innovation projects at Organization X. In addition, attention has been paid to the importance of project context for partner selection. Chapter 4, shows the results of the multicase study. The partner selection models of the cases will be compared with each other followed by a comparison with the literature model. In Chapter 5, the overall conclusion, improvements for literature and Organization X, further research and limitations will be described.
2 Partner selection models
After an organization has decided to engage in collaboration, the selection of an appropriate collaboration partner is the next important decision. But how can an organization select with who m to collaborate? Eden et al. (2008) noticed that in the past little attention has been paid on alliance partner selection which makes it interesting to take a close view on the available knowledge about partner selection. In 1988, Geringer conducted one of the first in-depth studies about partner selection criteria. He discovered that an organization’s culture, past experience, size and structure were as important in selection criteria as task-related criteria. Since then various authors introduced criteria and selection models to assign a collaboration partner for innovation projects. The partner selection models of Emden et al. (2006), Feng et al. (2010) and Chen et al. (2010) have been identified and will be explained in the paragraphs §2.1, §2.2 and §2.3. These models will be compared (§2.4) and merged (§2.5) to facilitate the investigation. In paragraph §2.6, other variables that have been identified by literature as relevant during partner selection will be added to the partner selection process to create an adjusted partner selection model (§2.7). The aim of this chapter is to create a partner selection process based on the phases and variables identified by the partner selection literature.
2.1 Model of the technological, strategic and relational aspects of partner selection
As several authors corroborate the importance of partner selection for new product development, Emden, Calantone and Droge (2006) introduced a selection model that proposes certain selection variables that can be used to consider proposed collaboration partners. The goal was to develop a process theory of partner selection for collaborative NPD alliances using a theory development approach. The authors conducted a literature analysis parallel with a serie of case study interviews with managers currently in collaborative dyads. Emden et al. (2006) found three factors that made an investigation of partner selection for NPD codevelopment timely. First, product innovation has become increasingly more challenging, a new model or paradigm shift is necessary. Second, the logic of alliances demands extensive information flows, whereas the logic of NPD has ownership of differential competitive advantage as its locus. Third, the high risks accompany the high potential benefits in codevelopment alliances. Therefore, organizations should try to reduce the risks while maximizing the benefits to choose the right partner.
The selection model of Emden et al. (2006) identified three sequential phases that consist of categories with related variables that were formed inductively. Organizations have to follow this process sequentially to successfully elect a partner to collaborate with. The first phase, Technological alignment indicates unique competences of potential partner’s and stimulates idea generation for new opportunities which triggers collaboration. In this phase mutual understanding of
technologies and their implications can be exploited as both organizations realize the synergistic value of integrated technology. This phase triggers the partner-evaluation process. Mutual gains are required, therefore, the second phase Strategic alignment indicates to what extent partners’
motivation and goals correspondence with one another. At this stage the organizations form teams to develop project specifications. It is very important that the people involved speak the same language and are willing to make adjustments, compromises and sacrifices. Therefore, the third phase is Relational alignment between the organizations. This phase shows that compatible cultures, propensity to change and long-term orientation may create necessary ground for collaboration.
These last two phases are as important as the first phase ensuring the transfer and integration of know-how and in creating product value through collaboration.
The partner selection model of Emden et al. (2006) with the order in which these phases are practiced associated with the progress decisions, result in a choice of a collaboration partner that has the potential to create synergistic value.
Figure 1. Emerging Theory of Partner Selection for Creating Product Advantage through Collaboration, Emden et al, 20061
1 The significance of the variables can be found in Appendix 1
2.2 Method for partner selection of codevelopment alliances
Feng, Fan and Ma (2010) propose a method for partner selection of codevelopment alliances using individual and collaborative utilities to select appropriate partners. An evaluation hierarchy for partner selection shows the individual and collaborative utility associated with attributes. The fuzzy multiple attribute decision making method (FMADM) is proposed to integrate the assessment data of individual and collaborative utilities to obtain a final ranking of all proposed partners. The attributes of the framework to measure the individual utility and collaborative utility for partner selection of codevelopment alliances are based on literature review. With respect to the attributes, the individual utility matrix and collaborative matrix are constructed. All elements for partner selection are qualitative, so it is convenient for experts to express their opinions for the elements of the two matrices in linguistic terms (Middle, High, Very high). The FMADM approach is proposed to respectively compute the overall assessment values of each candidate partner. Furthermore, the assessment values of individual utility and collaborative utility are integrated to obtain the overall assessment value of each candidate (Feng et al., 2010, p. 160). Finally, an overall ranking order of all candidates can be made based on the derived assessment values. Feng et al. (2010) used a software company to illustrate the potential application of the proposed method.
