BOOK REVIEW: “Network Advantage: How to Unlock Value From Your Alliances and Partnerships” by Heinrich Greve, Tim Rowley & Andrew Shipilov (2014)

Network Advantage: How to Unlock Value From Your Alliances and Partnerships by Heinrich Greve, Tim Rowley & Andrew Shipilov

Greve, Rowley and Shiplov have done extensive academic work and research on alliances over the past two decades. According to the authors of Network Advantage, companies have made more than 42,000 alliances in the past ten years. Despite this experience, many of them failed to be successful. This book explains why so many alliances fail and gives advice on how companies can work to ensure that they improve their chances of succeeding when they make alliances. This book is designed to give easier access to some of their research and is written in a style that would most managers of the general public will find easy to understand.

Key words

Network, alliances, corporation, value creation, partnerships

Summary

Based on their research, the three academics and management consultants have come to understand that companies have often not asked the right questions when making alliances. In fact, most alliances, like most marriages or relationships, failed through lack of compatibility between the partners. However, companies often do not ask questions about why they are entering into the alliance and what are the advantages and drawbacks of each partner.

Samsung and Google alliances

Samsung and Google set up an industry alliances in 2014

The book add client a series of network advantage principles that companies might wish to follow to improve their chances of success it then goes on to underline a series of questions that companies should study before engaging their resources into an alliance.

The book gives a series of “network advantage principles” that companies might wish to follow to improve their chances of success. It then goes on to emphasize a series of questions that companies should study before expending their resources in an alliance.

The book also gives a series of examples about how companies have succeeded or failed within alliances. This includes the differences in strategy between Samsung and Sony and how they spread or do not spread their technology across different partnerships. These differences are an approach has led to very different results for the two companies. The book explains how Philips Electronics, the Dutch multinational, goes about scoring a potential partner before they go into an alliances or how Renesas Electronics, the semi conductor, leveraged its partners and competitors after the March, 2011 earthquake and tsunami that struck Japan. Such was the skill of the Japanese company in managing alliances before this disaster that customers and suppliers sent 2,500 of their own workers to the Naka plant. This allowed the semiconductor to get back to full production within 6 months, one month ahead of schedule.

Network advantage gives an extra introduction to the most difficult aspects of engaging in alliances and gives clear guidelines on how companies can improve their performance when working within them.

Shipilov and Rowley discussing the opportunities of partnerships & alliance portfolios

Interesting quotes

“Between 2002 and 2011, companies around the world formed close to 42,000 alliances. Over 50% of alliances fail and these failures erode their company’s competitive advantage.”

“When executives refer to “alliances,” they almost exclusively mean relationships with individual partners and they seldom think about how all of their firms’ relationships fit together. Nor do these executives actively manage these networks to extract the competitive advantage.”

“Illegal music sharing, which started in the 1990s, was a disaster for the content division, but it encouraged people to buy more powerful hardware, which was a boon for the hardware division. Sony failed to out-gun Apple for a number of reasons, most notably because Sony’s content business felt that music could not be given away at a low price; yet this strategy formed the core of Apple’s success.”

“By the time the different were forced to cooperate and extensively share information from alliances, Sony had lost its lead in two crucial categories: televisions and portable music devices. Competitors had beaten Sony in the race to flat-panel displays and digital music players like the iPod.”

Trust

“When the devastating earthquake and tsunami struck Japan on March 11, 2011, the production facilities of Renesas Electronics in Naka town were hit hard.”

“Renesas’s customers and suppliers responded promptly by sending up to 2,500 of their own workers to the Naka plant. In Singapore and Taiwan, the firm’s contract foundries accelerated their pace of production to fill some of the gap during the production stoppage. By mobilizing the network, Renesas limited production slowdowns and stoppages among automakers to just a few weeks, and its Naka plant was back to full production in September, one month ahead of schedule.”

“Lufthansa’s alliance with Qantas is also interesting because the relationship is deeper than many airline alliances. These two companies formed a joint venture called Jet Turbine Services to provide commercial aircraft engine maintenance, repair and overhaul services in Australia.”

“Over the past 40years the Japanese automakers were smaller than the big-three US automakers. Collaboration within the integrated alliance networks enabled the Japanese car makers to develop critical mass to take on the US market.”

“Knowledge travels across the alliances like goods across the highways.”

“In 1981, three French insurance companies – MAIF, MAAF, and MACIF – created a multi-party joint venture called Intermutuelles Assistance (IA) to achieve economies of scale in processing customers’ claims. If you are insured by one of these companies and your car breaks down, you call IA not your insurer. 
By 2011, there were 12 members participating in this joint venture, as many other insurance companies discovered the benefits of pooling their resources in this initiative.”

“It’s clear from Samsung’s advertising and product announcements that the firm has lost interest in competing with Sony and is instead gunning for Apple. Witness its 2012 ads depicting iPhones as less capable than its own phones or its 2013 launch of a mobile phone with movement-tracking features that far exceed the capabilities of iPhones.”

Prof. Arun Singh is talking about the major differences of joint ventures & strategic alliances
Evolution of alliances as consisting of a repetitive sequence of negotiations negotiations, commitment, and execution stages, each of which is assessed in terms of efficiency and equity (…) – Peter Simth Ring & Andrew H. Van de Ven (1994)

See more book reviews:

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Dealmaking: The New Strategy of Negotiauctions by Guhan Subramanian

I confess that when I picked up the book for the first time I was a bit surprised. “Negotiauctions”? A book from Harvard with a spelling mistake on the front cover? Not at all. The word is just a collocation derived from ‘negotiation’ and ´auction´. The basic premise of this book is that in a interaction between the buyer and the seller you either have a one to one discussion, a negotiation, or an open market situation where the highest bidder wins, an auction. Guhan Subramanian takes this even further demonstrating how in real life we often move quite easily from transaction mode to another.

BOOK REVIEW: “Leading in Turbulent Times” by Peter Lorange (2010)

Leading in Turbulent Times by Peter Lorange

Jeff Immelt, CEO of General Electric, has said that anyone could have run the corporation in the 1990s. Conditions were so favorable that “a dog could have run GE” he claims. Not very flattering for his predecessor, Jack Welch!

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