Andreas Perschon - Director Alliance Management at Kraft Foods, Coffee -
speaking about key success factors of best-in-class cooperation
at CoDev 2009 Conference in Scottsdale, AZ, USA:
"Choosing the Right Partner:
Kraft Foods and Bosch and Siemens Home Appliance Group Brew the Right Mix with Tassimo…
…Open innovation ventures can fail for many reasons. Leading experts point to the relationship between partners as the prime culprit. Sometimes getting the relationship right is as easy as choosing the best possible partner in the first place. When Kraft Foods decided to pursue an external alliance to develop what became the Tassimo Beverage System, it knew that the product's success depended on selecting the right partners.
The Tassimo beverage system operates by inserting “T” discs containing exactly measured beverage ingredients into a brewer that carefully calibrates the process for making an individual serving. It represents the combined efforts of Kraft Foods and the Bosch and Siemens Home Appliance Group (BSH).
Speaking at the CoDev2009 conference (Scottsdale, Arizona) Andreas Perschon, Director of Alliance Management for Kraft's hot beverage system, reported that Kraft developed a comprehensive set of criteria to define what it was looking for in potential partners. While the criteria themselves mattered, equally important was the process of negotiating the agreement that would govern the venture, since the negotiations would shed light on the party across the table, helping to validate the final choice.
In order to compare potential partners, Kraft considered several factors including:
- Compatibility of brand values
- Cultural fit
- Manufacturing capabilities
- R&D capabilities
- Investment in R&D
- Demonstrated competence and strength in product categories
- Compatible business strategies
- Cost leadership
Of particular importance to Kraft was the compatibility in terms of brand values, said Perschon. Kraft took into account a company's attitudes toward quality, convenience, product variety and responsibility, all essential ingredients in its own brand identity, and crucial in a product that would sell reliability. Brand compatibility, in fact, has proved to be especially important, since the partners have employed a “360 degree” marketing approach that shows a single face to the consumer.
This focus also brought Kraft a step closer to seeing the overlaps in company cultures and the business strategies they mirror. Some useful questions Kraft asks in partner selection: Do the companies have a shared vision? Do their overall missions aim for the same goal? Will their fundamental principles make for a strong partnership?
Satisfied that BSH would match Kraft’s selection criteria, it was time to work on shaping the development agreement. Since credibility is perhaps the most important negotiating tool, this stage of the partner selection process offered a way to test how well Kraft's internal criteria had led to the right result. The negotiations, said Perschon, were built around clarity, empathy (standing in the partner's shoes), trust-building and a focus on interests as opposed to positions.
Clarity enabled Kraft and BSH to achieve agreement on what the parties meant, whether they were talking about success or metrics. Empathy created a deep understanding of each side's interests, strategies, expectations and concerns. Trust-building enabled them to test-drive problem-solving capabilities. By focusing on interests, both sides could discover objectives they shared and, where differences existed, how to find common ground. Documenting specific areas of agreements, including definitions and shared language, along with capturing contemporary feedback, was a useful approach throughout the negotiations. Much of the success of the process, said Perschon, lay in the depth and structure of the communication that supported it. In fact, he added, “You can't communicate enough.”
Part of the success of Kraft's partner selection criteria lay in its own rigorous self-assessment. In order to determine what it needed in a partner, the organization had to be clear about what it brought to the table. In addition, its criteria had to account for the challenges, requirements and opportunities the product venture presented. Since its launch, the Tassimo Beverage System has proved itself a winner in the marketplace. Behind that record lies a clear commitment to ensuring the right fit with the right partner.”
Director Alliance Management at Kraft Foods, Coffee (2009)
SOURCE: Scottsdale 2009 – The Management Roundtable – CoDev 2009