Figure 2 The evaluation hierarchy for partner selection of codevelopment alliances, Feng et al. (2010)2
Based on the evaluation hierarchy, Feng et al. (2010) created a framework solving the problem of partner selection for codevelopment alliances using individual and collaborative utilities to provide a formal procedure to integrate utilities between partners and to rank candidates. Feng et al. (2010) did
2 The significance of the variables can be found in Appendix 1
not provide the order in which the attributes of the framework should be measured to determine the individual utility and collaborative utility for partner selection. The model displays an overview of relevant attributes to consider during the partner selection of codevelopment alliances but does not provide a partner selection process.
Figure 3 Framework for partner selection for codevelopment alliances, Feng et al. (2010)3
3 The significance of the variables can be found in Appendix 1
2.3 Procedure for partner selection
Chen et al. (2010) want to introduce a mechanism for alliance partner selection that emphasizes on the relation between motivation and selection criteria as motivations for establishing a collaboration followed by different organization’s needs. The relative weights of the selection criteria are influenced by the motivation for establishing the strategic alliances. For the selection of an appropriate collaboration partner, the motivations, criteria and measurable sub-criteria must be identified (based on literature review) to evaluate the potential partners and to implement the analytic hierarchy process (AHP). First, the motivations to collaborate with anther organization are examined. An organization can have multiple motivations for establishing the strategic alliance, however, the priority of the motivations should be determined before proceeding to other procedures for partner selection. Second, the criteria and corresponding sub-criteria are presented and exploited to define the suitability of the suggested partners. Most of the partner selection criteria are qualitative, which can make the evaluation in subjective comparisons become vague. Therefore, the intensity of each motivation should be determined by calculating the priority index. The relative importance with respect to its motivation is weighted for every criteria. Based on these outcomes, the AHP-approach with fuzzy weighting processes and linguistic evaluation can be developed which can determine the performance of the proposed partners.
Figure 4 The relationship between motives, criteria and sub-criteria in the partner-selection, Chen et al. (2010)4
4 The significance of the variables can be found in Appendix 1
Chen et al. (2010) proposed an illustrative example and conclusions to present the procedure for partner selection. The procedure consists of eight steps (Chen, 2010, p.283):
1. Set up a committee for the strategic decision problem
2. Realize the motivations that drive an organization to collaborate and calculate the intensity of each motivation by calculating its priority index.
3. Calculate the relative importance weights for criteria with respect to each individual motivation.
4. Calculate the composite relative important weight for each criteria by multiplying its relative importance weights by the intensity of the corresponding motivation.
5. Determine the relative weight for each of the sub-criteria with respect to the criterion that it developed from.
6. Evaluate the performance for each of the potential partners using those sub-criteria.
7. Calculate the composite weighted performance of each candidate partner on each criterion by summing up the product of the performance of each candidate partner on each sub-criterion and its relative weight of importance.
8. Synthesize the performance of each candidate partner by summing up the product of the composite important weight of criteria and the composite weighted performance on the criteria.
With its partner selection procedure, Chen et al. (2010) emphasizes that the motivation to collaborate can be different. This results in various intentions and priorities that affect the weighting of the criteria (on their importance) during partner selection. Therefore, in advance of the partner selection procedure, greater weights should be assigned to certain criteria than to others based on the motivations for establishing the project. However, Chen et al. (2010) did not provide the order in which the criteria and sub-criteria should be measured to select a collaboration partner.
