Category Archives: social media; social networks; emotional capital; competitive advantage

Philips’ Alliances Will Save Your Health (and Money)

We all know that alliances with customers, competitors, and suppliers are important to any company’s ability to compete. As I write in my latest post for Harvard Business Review, that ability is compromised by the way we manage those relationships: all too often, each alliance is “owned” by one team or business unit. Thus, companies often miss out on opportunities for innovation that would result from transferring ideas and resources from small silos to other aspects of the business.

I set out in my book, Network Advantage: How to Unlock Value from Your Alliances and Partnerships, that a more holistic approach to managing alliances allows companies to create innovative new lines of business. A recent collaboration between customer relationship management and analytics company and Dutch electronics giant Philips provides a case in point.

The collaboration between two companies began as a simple buyer-supplier deal: Philips used Salesforce software to enhance its customer relationships. But somewhere along the line, executives in these two companies started asking: if Salesforce knows how to manage CRM data, can it also manage the clinical data from some 190 million medical patients that are treated each year with Philips-made equipment?

The two partners have decided to build a platform to connect healthcare providers, insurance companies, and patients to deliver clinical monitoring solutions. The Philips Digital Healthsuite Platform, as it is called, will collect and analyze data drawn from medical devices to enhance clinical decision making by professionals and allow patients to take a more active role in managing their personal health.

As a first move, the partners have created two applications — “eCareCompanion” and “eCareCoordinator.” The eCareCompanion is installed on a patient’s smartphone (or tablet) and connects to their health monitoring equipment, such as weight scales, pill dispenser units, blood oxygen measurement devices, and thermometers. Imagine John, a patient with obstructive pulmonary disease, often caused by smoking. John lives at home. To monitor his condition, John’s weight, blood oxygen, and body temperature data are constantly uploaded to the platform. The eCareCoordinator then analyzes the data feed from the devices worn by the patients. If the data pattern from a particular patient becomes worrisome, the eCareCoordinator can inform a nurse, relative, or doctor.

How can Philips and Salesforce persuade hospitals to start using this platform? How can the hospitals be sure the system is reliable and can lead to tangible cost savings? This is where an alliance between Philips and Radboud University Medical Center in the Netherlands comes into play. The two partners work very closely to develop and test new equipment, including the wearable devices that can collect patent data for the Digital Healthsuite Platform. The use of these devices on Radboud’s patients helps Philips develop a business case for using them in other hospitals. Furthermore, in the process of building the wearable devices, developing the apps, and analyzing patient data, Philips,, and Radboud develop valuable know-how to share with future partners who want to build their own apps or devices.

This innovation was made possible by the way Philips manages its alliances. Philips has created an Alliance Management office, made up of a small team of professionals who help Philips executives run individual alliances. The team helped negotiate the contracts with Salesforce and with Radboud Medical Center, obtained agreement on the key performance indicators, and developed tools to evaluate the partners’ perspectives on the evolution of the alliance. They also manage regular meetings in which the Philips executives in charge of the alliance can learn about what is going on in the alliance with Radboud and vice versa. This helps build multi-billion market opportunities across the three partnerships.

There are two lessons here for your company. First, get more out of your alliances as drivers by thinking of them as a network. And second, build a team inside your company to manage this network, especially where knowledge and resources overlap. There is huge potential in collaborating with customers, suppliers, or even competitors.

Collaborate to Innovate: Learning to Unlock Value from Your Alliances and Partnerships

How can you achieve competitive advantage using your alliances and partnerships?

What is “Network Advantage” and how can your company benefit from its collaborations with customers, suppliers and competitors?

How do giants like Philips and Samsung achieve profitable growth using their alliances?

I recently gave a 7 min TEDx-style talk for INSEAD Alumni reunion to answer these questions.

Collaborate to Innovate: Learning to Unlock Value from Your Alliances and Partnerships

How can you achieve competitive advantage using your alliances and partnerships?

What is “Network Advantage” and how can your company benefit from its collaborations with customers, suppliers and competitors?

