Managing Partnership Misfits

The dominant approach to managing project partners—first proposed by Aubrey Mendelow at an information systems conference in 1991—recommends mobilizing allies and transforming fence-sitters and blockers into supporters using a mixture of consultation, communication, negotiation, and relationship building. As explained in a Harvard Business Review article on project ecosystems, it’s all about getting buy-in.

Using this approach, partners and stakeholders are mapped on a two-by-two matrix according to their interest versus their power or similar dimensions. On its own, the four-box grid encourages crude assessments of stakeholder positions and applicable strategies. But it does little to indicate where likely sticking points might be and what alternatives remain open when you can’t get the partner you want. It also fails to advise project initiators on how to think creatively about their options.

The entire focus of this approach is on “stakeholder engagement,” which has come to eclipse the broader concept of “stakeholder management.” And when it comes to building project ecosystems, this presents a misleadingly positive and simplistic picture. After all, the emphasis on winning over stakeholders—or getting them to contribute more—ignores the challenging flip side of engagement—the frequent need to regulate or resist the unwanted involvement of stakeholders, including partners or allies.

We label this challenge containment. Overcoming it requires holding off partners whose overinvolvement could hurt the project. But doing this is often easier said than done. Indeed, our research and consulting work with dozens of project initiators highlights a clear attention bias. Initiators are so eager to sell their project that they may miss or ignore warning signs that a prospective partner or stakeholder has very different intentions.

Take the case of Tom Szaky, who dropped out of Princeton to co-found TerraCycle, an entrepreneurial venture that used worms to convert food waste into organic fertilizer. In 2003, while short of funds, TerraCycle entered a business plan competition sponsored by a venture capital firm, and the startup won a US$1-million investment. But as Szaky recalled in his 2009 book Revolution in a Bottle, it quickly became clear that winning the contest wasn’t all positive when one of the VC’s representatives proposed toning down TerraCycle’s emphasis on recycling garbage.

Szaky didn’t see the point, but amid the celebrations, he wasn’t too worried about the comment because “there was so much else to talk about.” But when TerraCycle’s new financial backers visited the fledgling operation for the first time, they confirmed that the startup’s new funding would come with some major strings.

In addition to dropping the environmental messaging, Szaky was told to make major adjustments to TerraCycle’s management team. With visions misaligned, he realized there was little point in trying to find a compromise. Despite having only US$500 in the bank, he turned down the seven-figure capital infusion, choosing instead to leverage the notoriety that came from winning the contest to target “green” investors—whose expectations could be better contained because they were not purely financial. Instead of ditching TerraCycle’s environmental focus, Szaky doubled down on it, diversifying into other forms of waste recycling. The company has since become a global leader in breaking down hard-to-recycle waste, with a presence in 21 countries and corporate partnerships ranging from tobacco and big oil to pharma and packaged foods.

Simply put, as highlighted in “Navigating the Leadership Challenges of Innovation Ecosystems,” an MIT Sloan Management Review article, Szaky made a difficult decision to put vision alignment above the immediate need for financing. And his clear value proposition made it easier to consider who needed to be aligned or excluded. For project initiators, the takeaway here is relatively obvious: pitching to potential stakeholders is essential, but so is probing their expectations and perspective to avoid having to manage a bad fit.

To get the right stakeholders on board and collaborating, project initiators must combine engagement and containment strategies. And to do this, they need more practical and nuanced guidance along with a new set of lenses through which to assess the suitability of potential partners and to identify, motivate, or control misfits. In other words, they need a tool to identify potential fault lines in future partnerships and to help iron out or contain misalignments.

Based on in-depth studies of successful and unsuccessful partnerships, we propose a framework that tests partner fit across three dimensions: task-fit (what each party needs); goal-fit (what each party aims to achieve); and relationship-fit (how each party works). How potential partners measure up on these dimensions flags likely misalignments with a prospective partner and allows project initiators to design ways to overcome them.