2.4 Comparison of the partner selection models defined by literature
The authors (Emden et al., 2006; Feng et al., 2010; Chen et al., 2010) introduced various models and variables to select a partner. There are some differences and similarities between their methods that can be identified.
Differences
Emden et al. (2006) formed three sequential phases that consist of categories with related variables while following this process sequentially to successfully elect a partner to collaborate with. Emden et al. (2006) does not consider the importance of the criteria during the partner selection.
Feng et al. (2010) integrated the assessment values of individual utility and collaborative utility to obtain the overall assessment value of each candidate to create a ranking order of all candidates.
However, Feng et al. did not provide the order in which the attributes of the framework should be measured and did not considered the importance of the criteria during the partner selection. The model displays an overview of relevant attributes to consider during the partner selection of codevelopment alliances but does not provide a partner selection process.
Chen et al. (2010) emphasizes that the motivation to collaborate can be different each project. This results in different intentions and priorities that affect the weighting of the criteria (on their importance) during partner selection. In contrast to the others (Emden et al., 2006; Feng et al., 2010), Chen et al (2010) considered the context of the project (motivation) which influences the importance of the criteria during the partner selection. On the other hand, Chen et al. (2010) did not provide the order in which the criteria and sub-criteria should be measured to select a collaboration partner.
Similarities
Emden et al. (2006), Feng et al. (2010) and Chen et al. (2010) used similar variables to select a collaboration partner within their own procedure.
2.5 Merging of the partner selection models
For this study the findings of the partner selection models will be merged to facilitate the investigation by creating one partner selection process based on the phases and variables identified by the partner selection literature.
The selection model of Emden et al. (2006) will be used during this study as a standard. In contrast to the other two models, the model of Emden et al (2006) identified selection phases while following this process sequentially to successfully elect a partner to collaborate with. The partner selection model already contains most of the variables used by the other authors. However, some variables that have been identified by Feng (2010) and Chen (2010) as relevant during partner selection are not present in the partner selection model of Emden (2006). To consider during this study if these variables have been identified as relevant in practice, the variables will be complemented to the partner selection model of Emden (2006).
The collaborative utility of Feng et al. (2010) is covered in the model of Emden, though, the individual utility; Financial health, Knowledge- and managerial experience and Capability to access new market is not covered.
Chen et al. (2010) also identified the variable Financial condition as relevant during partner selection. In addition, Chen et al. (2010) emphasizes the importance of considering the variables Corporation compatibility and Resource for R&D during partner selection.
Emden (2006) compared to Chen (2006) does not consider the importance of the context during partner selection. During this study the importance of selection criteria will be considered to determine the influence of context on partner selection for innovation projects. This matter has been taken into account to identify how important it is to consider the context of an innovation project during partner selection.
2.6 Additional variables for partner selection
In earlier paragraphs have been determined that the partner selection model of Emden (2006) will be used during this study as a standard. However, some variables that have been identified by authors of various literature streams as relevant during partner selection are not present in the partner selection model of Emden et al. (2006), Feng et al. (2010) or Chen et al. (2010). Therefore, in this paragraph variables will be identified that have not been suggested by the three partner selection models. The aim is to find variables that have been identified by literature as relevant during partner selection and contribute to the success of the partner selection process of Emden et al. (2006).
Eventually, this study will consider if the variables can be identified as relevant in practice.
The additional variables have been conducted by literature research that was focused on journals from authors in the Management, Marketing and Administrative Science literature streams and obtained from the literature database of the University of Amsterdam. To include the variables within the suggested partner selection model of Emden et al. (2006), studies must have identified that there is a relationship between the variable and partner selection. Some variables have been found for strategic- and relational alignment. However, during this study no additional variables will be suggested for the technological alignment phase.
2.6.1 Phase 2 - Strategic alignment Consensus strategy
Dacin et al. (1997) state that large distinctions between partner’s expectations and objectives should be taken into consideration to determine if a strategic fit can be obtained to achieve the highest probability of success. The selected partner should be able to help the organization to achieve its goals, nevertheless, the partner should mutually benefit from it to create a win-win strategy.