How do giants like Philips and Samsung achieve profitable growth using their alliances?

I recently gave a 7 min TEDx-style talk for INSEAD Alumni reunion to answer these questions.

Make Wine with Me: How to Use Small Wins to Build Trust Between Partner Companies

Douro Boys is a group of five independent wineries in the Douro River Valley in Portugal that built an alliance network after realizing that they could not compete on their own. The partners act almost as a single firm, sharing knowledge about wine making and markets. Their wines, such as “Quinta do Vallado” or “Niepoort” now routinely get over 90 points by the Wine Spectator and sales have doubled over the last ten years.

As I write in a recent Harvard Business Review blog post, they achieved this through an unusual exercise: the CEOs of the five companies decided to pool a small amount of their best wine to make 500 bottles of a one-off premium wine they called the “Douro Boys Cuvee”. They auctioned the bottles off at Christie’s at an average price of 300 euros, a price that put the Portuguese wine on par with high-end Bordeaux. The success of this small joint project instilled a strong sense of collective achievement among the member companies, which helped them to work on other projects much more effectively.

Douro Boys solved the problem of trust building among alliance partners by achieving a small win, an initiative (or a small number of initiatives) that partners can accomplish within a maximum of twelve (or even six) months after starting collaboration. We are not talking about conquering a new geographical market or investing millions of dollars in joint R&D. A small win can be as simple as winning a new client together or modifying an existing product to serve a small new customer segment.

When I started working on my book Network Advantage: How to Unlock Value from Your Alliances and Partnerships, I was often struck by how little attention alliance partners pay to the importance of small wins.  They tend to focus instead on mobilizing their stakeholders around big, audacious goals.

Setting such goals is important, of course, but you first need to develop trust. Otherwise, a partner will not share their knowledge or resources with you. And the small win is the shortest way towards developing trust: it helps partners to learn about one another and develop informal rules of collaboration. This leads to familiarity, familiarity leads to trust, and trust leads to improved information and/or resource sharing.

Here’s another example. N2build is a startup that wants to disrupt the construction industry by using new composite materials. For example, some of the innovative fuselage material in a Boeing Dreamliner could also be used to make wall panels or roofs for houses. The new composites have higher insulation properties, are more resistant to the elements and, after substantial R&D, can cost much less to manufacture than conventional building materials.

N2Build has a large network of R&D alliances: it collaborates with researchers at the Fraunhofer Institute in Germany, Massachusetts Institute of Technology, and INEGI (National Institute of Mechanical Engineering and Industrial Management), the eminent Portuguese research institute.

But researchers are often not the best collaborators: they tend to prefer to work on solving problems within their academic disciplines without engaging in cross-department collaboration. What’s more, institutions like these are accustomed to working with multinational corporations or space agencies rather than startups. INEGI in particular was skeptical of N2build’s ambitious goals. The small, yet decisive win for N2Build was to organize seminars within INEGI that brought together scientists from INEGI’s different departments to discuss the idea of how composite materials can disrupt the construction industry. The researchers later commented that it was extremely unusual — as a matter of fact, a first in INEGI’s 25 years history — to have people from all around the institute together in the same room brainstorming towards a common goal. The event was a turning point for INEGI.  It is now an integral part of N2build’s R&D activities and has opened doors to other scientific collaborations.

Correos, the Spanish postal service operator, uses the same strategy to build partnerships in the e-commerce domain. It collaborated with Luis Krug, a Spanish Internet entrepreneur and now the CEO of Pixmania, to build an e-commerce platform The goal is to become one of the largest online marketplaces in Spain to connect companies of any kind, including small or very large retailers, to their customers. But before the two companies joined forces to work on Comandia, they started with a small win: collaboration over the website. This was a discount webshop started by Luis Krug in 2009 on which Correos worked as a logistics partner and had to adapt its logistics chain in order to handle a wide variety of products. The two partners learned a lot about each other and developed trust, which then lead to Comandia, a much more ambitious project in terms of the number of potential sellers and customers.

