Wednesday, September 25, 2013

Samsung Beats Blackberry in the Global Alliance Game

To the investors of Research in Motion (RIM), the maker of Blackberry, the recent years have been really disappointing. It lost the fight to Apple and Samsung. There may be several explanations to this failure, but one which particularly stands out is the failure of RIM to build a strong alliance network. Alliances and partnerships are the sources of "network advantage"--the ability to improve operating efficiency and increase product innovation by combining resources and knowledge with partners. We discuss how companies can benefit from their relationships with customers, competitors and suppliers in a new e-book "Network Advantage: How to Unlock Value From Your Alliances and Partnerships". The print version of the book is available from January, 2014.

Let's look at the alliance network of RIM. This picture is built by looking at the RIM's alliance announcements between 2008 and 2011. Since these alliances happened a while ago, their positive or negative effects should be felt by now.

RIM is the firm at the centre of the picture and it has 4 (four!) alliance partners only. The alliance with the Royal Bank of Canada and Thompson Reuters (Woodbridge is its parent company) provided venture capital fund services to invest in mobile applications and services in Canada. The alliance with TiVo aimed at providing mobile television entertainment services for BlackBerry users globally. The alliance with NII Holdings Inc was to provide Blackberry Smartphone services in Latin America.

Did these alliances make sense? They sure did. But network advantage doesn't come to firms who simply build alliances, it comes to firms who build better (and more) alliances than competition. 

Let's compare RIM's alliance network to what Samsung is doing with its alliances. Below is the picture of Samsung's alliance network based on the announcements between 2008 and 2011:

Samsung works with Kia motors to build the car around its Galaxy tab, manufactures 4 G communication infrastructure in Russia, collaborates with Telstra to develop Internet TV for mobile devices, works with Nanosys to build better screens and batteries for smartphones using the nanotechnology. It works with Intel and Juniper on mobile security solutions and works with Korean Telecom (plus Intel) to transmit 3D signal through the mobile grid. It works with Dreamworks and Technicolor (Thompson) to develop 3D movies and viewing equipment. We might soon have 3D video enabled mobile phones!!!... Not to mention the fact that Samsung uses apps from Android platform for its phones. 

In short, the alliance network of Samsung allows it more (and cheaper) opportunities to innovate not only in hardware but also in content.
The sad story of RIM did not begin this year. It began several years ago when it failed to build a big enough network of alliances and partnerships to counter the network of Samsung (and of course the network of Apple). Samsung has excelled at the global alliance game and extracted its Network Advantage. Kudos to Samsung and condolences to RIM. May your company not repeat the RIM's mistakes!

Sunday, September 8, 2013

How to make your company more creative? Hire a senior executive who worked abroad.

Creativity is an important driver of competitive advantage for companies. One way your company can be more creative is to hire executives who worked abroad. These people are likely to offer non traditional solutions to your problems.

I recently did a study with Frederic Godart, Will Maddux and Adam Galinsky. We looked at how foreign working experience of fashion designers affected creativity of their collections. We found that fashion critics and buyers were more likely to view a designer's fashion collection as creative, if this designer worked (or is currently working) abroad.

Apparently, working outside of your home country changes the way you think: by looking at how different people in different cultures solve problems differently, your brain learns to think about how to approach any business problem differently. If a problem is solved in France in one way, perhaps the Italians solve it in a different way. And you can perhaps think of the third way to solve the same problem--by combining the French and the Italian approach. Karl Lagerfeld is even reputed to work in Italy and France during the same day!

Working abroad also shapes your personal network. If you work in one country and then go work to another country, you become a bridge between professional communities in both countries. For example, a fashion designer who works in France gets to know other French designers and when she moves to work to Japan, she can get to know Japanese designers. If she still stays in touch with her French friends, she will know what is going on in French fashion world while she is working in Japan. And this knowledge will help her combine French and Japanese fashion influences in the future collections. Our study shows that such collections are seen as being very creative.

So, next time you are looking for a senior executive to fill a job that requires creativity and ability to innovate, look up their Linked-In profile. Does it indicate that the person worked in several different countries? If so, she or he is worth looking at, as this person is likely to be indeed creative.

Sunday, September 1, 2013

Russian Businessmen Play the Global Status Game

How can a new company signal its quality to customers, suppliers and other business partners? One strategy is to "borrow status" from the well known people in the industry. If the prospective partners cannot judge the quality of your new company, they will think that your company must be of high status if it associates with high status people. After all, the prospective partners will think that your new high status associates must have done their due diligence before joining, thus it is safe for the prospective partners to work with your firm even if it is relatively new.

Russian businessperson Mikhail Friedman understands that very well. He is the man whose company received around 14,000,000,000 (14 Bln) dollars for the sale of its stake in TNK-BP-- the joint venture between a Russian oil and gas company TNK and British Petroleum. With these proceeds, Mr. Friedman set up a company -- called L1 Energy. This firm will make investments in oil, gas, telecoms, banking and retail. To add credibility to his venture, he hired a former BP chief Lord Browne to its international advisory board. Ironically, in the late 1990s and early 2000s Mr. Friedman and Lord Browne have been fighting over the control of Siberian oil fields, but eventually decided to cooperate on the creation of TNK-BP joint venture.

Apparently, having billions of dollars in the L1 Energy's war chest is not enough for success. So, Mr. Friedman turned to making status signals. What does Lord Browne bring to the table? He clearly has a lot of experience and knows people in the oil and gas industry, but his hiring is also designed to signal L1's status to prospective partners. James T. Hackett, former chief of the American company Anadarko Petroleum, and Andrew Gould, the former head of Schlumberger are also well known industry insiders. Naturally, their hiring is also aimed to enhance the status of Mr. Friedman's operations. The question is whether these status signals will persuade potential partners that it is safe to deal with Russian businessmen, knowing their tough reputation in the industry.

The lesson for other firms is clear. Get the well known people to work for you, this will help you enhance your status. Even if you have a lot of money, sending status signals is really important for continued success.