Kalaignanam, Shankar and Varadarajan (2006) confirm this vision and state that created firm value for both organizations is an important aspect during partner selection. However, it might not always
be a win-win strategy for both organizations when one of the organizations actually has no choice to reject the proposal. Eventually, the organizations should find a consensus in which both sides agree to collaborate. Therefore, it can be useful to determine during the partner selection process if consensus between both organizations can be achieved as it influences the success of the innovation project. This assessment identifies if the collaboration is attractive for both organizations and if it connects with the motivation correspondence and goal correspondence of the organizations.
Therefore, during this study the variable Consensus strategy will be considered at the strategic alignment phase of the partner selection model of Emden et al. (2006).
2.6.2 Phase 3 - Relational alignment Previous partner experience
Gulati (1995) and Eden et al. (2008) focused on methods to determine the reliability and capabilities of current and potential partners. In various situations, it can be beneficial to engage with a previous partner as several authors have stated that organizations prefer to collaborate with previous partners above new partners (Podolny, 1994; Gulati, 1995; Dacin et al., 1997). However, in some situations collaborations are formed by chance (Dacin et al., 1997) or a previous unconnected partner is selected as all options carry risks and rewards. Based on these studies, Previous partner experience influences the partner selection process and could be recorded in the partner selection model of Emden et al. (2006).
Cooperative competency
Sivadas and Dwyer (2000) describes cooperative competency as a construct that is derived from related concepts of mutual adjustment, absorptive capacity and relational capability, and a property of the relationship between organizations participating in NPD. Cooperative competency has been composed of interrelated antecedents; trust, communication and coordination, that influence NPD success. Through cooperative competency, the fit between the organizations can be identified to determine if the collaboration between these firms will result in a successful new product development (Sivadas & Dwyer, 2000). Therefore, Cooperative competency could be added to the relational phase of the partner selection model of Emden et al. (2006).
2.7 Adjusted partner selection model of Emden (2006)
The selection model of Emden et al. (2006) will be used during this study as a standard, because it identified selection phases while following this process sequentially to successfully elect a partner to collaborate with. Based on the partner selection literature a few variables have been added to the selection model of Emden (2006) to consider their relevance during partner selection as well. The
aim of the adjusted selection model is to create a partner selection model for innovation projects based on the knowledge that is available from literature.
Figure 6 Partner selection model of Emden et al. (2006), adjusted with variables from the partner selection literature
The proposed partner selection model of this research will be used to compare the suggested phases and variables by literature with the partner selection procedures followed during three innovation projects at Organization X to identify differences and similarities between them. The aim of the research is to use the results to suggest improvements for the partner selection literature and to determine how Organization X could improve the execution of its partner selection processes through partner selection literature.
3 Case study
In this research a multicase study will be used. During this explanation building case study, three collaboration projects of Category management will be studied: the development of a new cookie for the coffee and tea brand A (A), the introduction of B in the sport hospitality market (B) and the development of foreign spirits C. The innovation projects are used to investigate partner selection process in practice with its phases and variables. First, in paragraph §3.1 the research method and structure will be discussed. Second, in the paragraphs §3.2 (A), §3.3 (B) and §3.4 (C), the selection process of the individual projects will be illustrated in partner selection models. Finally, in paragraph §3.5 the importance and occurrence of the variables of the individual projects will be assessed, by means of the variables from the partner selection literature, to identify the influence of the project context. The outcome of the assessment will be discussed.
3.1 The research method and structure
The case study was conducted at Organization X at Zoeterwoude. Three cases A, B and C needed to select an external collaboration partner for their innovation projects. In addition, the category managers are not restricted to follow a certain partner selection process that has been determined by Organization X. The aim of this research is to clarify the selection process used by A, B and C to select a partner to collaborate with. First, the partner selection process with its phases and variables will be mapped to identify the followed procedure. Second, the importance and occurrence of the variables of the individual projects will be assessed. Von Corswant and Tunalv (2002) used an exploratory research for its multicase study. The design of the case study of Von Corswant and Tunalv (2002) will be used for the design of paragraph §3.5 of this case study as both studies aim to increase the understanding of what variables are critical for successful partner collaboration. The difference between both studies is that von Corswant and Tunalv (2002) examine critical variables while the collaboration partners already have been selected whereas this study is looking for the critical variables during partner selection.