If your company is planning a strategic alliance, aim for a small win first — this strategy works just as well with customers, suppliers, and competitors.

Can Your Alliance Network Lift a Stealth Bomber Off the Ground?

Does this airplane look familiar?
1940s Stealth Bomber Image
Source: Wikipedia
As I recently wrote on Harvard Business Review blog network, it should, because it’s a predecessor of the famous Stealth Bomber, a prototype completed by Jack Northrop’s company in 1948. In his time, Northrop — the inventor of the flying wing concept — was considered to be the aerospace genius, but he was not able to deliver on his promise to the U.S. military. The revolutionary airplane you never got beyond the prototype.
In 1980, Jack Northrop, then age 85 and confined to a wheelchair, visited a secure facility to see the first B-2 Stealth Bomber — the most advanced military aircraft capable of flying at extremely high altitudes and avoiding radar detection.
1980s Stealth Bomber Image
Source: Wikipedia
Even after 40 years of technological development and use of sophisticated computer design tools, the new bomber looked like a replica of Northrop’s original design for the flying wing. Reportedly, after seeing the aircraft, Northrop said he now realized why God had kept him alive for so long.
So why did one model fail and the other succeed?  Part of the explanation can be found by comparing the different networks of alliances that Northrop’s company formed in the forties and in the seventies.
In 1941, his alliance network looked small and simple hub-and-spoke system. Otis Elevators worked on design, General Manufacturing and Convair provided production facilities. Notice that the partners don’t work with one another and the U.S. Army Corps was actually brought in to arbitrate a dispute between Northrop and Convair.
Northrup's Alliance Network, 1940s
In 1980, the alliance network was more complex and highly integrated.  Network partners worked with one another, jointly negotiating technical standards. Vought Aircraft designed and manufactured the intermediate sections of the wings, General Electric manufactured the engine, whereas Boeing handled fuel systems, weapons delivery and landing gear.   In addition, each main partner formed individual ties with other subcontractors specific to their areas of responsibility.
Northrup's Alliance Network, 1970s
As we discuss in our new book “Network Advantage”, networks like this have two main benefits.  First, alliance partners are more likely to deliver on their promises.  If information flows freely among interconnected partners, how one firm treats a partner can be easily seen by other partners to whom both firms are connected. So if one firm bilks a partner, other partners will see that and will not collaborate with the bilking firm again.
Second, integrated networks facilitate fine-grained information exchanges because multiple partners have relationships where they share a common knowledge base. This shared expertise allows them to dive deep into solving complex problems related to executing or implementing a project.
This is not to say that the hub-and-spoke network of the 1940s doesn’t have its uses. In fact, they are usually more effective at coming up with radical innovation than are complex, integrated networks. In a hub-and-spoke configuration it’s more likely that your partners will know stuff you don’t already know and combining new, distinct ideas from multiple spokes leads to breakthrough innovations for the hub firm.
But Northrop’s hub and spoke portfolio was not useful in 1940s, because he already had an innovative blueprint for the bomber. All Northrop needed to do was to build reliable manufacturing systems that would execute his ideas based on incremental improvements made by multiple partners at the same time.  That scenario called for the integrated network of the 1970s.
The key to choosing between the two types of network is to ask: do you already have a final idea that needs to be implemented with incremental improvements? Is it important that all of your partners trust each other and share knowledge in implementing your idea? If so, then the integrated alliance portfolio is right for you. If you are exploring different options and it is not critical that your partners trust one another, work together to develop and/or implement them, then the hub and spoke portfolio is the best.
You can read more about this and other network-related stories in my new book “Network Advantage: How to Unlock Value from Your Alliances and Partnerships”

Use Social Media to Develop Emotional Capital with Your Employees

Many organizations have started using social media tools internally to interact with their employees.  However, the majority of companies have either stayed away from using these tools or failed to see satisfactory results. In fact, in our survey of 1060 global executives, only 30% said that they work for companies that benefited from the internal use of social media.

