Strategic partnering principles

12/01/1998

Strategic partnering principles

Rick Hill

In today`s world of high technology, many links must be created between manufacturers to deliver leading-edge solutions to customers. In the semiconductor industry, with its complex manufacturing and interrelated processes, the needed solution often requires expertise from multiple suppliers.

Today, our customers are looking for suppliers who can provide integratible, best-of-breed processes. Suppliers with complementary products who work together to deliver such complete, open-architecture processes - such as the Damascus Complete Copper solution of partners Novellus, Lam Research, and IPEC - can offer their mutual customers the best of both worlds. Customers gain the ability to select the products that most meet their needs, as well as the ease of process integration expected when working with a single vendor.

At Novellus, we have found that the efficient, timely delivery of these multivendor solutions often requires intense, prolonged communication among the vendors involved. Partnering is a way of formalizing this necessary communication channel among complementary suppliers who are focused on the common goal of serving the customer`s needs. When the partnership ceases to deliver an optimal solution to the customer, it is relatively easy to dissolve the partnership or revise it in such a way that it again delivers the desired value.

Why would a company choose to partner rather than pursue an acquisition? Acquisitions are risky, especially in the high-technology market. Corporate cultures must be melded together; infrastructure and personnel issues must be resolved; and areas of responsibility must be delineated. Cost issues aside, the time and energy spent in resolving these and other issues can result in lost technological edge and market share. A better approach is open communication between key players who each own a part of the solution. Healthy competition is promoted and the customer can craft an ultimate equipment configuration.

Working with partners

When choosing a partner, the first concern should be whether the partner has the right technology. Beyond that, choosing the best partner depends on whether the companies share similar management views on the importance of delivering quality results to the customer and the level of effort needed to accomplish that task. In addition, they have to share a vision of the future. In particular, it is important that both high-tech parties understand how technology changes the business landscape.

Another element in a successful partnership is clear recognition of common and individual company goals. If the team sees that the fruit of its labor has a measurable impact on its own goals, as well as on the industry, it makes it easier to work through the program`s challenging times. The current Damascus partnership is predicated on these twin principles of a shared vision and compatible market goals.

In any internal or external program, conflicts have to be managed. In multicompany partnerships, communicating frankly and directly is key to effective conflict management. When engaged in a cross-corporation partnership, it is important that all the parties embrace this approach. Ironically, this is often easier in partnerships than on an internal, interdivisional level, since threats of repercussions from "telling the emperor he has no clothes" are virtually eliminated.

Another critical element in managing a successful partnership is reaching an equitable agreement on the allocation of resources. This consideration should be resolved early in the partnership discussions, especially if companies of different sizes are involved. While types and levels of resources assigned to the partnership may vary from partner to partner, each has to be committed to allocating its appropriate share. Beyond that, management must be willing to drive equally hard for results by all participants.

Quality issues must also be decided, such as how to deal with situations in which one partner`s product fails to perform as promised, thereby compromising the performance of the whole tool set. This critical issue must be resolved if the partnership is to have credibility with its customers. In the Damascus partnership, we have established an intercompany copper integration technology center, identified top executives within each company to manage the alliance, and rigorously specified process parameters to ensure easy integration. Beyond this, customers who experience problems with a particular tool can return the entire tool set should they so desire.

Partnership trade-offs

One area of potential conflict is the migration of the partners into competitive situations. Initially, most partnerships are formed because each member holds a unique piece of the desired solution. As information is exchanged, however, there is always the danger that one of the partners will decide that, having accumulated enough of its partners` knowledge and technology, it will benefit more through competition than continued cooperation.

This tendency can be minimized if the management of each of the participating companies remains committed to the partnership and its common goals. Frequent, regular communication between top executives of the companies helps to build the necessary levels of trust and cooperation to make such partnership breakdowns unlikely.

I expect we will see increasing numbers of partnerships in our industry. They allow participating companies to remain nimble and flexible, while providing a more complete solution than any of the partners could have offered alone. By pooling technical knowledge and resources, partners can introduce new technologies that have the potential to revolutionize the industry.

The key to success in any business lies in delivering the best results to the customer. The key to achieving that success lies in forming an expert team and executing your vision. Whether this is done through partnerships or through acquisition is only a question of what is in the best interests of the customer, the industry, and the individual company`s shareholders. n