With the use of various data collection methods this research tries to provide in-depth insight into the situation of partner selection during the cases. Moreover, various data collection methods provided an increase in the construct validity of the research (Yin, 1981; Eisenhardt, 1989; Yin, 1994). Qualitative evidence was obtained through one-to-one in-depth interviews with three category managers. The individual interview provided insight in which selection phases and variables the cases used to select a collaboration partner. First, each manager was asked to describe the partner selection process of their case; which candidates were present, how these candidates
were selected and based on what factors a candidate was chosen. Second, each manager was asked to identify variables that they considered to be critical regarding the selection of a collaboration partner. Third, each manager was asked to divide the partner selection process of their case in phases and identify under which phase the variables were covered. Finally, the list of critical variables from the partner selection literature were presented to the category managers, with the question to rate them along several dimensions: their occurrence, importance and in which phase of the selection process the variables occur (first, middle or final). Afterwards the results of the interview were presented to the interviewee to verify the results. The aim of the qualitative data collection and the resulting analysis was to narrow down and structure the list of critical phases and variables.
Furthermore, meeting minutes and presentations were used to describe the selection process and increase construct validity (Yin, 1981; Eisenhardt, 1989). The various data provided through these methods provide a stronger substantiation for the research. The results underpin, confirm and support the qualitative evidence that was obtained from the in-depth interviews. Besides, it provides case details and additional figures. For each of the cases a partner selection model will be described.
3.2 A
In 2009, Organization X decided to extend their offering to the hospitality market and started an innovation project to develop a new brand for coffee and tea; A. Organization X successfully introduced a product line at various channels of the hospitality market. To deliver a complete concept to the customer, A developed complementary products like sugar, milk and cookies. In the Netherlands, Dutch consumers expect a cookie or delicacy beside a cup of hot beverage in the hospitality market (Brabants Dagblad 2007). Therefore, a ratio can be determined between the sales of cookies and hot beverages. However, the sales figures of the cookies of A remain behind the other products in contrast to the expected demand of the consumers. Only half of their customers (41.5%) purchase the A cookies which means there are large growth possibilities for their cookies in the hospitality market. To find out why only half of their customers purchased A cookies, market research was conducted to identify missing product characteristics and market opportunities. Based on these developments, A decided to develop a new product (cookies) to meet the requirements of the market and to enlarge their turnover by 30%.
3.2.1 The organization’s opportunity
During the partner selection process, A is looking for a collaboration partner that is the most suitable candidate of the existing providers. However, the most suitable candidate of the existing providers should be capable enough to meet the requirements of the innovation project. A already collaborates with the organization ‘VO’ to offer the current cookie line on the hospitality market. It seems that
VO would benefit from factors as previous partner experience. Nevertheless, some product characteristics cannot be delivered by VO which restricts the development opportunities of A. A new collaboration partner could be innovative and stimulate the hospitality market by introducing a new product that meets the unfulfilled demands of the market. The aim is to capture new ideas emerging from the cookie suppliers to approach the hospitality market. Which means that A involved potential collaboration partners before the design of the new product was decided.
3.2.2 Cookie project
In 2011, A decided to develop a new cookie to meet the unfulfilled needs of the market. The category manager approached the current cookie supplier VO who suggested to provide cookies for the various distribution channels at every moment of the day. Organization X has good previous partner experience with VO which is an advantage, however, they are not able to deliver unwrapped cookies. Another cookie supplier, LP, was present at a fair and offered a large assortment.
Moreover, the supplier was flexible in their packaging options and logistical capacity, and was able to switch production easily. Furthermore, LP pointed out that there was a large demand (40%) for unwrapped cookies in the market. The third supplier PR was introduced by a A representative and offered wrapped and unwrapped traditionally-baked cookies with a chosen printing. PR was flexible in their production, offered an interesting price for a high quality product and was able to link the cookie to the brand. A met all three suppliers to find out what their technical capabilities, objectives and approaches were. Afterwards, the supplier’s offerings and concepts were introduced to employees of the Marketing and Category management departments and critical success factors and cannibalization risks were identified.
