Getting value from the ecosystem | KPMG | CA
Investing in ecosystems

Getting value from the ecosystem

Getting value from the ecosystem

Canadian CEOs have high expectations for growth, but they don't seem to expect much from their strategic partnerships and third-party relationships. What's holding Canadian companies back from getting value from partnerships?

Given Canada's reputation for collaboration, it seems somewhat strange that Canadian CEOs have such low expectations when it comes to business partnerships and strategic alliances.

Consider this: just 18 percent of Canadian CEOs believe strategic alliances with third parties will allow them to achieve their growth objectives, compared to 33 percent of companies globally. When asked what actions they would take to drive growth, less than a third of Canadian CEOs said they would partner with third-party data providers or innovative startups (compared to more than 50 percent of the global respondent pool).

What is more surprising is that Canadian CEOs don't seem to think they are missing much by avoiding collaboration and partnerships. Two-thirds of our respondents said they believe they could achieve the agility they need without using third-party partnerships; just a quarter of global respondents were as confident. And more than three-quarters said they believed they could still compete by focusing on the organic 'build' approach rather than through third-party partnerships (compared to just a third globally).

Canadian CEOs understand the value of partnering with third-parties, innovation startups, vendors, customers and even competitors. The problem is their experience to date has often been lackluster and disappointing. Most struggled to gain the anticipated value from their tie-ups in the past; many are now unwilling to hang their growth forecasts (or their remuneration) on the success of their partnerships with outside parties.

While this sentiment may be somewhat justified, it doesn't change the fact that partnerships can deliver significant value in today's business environment. Partnerships can catalyze an organization's innovation process; they can help add much-needed capabilities and skills during times of transition and growth; they can serve as a testing ground for new ideas and models before they are adopted into the wider organization; they can help change organizational ways of working and introduce new capabilities; and they can help organizations get closer to their customers.,

Why do Canadian companies seem to struggle getting value from third-party relationships? In part, it is because we tend to approach these types of relationships from a transactional perspective rather than a strategic collaborative one. For whatever reason, Canadian alliances and partnerships are often founded on the strength of the contract terms and conditions rather than on a vision for a mutually beneficial outcome. What that means is – from the very start – the partners are in a constant state of conflict.

In other markets (the US in particular) the more successful companies are those that develop their relationships on a deep desire to help each other succeed. They want to invest time and resources into improving the relationship. They take the time to understand and align to the other party's goals and vision. They view contract terms and conditions as a legal necessity rather than a founding constitution.

It is not surprising, therefore, that Canadian CEOs were more than twice as likely as their global peers to say they had, in the past, ended a third-party relationship that would have driven growth because they didn't feel the third party was a good fit for their culture and purpose. Companies in other jurisdictions likely spend more time assessing the cultural and strategic fit before they enter into partnership agreements.

That being said, Canadian CEOs do have plenty of very reasonable concerns about third-party relationships. The biggest difficulty, according to our respondents, is sharing data (particularly their commercially-sensitive data) securely with their partners. And, frankly, it should be a prime concern – for all parties in the relationship. Again, terms and conditions will only go so far in protecting the partnership's data; all parties will need to work closely and collaboratively to achieve the right levels of data security.

And, remember, if you think the data is far too sensitive to share outside of the organization, don't share it. Knowing what to share and with whom is key to managing the third-party relationship and understanding the cyber security of your own company, and that of your potential partner, is critical before sharing information.
 

barriers to extracting value from third-parties

Our results also show a high level of experience about the challenges of engaging with smaller, nimbler startups. One-in-six CEOs admitted that their own legacy IT systems posed the greatest barrier to extracting value from their third-party relationships. An equal number said their procurement process was too rigid, lengthy and complex to make partnerships work.

Canadian CEOs, their business development leaders and their procurement departments need to recognize that different partners will have different levels of experience when striking agreements. The goal should be to help smaller partners navigate the process and secure a good agreement based on business value rather than simply pushing them down to the lowest cost.

While our data suggests Canadian CEOs have little appetite for partnerships and alliances right now, I believe that – with the right approach and a few successful engagements – partnerships will quickly become a key growth strategy in the Canadian market for us to compete globally. Those that start refining their approach and building their relationships now will be well placed to capitalize when the right partners and right opportunities emerge.

*All statistics result from the 2018 Canadian CEO Survey.