 TRIPLE JEOPARDY DIAGNOSTIC

TASK-FIT: NEED AND BENEFIT
The first diagnostic assesses whether joining forces makes functional sense and centres on two factors: the partner’s capacity to deliver on your pressing need and their capacity to derive enough benefit from the collaboration.

You are looking for a partner with the required capabilities or resources who values the expected gains, which are not just financial rewards, but could relate to learning, inspiration, or reputation. A perfect match is rare. Oftentimes, you will identify a partner who has the expertise or resources you need but struggles to see the benefit—and therefore needs motivating to participate; or else a partner who stands to gain from association with the project but has little to contribute—and therefore needs containing or rebuffing.

Engaging partners who don’t see the benefit: You may identify a partner with the exact resources or expertise that you need but also has other better opportunities. That partner will need persuading. This is where much energy is spent—engaging with value-critical stakeholders and helping them see “what’s in it for them.”

Returning to the case of Szaky, the big need for TerraCycle (having acquired funding) was to persuade a big-box retailer to start stocking the product—rather than selling through individual stores and nurseries. After weeks of calling Home Depot, Szaky finally secured a meeting with the head of online merchandise. With no serious client base or retail experience to point to, eliciting interest in the product was not straightforward. So Szaky worked hard to build a connection. He came in not just with a polished presentation that told a compelling story but also with worms and plants grown with and without the fertilizer to create an emotional link with the product.

He minimized the risk to Home Depot by playing the “what have you got to lose” angle, as well as highlighting the profit potential of the product. Retailers could earn gross margins two or three times superior to comparable products even though it sold for less. This was down to TerraCycle’s own costs being so low (thanks to organic waste that could acquire for free, worms that processed the waste for nothing, and packaging that used recycled soda bottles).

Szaky came away with an order for only one pallet, but it amounted to more sales than all their previous orders combined. Crucially, that first order opened the way for deals with other major retailers, including Wal-Mart and Target. Of course, you can waste a lot of time trying to enthuse the ideal stakeholder when in fact it is not a realistic outcome—but in this case it paid off because Szaky created a connection that went beyond the return on investment.

The takeaway here: Partner motivation is multifaceted and financial gains may not be the primary driver.

Containing partners you don’t need: At the other extreme, some stakeholders may stand to gain from their involvement, even though their contribution to your project is marginal or even negative. As highlighted in the MIT Sloan Management Review article “Protect Your Project from Escalating Doubts,” these partners need to be side-lined or contained in a role in keeping with their contribution; otherwise, they risk disrupting the project ecosystem. Any stakeholder who extracts disproportionate value from the venture is liable to demotivate the other partners.

TerraCycle offers an unusual example. Paradoxically, the rapid success of its product, as it started to claim shelf space in stores, triggered interference from an unwanted stakeholder. Scotts, the largest plant food company in the United States, issued a lawsuit objecting to two things: TerraCycle’s advertising claims that its product was superior and TerraCycle’s packaging, which Scotts argued was too similar to its Miracle-Gro’s packaging.

However tenuous the claims, they still had to be answered. As a result, Scotts’s hostile action posed a huge containment challenge. TerraCycle could not afford a protracted legal battle, or the staff time required to prepare the case. As part of the legal process, TerraCycle would have to disclose a wealth of details that would distract its overstretched staff from meeting shipping dates with demanding retail partners. Even if the process did not bankrupt the start-up, it would damage its fragile credibility with large retail chains.

Unable to compete with Scotts’s financial muscle, Szaky looked to contain the threat through mobilizing a constituency with low interest and little cohesion—public opinion. TerraCycle created a website, SuedByScotts.com, sharing the details of the complaint—and cheekily asking people if they could tell the difference between the two products. The narrative presented a ready-made story for the media.

Within a few months, numerous major media outlets had covered the dispute, billing it as a turf war between an industry giant and an eco-friendly start-up. In addition to pressuring Scotts into withdrawing its lawsuit (in exchange for modifications to TerraCycle’s marketing and packaging), the publicity boosted the start-up’s visibility. TerraCycle was able to open a new US$5-million round of investment and closed it in just a few weeks.