3.2.3. Results
When the A project started there was no clear direction about what kind of product should be developed, though, the price/performance ratio should be attractive, it should fit within the A concept and be a way to enlarge its turnover. Three parties offered a product, however, according to the category manager PR’s traditionally prepared offering added something to the A concept.
Moreover, it revealed that PR had the same cultural value as A regarding the quality and production methods of their products. During the interview the partner selection model (figure 7) with its phases and variables was identified. The meeting minutes confirm these phases and some of the variables. It is striking that variables such as Cooperative competency and Consensus Strategy are seen as overarching and were considered at every phase. A suggested the need to communicate the collaboration between both organizations to the market. PR hesitated about this collaboration condition, considered the consequences for its business and eventually agreed. According to the
category manager, a consensus strategy was reached with an outcome that was beneficial for both organizations. The end presentation shows the collaboration considerations and introduces the chosen partner to the organization. A decided to collaborate with PR because they had the technical abilities and flexibility to produce a cookie that meets the demands of A and the market.
Furthermore, the financial conditions were in good order which created a beneficial situation for both organizations. After almost a year the partner selection process of the case is declared by Organization X to be successful.
Figure 7 Partner selection model Cookie project formulated by category manager A5
3.3 B
In the second case B, Organization X was looking for a partner to collaborate with to offer B to the sport hospitality market. The aim of this innovation project is to introduce commercial products of the collaboration partner to Organization X’s sport channel but not to develop a new product with this partner. This market introduction is: (1) to extend the assortment of Organization X to create one stop shopping (to become the only supplier for the sport hospitality market); (2) to enlarge its wholesale business margin. The advantage is that the visits of Organization X customers to other wholesale businesses will decrease which also keeps them away from attractive alternatives. The sport hospitality market of Amsterdam will be used as a pilot with a term of twelve months to find out if the concept is advantageous for Organization X. The introduction of the pilot will be in
5 Outcome of the data collection can be found in Appendix 2
consultation with all people involved with the aim to succeed this market introduction. Through these B Organization X can increase their turnover and customer retention.
3.3.1. The organization’s opportunity
During the partner selection process, Organization X is looking for a collaboration partner that is the most suitable candidate of the existing providers. However, the most suitable candidate of the existing providers should be capable enough to meet the requirements of the innovation project.
Organization X already collaborates with MC. According to the category manager it can be advantageous to collaborate with a previous partner, because it can stimulate business to other parts of the organization (Organization X). However, there are two other parties that can be exploited as they have an interesting offering of products that have branding and are interested in the sport hospitality market. Organization X expects high involvement from its collaboration partner as their organization is not familiar with frozen products. Furthermore, the partner should be large enough to have (financial) resources to develop their own products. Organization X already knows what kind of products they want to introduce in the sport hospitality market. In other words, the design of the new offering has already been chosen.
3.3.2. B project
First, Category management carried out field and desk research (internet, connections, representatives and fairs) to explore the market and its players. The partner should not have a wholesale function as the goals of both organizations otherwise would not correspond. Second, Organization X wants to collaborate with an organization that has branding and a sales force. Three organizations remained: MC, RY and BCK. Organization X already collaborated with MC though they had their own interests at heart and therefore became eliminated after the first phase. RY was an interesting player by offering good prices for quality products. BCK is focusing on places were parent and child come together. The sport market is their third sales market. Furthermore, BCK closely collaborate with FF (chips) and R (sauce) which enables them to take responsibility for the whole frozen products assortment in exchange for exclusivity. Because the B project is a pilot, it demands investments and risks from Organization X and the suggested partners. From the start all participating organizations (so all suggested partners) had to do market research to determine an offering that would create a beneficial situation for both organizations (Consensus strategy) operating at the sport hospitality market.