Why do so many companies either avoid using social media or fail to make it work? In an article with Quy Huy which just came out in the MIT Sloan Management Review ( we find that to be successful, internal social media initiatives must focus first on the development of EMOTIONAL CAPITAL  that represents the quality of the emotional connection between a company and its employees. Executives who use social media to build emotional capital in the communities of their employees reap real benefits, in terms of improved information flows, collaboration, lower turnover and higher employee motivation.

The reason social media works well in one company and can be totally ineffective in another can be seen by looking at the experience of two companies – a technology company Tekcompany [i]and the European Nordic branch of Tupperware, a U.S. based kitchenware company that sells the products through direct sales channel.

Tekcompany’s executives mobilized expensive experts to develop internal applications that mirrored the functionality of Facebook and Twitter, and built a platform that allowed for the creation of internal wiki pages. In the end, however, the company had little to show for all that effort. Tupperware Nordic, by contrast, invested less than $50,000 in social media initiatives, but obtained much more impressive results. Between 2008 and 2011, the turnover rate of Tupperware’s predominately part-time sales consultants—one of the most important cost drivers and indicators of morale in a direct sales industry fell dramatically. Furthermore, both the ease at which best practices diffused throughout the company and the company’s revenues increased.

Tekcompany followed an implementation approach that reflected a traditional information technology mindset. When asked about the most important factors that accounted for success of social media communities, TEKCO executives told us only about technological aspects (e.g. the ease of use and availability of social media tools), without any hint that they had also considered emotional capital.

In a stark contrast to  Tekcompany , Stein Ove Fenne, managing director at Tupperware Nordic, had an intuitive understanding of the importance of creating positive feelings through social media tools. Through his actions he has demonstrated the four pillars of emotional capital:  authenticity, pride, attachment, and fun.

A major source of authenticity is the senior executives’ ability to show that their statements in the “virtual” world are consistent with their behaviour in the “physical” world. For example, Fenne began by establishing personal relationships with many consultants by visiting all major centers of activity. He started to invite consultants to Tupperware’s headquarters on a regular basis and roll out a long red carpet in front of them. Many of his colleagues were shocked by this treatment in the low key and egalitarian Scandinavian business culture. Yet, precisely because this symbolic gesture was so unusual in that local business context, consultants noticed it, greatly appreciated it and discussed it extensively in their physical and virtual conversations.

Pride is a feeling experienced when one’ achievements are recognized and appreciated, and this helps motivate people to continue achieving in the future. Fenne uses social media to provide an inexpensive platform for generating non-monetary rewards for consultants. He frequently organizes webcasts from his office, where he and his staff play the role of talk show hosts. Consultants’ teams from different countries connect and observe what is going on in headquarters through WebTV and post their live comments on a Facebook-type “wall” seen by all participants. During the show, Fenne calls on every sales team, publicly asks them to report their results and thanks them for their achievements.

Employees’ attachment to the company is generated when employees feel that they belong to community with shared values and interests. Some of these values go beyond direct work-related interactions. Fenne created a Tupperware Nordic page on Facebook to which consultants can link their personal pages. Some consultants indicate that they enjoy cooking, others enjoy music, and still others enjoy reading/writing blogs on burning social issues. When consultants visit the company’s Facebook page (or Fenne’s personal page), they can identify other consultants who share the same non-work interests and connect with them directly.

Fun is particularly important in an organization that wants to encourage innovation. When Tupperware’s consultants discover particularly effective ways of product demonstration, they produce best practices videos. Sometimes these videos gently make fun of the persons in those videos, for example, showing a competition among Danish men who (somewhat clumsily) compete in cooking using Tupperware products. These videos are shared through social networking websites. Funny elements in these videos attract viewers’ attention and show that deviance from “corporate” ways of getting things done not only is tolerated, but encouraged.

You can read more about this research at:

[i] A company’s identity is disguised.