The key takeaway: Containment strategies come in many forms, and you can even mobilize one stakeholder to contain another.

 GOAL-FIT: UNDERSTAND AND AGREE
The goal-fit assessment hinges on two factors—does the partner understand and agree with the proposed focus and scope of the project? This was where the initial collaboration between TerraCycle and the VC firm fell apart. Though each wanted what the other could provide, they could not agree on the focus of their collaboration. The gap was just too wide.

As a project initiator, you seek a partner who really gets your project intentions. But that is the ideal. More often, you will find a partner who partially agrees and needs persuading, or else partially understands and needs containing (to avoid disrupting the other partners).

Engaging partners who don’t agree: Consider the experience of Bertrand Piccard, the Swiss psychiatrist and record-breaking balloonist who, in 2003, came up with a project to build a solar-powered plane to fly around the world—and approached big aviation corporations as obvious partners.

Neither a physicist nor an engineer, Piccard was not taken very seriously by aeronautical engineers, who fully understood what he hoped to create but disagreed that it could be done. At a 2018 management development conference in Switzerland, he noted: “They told me, ‘It’s completely impossible.’ It took them five minutes to calculate that there was not enough solar energy to run an airplane day and night.”

Normally, this leaves the door open for motivating the partner to compromise or perhaps get involved in a lesser capacity. But these experts were adamant that there was no way of convincing their companies to collaborate on any level.

Deprived of a partner who could understand and potentially deliver the entire project, Piccard turned instead to partners who understood its individual elements, appreciated its ambition, and could be persuaded to engage in exploration.

Piccard started by approaching the Federal Institute of Technology in Lausanne (EPFL), sometimes dubbed the Swiss MIT, with its deep grasp of cutting-edge technologies in numerous domains. Stefan Catsicas, the institute’s director of research, was clearly taken by the vision. Piccard helped him see the project’s potential to become a “flying laboratory,” capable of stimulating high-level research and mobilizing meaningful collaboration between the institute’s heavily siloed specialists.

Catsicas agreed that EPFL experts would conduct a feasibility study and nine months later they concluded that the project was conceptually achievable. Yet to produce a plane with the weight of a family car and the wingspan of a jumbo jet would require technological breakthroughs on multiple fronts.

Though well aligned with the spirit of exploration needed for this project, EPFL could not actually build the plane, but it agreed to continue as a scientific partner of the project. It also proposed that alumnus André Borschberg—an engineer, entrepreneur, and former fighter pilot—take responsibility for the operational side of the project, allowing Piccard to focus on finding external sponsors.

Of course, even if they agreed with the goal, the partners had to see what was in it for them. Looping back to the first diagnostic assessment, why would technology partners or sponsors agree to collaborate on a project with no immediate commercial benefits? To motivate them, Piccard had to open their minds to indirect benefits. For some, it was a means to accelerate internal innovation, to develop a disruptive mindset, and to boost the entrepreneurial spirit of their employees. For others, it served to showcase their reputation for cutting-edge innovation or their strategic commitment to sustainability, or helped give global visibility to their corporate brand. For EPFL, it was all of the above.

Takeaway: If your ideal partner does not agree to participate, look for substitute partners who understand key aspects of the project and are more amenable to the overall goal.

“If your ideal partner does not agree to participate, look for substitute partners who understand key aspects of the project and are more amenable to the overall goal.”

Containing partners who don’t understand: Piccard’s initial plan had been to work with an aviation partner that would construct the plane. Instead, he pivoted to working with technology partners who bought into his goal but were new to aircraft design. To some extent, this proved an advantage. As pointed out in the Management Science article “Integrating Problem Solvers from Analogous Markets in New Product Ideation,” research has shown that experts can be blinded by their professional assumptions—and are often more creative in domains adjacent to their own.

