Dig Deep to Form Strategic Partnerships in Machine Vision
| By: Winn Hardin, Contributing Editor
During the past decade, the machine vision industry has come of age. Once just an “enabling technology,” machine vision has gone from obscure automation tool, to competitive advantage, to best practice, to stand-alone market solution. For example, smart sensors are moving toward embedded vision systems on a chip. And as it matures, machine vision is gaining more attention from tech giants outside of the industry.
In addition to mergers and acquisitions, one way companies can take advantage of competitive consolidation in order to make their companies stronger, more attractive, and more profitable is through forming strategic business partnerships.
Successful strategic partnerships within the machine vision industry yield new capabilities and ideas, expand into new markets, and ultimately increase revenues. But at their worst, such alliances can lead to customer dissatisfaction, broken trust, brand damage and plummeting profits.
While 85% of companies acknowledge that business partnerships are critical for growth, 43% of them have high failure rates and 42% are not well leveraged, according to a report from the Business Performance Innovation (BPI) Network and Chief Marketing Officer (CMO) Council. What’s more, 67% of leaders surveyed say their companies have no formal partnering strategies.
Despite the potential risks of failure, companies show no signs of slowing their commitment to entering strategic business partnerships. The 2015 Global CEO Survey by PwC says 51% of CEOs planned to form new strategic alliances last year, a five-year high. Why? Among the biggest drivers is access to new and emerging technologies, as well as innovation capabilities.
To make those business partnerships work to best advantage, Frost & Sullivan suggests companies take a comprehensive approach to assess, establish, and sustain strategic partnerships.
“When we look at design partnerships with an OEM , for example, typically what we are seeking right out of the gate is synergy between our imaging interface expertise, their technical requirements, and the market opportunity,” says John Butler, sales operations manager for Pleora Technologies Inc. (Kanata, Ontario, Canada), a manufacturer of high-performance video interfaces. “One thing we want to avoid at all costs is reinventing the wheel. If somebody comes to us and describes in minute detail exactly what they need for a solution, chances are it already exists and we’ll point them in that direction.”
The technology partners that Pleora has done the best with “have some kind of differentiator or specialty, whether it is the type of sensor they offer, the markets they play in, or their feature sets and they can leverage our products and system knowledge,” Butler adds. “Working together to develop a ‘me, too’ product has far less likelihood of being successful in the marketplace.”
In developing ongoing strategic partnerships, machine vision companies can apply criteria from mergers and acquisitions (M&A). “Our firm is chosen as a partner mainly because of the combination of these factors: excellent international network in the target industries, deep technical understanding in all aspects of machine vision, impeccable reputation for professional service, trustworthiness, and very good track record,” says Gabriele Jansen, managing director of machine vision M&A expert Vision Ventures (Heppenheim, Germany). “On the opposite one would find short-term cost considerations and a DIY mentality as some of the common mistakes in choosing a partner.”
When considering business partners, Jansen suggests thinking of the complete ecosystem “way beyond the vertical food chain up and down. Strategy advisors and providers of market intelligence are very helpful business partners as are associations, trade press, and trade shows. Every stakeholder has the capacity to help you in your business if only you understand how to listen carefully and are willing to help them in their business in return.”
An Investigative Approach
Critical to developing strategic alliances is rigorously vetting potential partners. That means scrutinizing factors such as an organization’s reputation in the machine vision industry, its financial status, and its other partners in order to avoid conflict, among other criteria. Case studies provide insights into capabilities, as do phone calls to those other partners.
Another important aspect to gauge is compatibility with your organizational structure and culture. Research from Belgium’s Vlerick Business School suggests that three behavioral characteristics — underlying attributes, communication style, and relationship management — impact an alliance’s performance. The principal traits of interdependence, trust, commitment, and coordination “determine how the partnership can best generate cost and service benefits,” according to the researchers. Meanwhile, transparent and precise information sharing in a strategic partnership will help improve services, and solid management skills help reduce costs.
To further assure a strategic fit, evaluate the other company’s overall strengths and weaknesses, management style, capabilities, and resources. As strategic partnership advisor Mazhar Syed points out, it is essential for partners to share a broad business philosophy and belief system rather than short-term goals. After all, the alliance needs to support both parties’ strategic plans.
At the outset, the two companies need to clearly establish criteria and objectives of the partnership, as well as the metrics used to measure success. While these benchmarks are typically financially driven, they also include customer satisfaction, referrals, and improvements in quality, productivity, and processes.
In many strategic partnerships, protecting intellectual assets is vital. Nondisclosure agreements help avoid misunderstandings by articulating the information each party will share. Joint development agreements, on the other hand, explicitly outline ownership of future intellectual property (IP) produced during the strategic partnership.
Sometimes acknowledging the need for a strategic alliance is half the battle. In developing its hybrid plug-in buses, Volvo created an efficient hybrid driveline but didn’t have knowledge about supporting systems like advanced traffic management. By partnering with those who had that knowledge, the world’s second-largest truck maker delivered the product faster to market.
By properly targeting, evaluating, and maintaining a strategic partnership, machine vision companies can expect long-term benefits. “When we as the interface partner and the customer as the product or solution provider go to market together, we tend to keep customers for the long haul,” Pleora’s Butler says. “That is a testament to the fact that what we are providing end-customers is not necessarily just a component, but rather a solution.”