3.3.3. Results
For the selection of suitable collaboration partners, Organization X considered Previous partner experience as they already collaborated with MC and the Competitive position of the proposed collaboration partners due to the consequences for the wholesale business. Meeting minutes show that an important aspect in the B project is that the Organization X representatives should obtain product knowledge and sales support from the collaboration partner as they are not familiar with the B. Furthermore, it is essential for the success of the project that the partner is prepared to assist in finding solutions for problems or special requests of clients of Organization X. This has to do with Motivation- and Goal correspondence, Market knowledge complementary, Capability to access new market and Technical ability of the collaboration partner. The end presentation of this project shows that category management has decided to collaborate with BCK, as BCK was prepared to take responsibility for the whole B assortment and both organizations had a large interest in the sport hospitality market. Besides, BCK was able to deliver a large and complete assortment (with other suppliers involved), for competitive prices and offered the required sales support to the Organization X unit at Amsterdam. Organization X and BCK negotiated to find an offering that creates a Consensus strategy for both organizations. The end presentation shows the outcome of these negotiations. After a few months, the selection partner process of the case is declared by Organization X to be successful.
Figure 8 Partner selection model B project formulated by a category manager6
6 Outcome of the data collection can be found in Appendix 2
3.4 C
Organization X offers a large product assortment, of their own and other brands, to the hospitality market. For the other brands, Organization X served as a wholesaler with the result that they had limited control on the producers and their prices. To enhance knowledge of market prices, competitive position, turnover and a position in the distilled production association, the Category management department decided to start an innovation project to develop its own foreign spirits named C. Furthermore, it improves its assortment as most competitors of Organization X distribute their own distilled private label and it meets the trend in the hospitality market to introduce small and new brands. Therefore, Category management had to select a producer to collaborate with, who could produce a qualitative main stream product with a competitive price that is 15-20% lower than premium brands.
3.4.1. The organization’s opportunity
During the partner selection process, Organization X is looking for a collaboration partner that is the most suitable candidate of the existing providers. However, the most suitable candidate of the existing providers should be capable enough to meet the requirements of the innovation project.
Category management had to select a reliable partner that can be flexible, deliver quality and wants to grow. Various bottlers were selected who had their own advantages and disadvantages.
Organization X organized tasting panels from A-brands, to identify expectations of customers. This resulted in a reference pack to display which quality and taste standard the new developed products should meet. Organization X expected from their partner the ability to develop a Gin, Vodka, Rum and Red Vodka, that would meet this reference pack. This means that the design of the new offering already had been chosen. Organization X was looking for a partner that is flexible to start with low quantities, prepared to grow along with the project, has logistic capabilities and the ability to develop a quality product for a competitive price.
3.4.2. C project
First, Category management visited a bottler’s fair where four interesting parties were selected: AD, HH, WDS and TRK. AD is a large experienced producer with brands like BLS and KP, and offered the best price. HH is also an experienced producer, but offered high prices and wanted to produce the annual volume production at one moment. TRK has the ability to switch fast which enhances flexibility, but offered the highest price. WDS is a small flexible producer. WDS is professional, offers qualitative products with the right taste (met the reference pack), are able to store the stock and willing to adjust the standards and systems to Organization X. Second, during the orientation phase Category management created a briefing (RFQ – Request For Quotation) with product
characteristics, taste references, sales pitch and its value chain. The selected bottlers were shown the briefing and asked to present their quote which made it easier to compare the various offerings.
Based on the quotations and other selection criteria Category management selected a collaboration partner.