As Piccard observed: “If people believe something is impossible, you have to find people who don’t know it’s impossible.”

While Piccard raised funds, Borschberg identified specialist companies that could deliver innovation on the component technologies. For example, he approached the shipyard that built the hulls of the Swiss catamaran that twice won the Americas Cup. The designers could not judge the overall feasibility of the project, but they could certainly bring their expertise to bear on the fuselage aspect. Piccard recalls: “[They] told us, ‘We can make your plane as light as you want because we know how to use carbon fiber.’”

Piccard and Borschberg were able to persuade other specialist companies to accept the challenge of pushing innovation boundaries in their own domain. For example, Swisscom was asked to develop a satellite telecoms system ten times lighter and more efficient than anything commercially available.

The key to involving partners who agree with the goal but don’t fully understand the moving parts is to provide freedom within a frame and to limit their involvement to the parts they do understand. But in this case, the containment challenge was particularly daunting, as it involved so many specialist partners without a common background in aviation.

As highlighted in the Harvard Business Review article “Managing in an Age of Modularity,” Borschberg’s solution was to get the central team, with the help of EPFL, to structure the project as a tight set of self-contained modules with clear responsibilities but ambitious targets in terms of weight and performance. Of course, in a complex project requiring innovation on multiple fronts, developments in one area are bound to have knock-on effects in adjacent areas. So, although the interdependencies were minimized, overlaps still existed.

And as explained by the MIT Sloan Management Review article “Easing the Invisible Burdens of Collaboration,” these remaining challenges of coordination (the ability to collaborate) were compounded by the bigger challenge of cooperation (the willingness to collaborate). Having assembled a disparate group of 80 technology partners, Borschberg had to devote much time to containing the frictions between diverse partners. Looking back, Borschberg reckons that it took two years to develop mutual respect and to get everyone on the same page and working collaboratively.

Ultimately, Piccard and Borschberg created a technology platform that drove innovation in multiple domains, from battery storage capability to carbon-fiber nanotechnology. The prototype plane made its maiden voyage in 2010 and, in 2016, the slender aircraft, piloted in stages by Piccard or Borschberg, made history by completing the first round-the-world solar-powered flight.

Takeaway: With partners who agree but don’t fully comprehend the coordination needs of the project, you will need to provide a clear structural framework and take a proactive role in integrating them into a healthy culture.

RELATIONSHIP-FIT: TRUST AND CONTAINMENT
The third diagnostic assessment considers relations with a prospective partner and revolves around two factors—how much is the partner trusted and committed to make it work? In short, how much risk or monitoring will the relationship entail? A partner may tick the previous boxes: possessing the necessary capabilities and seeing the future benefit, as well as understanding and agreeing with the objective. Yet, that does not guarantee that the relationship will work. The partner may prove unresponsive, inflexible, or unreliable.

To mitigate these risks, you need to assess your level of trust in the partner and the level of commitment shown by the partner.

Engaging trusted partners who won’t commit: Trust in the partner may be high because of the partner’s reputation in the industry, past collaboration, shared values and practices, or a personal connection. But if only trust is high, you may need to stimulate the partner’s commitment to the project.

Consider the IMD case study Logitech: Learning from Customers to Design a New Product, which explores the experience of Logitech engineering director Yves Karcher. Back in 2004, Karcher started an executive MBA. For his project, he focused on one of the Swiss-born company’s own products—the device used to deliver PowerPoint presentations. Logitech’s existing offering was an advanced Bluetooth-enabled presenter-and-mouse combination, but it remained a marginal seller and profit-maker for the company.

Through field interviews and observation of professional presenters, Karcher captured some surprising insights. It seemed that users were frustrated by some of the technologically advanced features that were assumed to be value-adding. Bringing these insights back to his trusted allies inside the company, Karcher expected them to embrace the project.

