eRelationships

Mainspring’s Dan Greenberg gives online seminar to LFM-SDM alumni

By Monica Nakamine
March 16, 2001

Summary:

  • Collaborative networks can now be pursued due to the inexpensive cost Internet-based collaboration tools.
  • eRelationships enable information flow between pairs of business partners.
  • They are also a low-risk way to optimize supply and distribution while reducing the risk of jumping to collaborative networks.
  • Selecting the right technology vendor is another crucial decision that must be made so that both parties come out winning.

In one of a series of ongoing on-line seminars for the LFM and SDM alumni community, Dan Greenberg, ’95 Sloan MBA and Director, eStrategy at Mainspring, a consulting firm in Cambridge that partners with companies to develop online and offline business strategies, discussed e-Relationships — what they are and how to create them.

On February 15, 2001, 18 LFM and SDM alumni and current students from various parts of the U.S. simultaneously logged on to a directed site to follow along with Greenberg as he gave his presentation. Participants were also linked via a conference call so that questions and comments could be addressed during and after Greenberg’s discussion.

According to Greenberg, "eRelationships alter manufacturers’ supply chains by strengthening individual alliances without completely dismantling their sequential structure. [They enable] bi-directional information flow between pairs of business partners and are a low-risk way to begin to optimize supply and distribution while reducing the risk of jumping to the end-state of collaborative networks."

Business partners include:

  • Suppliers
  • Manufacturers
  • Distributors
  • Customers

Exactly what is a collaborative network? Traditionally, competition exists between individual companies, but, as Greenberg explained, manufacturers are now migrating toward a broader notion of collaborative competition:

  • "Alliance web vs. alliance web" instead of "company vs. company"
  • Disaggregated providers vs. vertically integrated
  • Value-based competition vs. price-based competition

Collaborative networks, then, are more about who you know, and less about what you know. Greenberg gave an example:

"Fish tend to swim in schools. Predators see [the school of fish] as one big fish, instead of small, individual ones," he said. "Nike is a marketing and design company; it manufactures nothing. But they created a web around them so that they appear as a large sneaker company. Industrial companies have started to think this way, too."

A determining factor in creating a successful eRelationship is a company’s ability to embrace this new strategy of doing business and how it can form alliances with other companies instead of bumping heads with them. Greenberg said that eRelationship implementation must be driven by the company’s business goals. Strategizing then begins when the company identifies, segments and prioritizes business partners with whom the company wants to have an eRelationship.

"The Internet has allowed for eRelationships to be pursued and blossom by introducing lower cost-collaboration tools," Greenberg said. "The fundamental nature of an eRelationship is to create a partnership that will be mutually beneficial for both parties, and it’s easier to ensure these benefits when communications is less expensive."

Greenberg also pointed out that defining the strategies and establishing similar goals are crucial to ensure that this happens.

In parallel with organizational change is technology implementation. It’s important to choose the technology that will best support the business strategy. Only then should technology vendors be chosen.

Greenberg’s presentation provides several examples of the technology vendors that different companies have chosen and how each relationship proved to be valuable:

  • Covisint, a vendor of Netmarkets, helped ArvinMeritor, Inc. claim 10% to 15% savings for automakers.
  • GE Power Systems collaborated in real-time on 3-D product designs, thanks to Alibre, a CPD vendor.

Although an eRelationship may be flourishing, Greenberg emphasized that it must be re-evaluated on a regular basis. As the company grows, its needs might change; therefore, the partnership must also adjust according to those demands or possibly be dropped entirely. It takes strategic thinking, careful consideration on many different levels and constant evaluation for one to continue to be profitable and mutually beneficial from all aspects.

"Establishing an eRelationship is a low-risk way to transition from the sequential and vertically integrated chain toward the new paradigm of collaborative networks, but collaborative networks may not always be attainable or even appropriate," says Greenberg.

Greenberg pointed to Mainspring’s relationship with MIT as an example of a mutually beneficial collaboration.

"MIT is part of our ongoing outreach to the academic community in order to share some of our insights and to gain insights from them," said Greenberg. "We pursue relationships with individual academics and also institutions which are in alignment with our vertical practices. LFM, for example, is very much in alignment with the Industrial and Life-Sciences practice, which works extensively with manufacturing companies."

LFM and SDM plan to offer future webcasts during the year. The next one will be in April (date TBA) with Professor Don Rosenfield, director of the LFM Fellows Program, who will be discussing "Global Supply Chain Strategy."