At the recent IACCM European Conference in Dublin I presented together with Ivo Rutten of Philips Lighting. Our story was titled “How many years does it take to change a light bulb”. This title by itself might be a bit odd for a presentation about alliances at the conference of an International Association for Contract and Commercial Management (IACCM). The subtitle of our presentation explained a bit more: “How strategic alliances are helping Philips Lighting to transform”.
We started our presentation with a short video of Philips Lighting, which shows the history of light. In the video it is striking to see how long the lighting industry has been built on traditional incandescent lamps and only recently began to transform.
This industry is now transforming fast into a connected industry with, possible fully automated, smart lighting in your home, your office and your city.
With the audience we discussed the role alliances and ecosystems play for Philips Lighting in transforming from a traditional lighting company into a LED powerhouse. To achieve this transformation, Philips Lighting needed capabilities they did not have available in their own organization: capabilities and solutions, where other companies are market leaders. By establishing well crafted alliances between Philips, the market leader in light, and other market leaders, Philips Lighting and their partners are now able to create unique offerings with non-copyable differentiators.
During the conference I once again noticed many similarities between the world of contract management and the world of strategic alliances. This year maybe even more than last year. A couple of sessions highlighted the importance of the relationship in establishing and managing contracts. From a pure contract perspective, this is probably also driven by the fact that over the past 20 year the focus for procurement contracts shifted from goods to services, amounting for 56% of the contracts in 2015.
Business is now, more than ever, about relationships rather than purely about procurement contracts. Tim Cummins, IACCM’s CEO, summarized this in his closing speech as “We are no longer buying and selling things, we are buying and selling relationships”
From that perspective it is quite logical that there are many similarities between contract management and alliance management: it is about collaborative relationships. There might be a different focus area, yet both are dealing with living the contracts, orchestrating the stakeholders, managing the internal organization and striving for win/win/win’s with partners.
Healthy collaborative relationships are built upon trust and supported by a contract. Like in the “Getting to We” methodology, in a trustworthy collaborative manner the relationship is established and the contracts are negotiated. As Ivo said in our presentation: “trust is vital, as a contract does not come together in a negotiation unless there is at least some trust that the partners share a joint agenda.”