3.4.3. Results
The interview, reports and meeting minutes show that the value for money proposition was very important for the C project. The value proposition was based on the final offering which was influenced by several selection variables. First, Organization X oriented itself to find out if the partners were willing to change and if they had the financial and technical capabilities to enter the market. According to the category manager, the orientation phase is the most important phase of partner selection, because the better the input (the formulation of the RFQ (Request For Quotation)) the better the output (selection of the most valuable collaboration partner) will be. Furthermore, the category manager stated that the suggested partners need Knowledge and managerial experience to know how to handle and recognize opportunities for collaboration and thus the urgency for their organization to show a motivated institution. AD found the quantities too low, missed Motivation correspondence and Propensity to change, so did not want to collaborate. Second, Organization X determined if the three remaining organizations had the Technical ability for flexible production and the Logistic capacity. Organization X asked the three organizations for a RFQ after which they received an offer. Organization X negotiated with the best offering for the final details to create a good value proposition for its brand with interesting conditions for both organizations to create a Consensus strategy. WDS appeared to be the most interesting partner to collaborate with and was selected. Despite that the Financial condition of WDS was checked and positively reviewed at the orientation- and contracting phase. After a year the organization turned out to be financially unhealthy and went bankrupt. Organization X ended up in an unpleasant situation but started a collaboration with HH with lower cost prices and a more stable product offering. Although the selection process of the case seemed to be successfully executed in early stages, eventually, the selected partner failed to meet one of the most important requirements.
Figure 9 Partner selection model formulated by category manager C7
3.5 Importance of the project context
3.5.1 Variables of the partner selection literature
To identify the importance of considering the context of a project during partner selection the category managers were asked during the interviews to assess the selection variables found in the partner selection literature (see paragraph §2.7) on their occurrence, importance and in which phase of the selection process the variables occur (first, middle and final) during their own projects. The results are as follows:
7 Outcome of the data collection can be found in Appendix 2
Table 2 Assessment of the variables of the partner selection literature by interviewees
3.5.2. Importance of the variables
The importance of most variables was reviewed almost the same by the category managers during their innovation projects. However, there were some exceptions. First, it is notable that the variables of the Strategic alignment phase have been identified as important by all innovation projects.
However, the importance of the variables classified in the Technological alignment phase and Relational alignment phase seem more dependent of the kind of innovation project. The differences and similarities of the variables in the Technological alignment phase, Strategic alignment phase and Relational alignment phase will be explained.
Technical alignment
In the Technological alignment phase it is striking that the variables Technical resource and market knowledge complementary, Technology capability and Capability to access new market are important for all the innovation projects.
C stated that it was pretty important during their project that both organizations had an overlapping knowledge base (Overlapping knowledge bases) to clarify what the fixed outcome should be and
how to achieve this desired outcome. A and B did not find overlapping knowledge bases important as they do not have much knowledge about their partner’s knowledge base. Therefore, they expect their partners to dispose the necessary knowledge to fulfil their part of the agreement.
The variable Resource for R&D was more important for the A project than the other projects. A wants to improve and change its offer over time which asks for resources for R&D from the collaboration partner. B, however, did not find Resource for R&D relevant. According to the category manager, this is because the B project does not develop a product with its collaboration partner but instead introduce a variety of products and brands of the partner to their sport hospitality market. The collaboration partner takes full responsibility for the development of their own brands to deliver a quality product that is attractive for Organization X to market. This makes the B project independent of the Resource for R&D of their collaboration partner in contrast to the other projects who develop a product that has a brand name owned by Organization X. Although C links its brand name to the newly developed product, due to market knowledge C knows exactly what they want to produce. Therefore, Resource for R&D is not relevant for C as it wants to produce fixed products that do not have to be changed or improved over time.
Strategic alignment
Notable is that each of the variables of the strategic alignment phase has been identified by all the innovation projects as important. Still there are some differences within the level of importance which is probably dependent of the context of the projects. B expect high involvement of their collaboration partner because Organization X is not familiar with frozen products. Therefore, Motivation- and Goal correspondence might be more important variables than for the other innovation projects. C and B more emphasize the Financial condition of their collaboration partner than A. This is due to the fact that the outcome of the innovation project will have much larger effect on their final results. The variable Consensus strategy has been identified by all projects as important for partner selection because it enlarges the satisfaction of both organizations and thereby the chance of success of the project.
Relational alignment
In the relational alignment phase Propensity to change, Cooperative competency and Knowledge and managerial experience are important for all the innovation projects. The variable Previous partner experience was found pretty important by all projects and was taken into consideration at the beginning of the partner selection process.
It is striking that the variable Compatible culture was more important for the A project than the other projects. A finds a compatible culture important, because their image (cultural brand values)