He tried to persuade his engineering and marketing colleagues that users would appreciate “simpler and stress-free functionality,” but his message fell on deaf ears. The project clearly fitted with the company’s capabilities and product portfolio, but with more prestigious projects competing for funds, Karcher stood little chance of gaining top-level approval for a small category device with low strategic importance.

Unable to push the project up the company’s priority list, Karcher tried instead to secure a lesser commitment. He used his close relationship with his marketing counterpart to keep the project alive. The “polite support” he received from marketing was enough to pass Gate 1 of the innovation process—as an idea worth prototyping—but would not get him past the second stage. Leveraging his links to colleagues in other divisions, he gained access to a list of outside contractors capable of meeting his various project needs.

Takeaway: The conventional view of stakeholder engagement is often too binary, when in fact there are degrees of involvement. A trusted ally who won’t commit to your project can still be persuaded to nudge it along in the right direction.

Containing a committed partner you don’t yet trust: With a limited budget to develop the device, Karcher turned to outside partners to pursue the project (while remaining part of Logitech). He found an industrial designer willing to produce the design for a modest price, then looked for a partner capable of developing a full working prototype and manufacturing it to Logitech standards.

He found one based in Taiwan. Logitech had outsourced occasional work to this manufacturer and the partner was highly motivated to expand the relationship with the company. Regardless of the existing level of trust, prospective partners may signal high commitment to a project through their focused attention, energy, responsiveness, and flexibility—confirming that this is a real priority for them.

On the other hand, the Taiwanese partner had not previously worked on a wireless presenter device or assumed responsibility for development—only manufacturing. Given the breadth of the mandate, geographical distance, and unproven nature of the relationship, Karcher had to contain the associated risks and uncertainties. He did so in two ways.

First, Karcher limited the financial risk by not paying development costs but promising the partner a larger cut of future sales revenues. Second, he contained the product risks by persuading Logitech to assign one of its Taiwanese managers to the project. The project manager reviewed all the documentation produced by the partner as well as meeting with them fortnightly to ensure they adhered to the engineering specifications, as well as the functionality, performance, and quality requirements.

As Karcher pointed out, it was a minor commitment for Logitech in exchange for a device that promised high margins without taking up any of Logitech’s limited production capacity. The device was developed and manufactured in less than a year and found its market without much promotion or advertising investment. Sales and profit contributions far exceeded management expectations. In fact, it proved so popular that Logitech was able to sell it in packs of ten to organizations.

Takeaway: When managing a committed but untested partner, you can reduce risk and uncertainty through financial structuring and progressively diminishing supervision.

 PARTNER-FIT DIAGNOSTIC
(Questions to ask before entering partnerships)

When crafting this paper, we deliberately chose examples where project initiators had to navigate an ill-defined system—cases where unusual problems required creative solutions to stakeholder management on both the engagement and containment dimensions.

We also chose to focus on role-based stakeholders who made an active contribution (funding, resources, capabilities, and ideas) to the project. But the same principles apply to the way you engage and contain agenda-based stakeholders, such as NGOs and regulators, whose acceptance or tolerance you seek and who may be opposed to your project (the twist with these stakeholders is that proactive engagement is often the best form of containment).

In a perfect world, all projects would easily attract great partners that offer expertise, enthusiasm, and skills (hard and social) along with flexibility and creativity. In addition to contributing valuable ideas, great partners are easy to manage. But they are also extremely rare, which is why attracting the wrong partner is an issue that needs to be better understood.

When facing the triple jeopardy involved in building your project ecosystem, you cannot expect partners to excel across all three grids outlined above. And since most prospective partners will fall short on some dimension, you need to proactively motivate or contain them. The proposed framework will provide a better idea of where misalignments might occur than you’ll get by focusing on “stakeholder engagement” alone. And this will help you reduce risk by helping you achieve a better fit with imperfect partners.

Managing misfits is hard work. But it is also critical to success because, as our experience has shown, a project’s outcome often depends on the initiator’s ability not just to engage with value-adding stakeholders, but also to curb the excesses of disruptive partners.

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