Twin fates: partnerships will keep manufacturers' doors open.

"UNITED WE MANUFACTURE" IS A CLICHE THAT APTLY describes how to enhance manufacturing in a tight economy. Survival of all as a group means survival of each and every entity in the group. We need a healthy manufacturing base in order to have an overall viable economy. Even the booming service enterprise industry depends on outputs from the manufacturing sector. There is an increasing demand for all things manufactured--milling, turning, drilling, grinding, cutting, forging, plastic injection molding, finishing and casting, welding and more; we all depend on mutual manufacturing outputs. Manufacturing lays the foundation for economic advancement. It is, therefore, imperative to develop strategies jointly for enhancing that unifying sector of the global economy.

Without creative solutions, the future of independent manufacturing in a tight economy is very bleak. Manufacturers are all enmeshed in the global system of market movements. The recent coordinated expedition of the big three of the U.S. auto industry in search of government bailout is illustrative of the need for competitors to partner even in the face of fierce market rivalry. If General Motors Corp. can boost the chances for the survival of Chrysler, it is directly boosting the industry upon which its own survival rests. This article presents extrapreneurship as a partnering strategy for manufacturers in a tight economy.

What is extrapreneurship?

Terms such as "coopetition" have been used in the past to describe strategic alliances between competitors. Left to its own devices, cooperating competition can falter and degrade over time, particularly when market push comes to market shove. Extrapreneurship is an extension to entrepre-neurship and intrapreneurship currently embraced by business and industry. Entrepreneurship sets up independent business pursuits that compete in the open market. Intrapreneurship sets up an internal semi-autonomous business unit of an organization that may operate under a different business model from the parent company. Extrapreneurship sets up a physical presence of one manufacturer within the operation of another cooperating manufacturer. It should be emphasized that extrapreneurship is not conventional outsourcing. It is a direct set-up of operation within the facility of the cooperating manufacturer. It allows a manufacturer to have a presence (or even a product) in an area for which it does not have internal core manufacturing competence.

Although elements of what extrapreneurship entails are being practiced by many organizations (e.g., customer site co-location), there had not been a formal or unified formulation as a manufacturing initiative. Extrapreneurship sets up a unit of one competing but cooperating company within the premises of another company. It is the next best thing to direct acquisition or merger. This approach indicates that the collective success of the manufacturing sector requires a systems-oriented synergistic approach. Not all manufacturers are fully versed in all segments of their operations. Embracing (or even housing) a unit of a competitor that brings added value is a strategy that creates mutual manufacturing support.

Key components of extrapreneurship

There are several concomitant components of extrapreneurship; however, strategic partnering and cooperation are the two components that shape this business method as a whole.

Unlike conventional strategic business partnering, extrapreneurial strategic partnering has a requirement for physical co-location of units of the partnering organizations. Strategic alliance is defined as a formal alliance or "joining of forces" between two or more independent organizations for the purpose of meeting mutual business goals. Each partner in the alliance has something to bring to the table such as products, supply chain, distribution network, manufacturing capability, funding, capital equipment, operational expertise or intellectual property. Strategic partnering represents cooperation while synergy ensures that each partner derives benefits beyond normal independent operation.

The co-location strategy of extrapreneurship is what facilitates coordination and implementation of the ideals of cooperating. It represents partnership outreach of business-to-business collaboration that borders on subsidiary relationship. Manufacturing organizations must leverage existing structures of entrepreneurship and intrapreneurship to create sustainable extrapreneurship relationships. This triangular strategy has the goal of achieving communication, cooperation and coordination of manufacturing initiatives. With a strategic project management approach, we can build constructive extrapreneurial relationships rather than adversarial relationships among manufacturers.

While there are pros and cons of partnering, the advantages often outweigh the downsides. Advantages of strategic partnering include allowing each partner to concentrate on operations that best match its capabilities, permitting partners to learn from one another and develop competencies that may be readily utilized elsewhere and facilitating synergy that increases the outputs of partners' resources and competencies.

The key characteristic requirement for extrapreneurship is the physical co-location of units of the partnering organizations. Strategic partnering can be executed in a step-wise formation:

Step 1: Strategy development. This requires a feasibility study of the proposed alliance with respect to objectives, rationale, people, technology, process, resource base, management, challenges and conflict resolution strategies. Strategy development requires aligning the objectives of the alliance with the overall corporate vision and mission. A key part of strategy development is an internal SWOT analysis to document strengths, weaknesses, opportunities and threats.

Step 2: Partner assessment. This involves assessing a potential partner's capabilities, performing benchmarking analysis, developing tactics to accommodate a partner's management styles, developing criteria for partner selection and understanding mutual resource requirements.

Step 3: Agreement negotiation. This involves determining prospective partners' relative objectives, contributions, rewards, information protection, team composition, performance assessment procedures, policies, procedures and termination clauses.

Step 4: Strategy implementation. This involves actual operation of the alliance between the partners. It requires management's commitment to resources allocation, linking of budgets, coordination of priorities, schedule development, tracking, control and reporting. This is an area where project management techniques could be most useful. Many alliances written so beautifully on paper often falter due to lax implementation strategies. Partnering strategy implementation is of four different types:

* Joint venture: Two or more partners create a legally independent company to share some of their resources and capabilities to develop a mutual competitive advantage in the marketplace.

* Equity strategic partnership: Two or more partners own different percentages of the company they have formed by combining some of their resources and capabilities to create a mutual competitive advantage in the marketplace.

* Non-equity strategic partnership: Two or more partners develop a contractual relationship to share some of their unique resources and capabilities to create mutual competitive advantage.

* Global strategic partnership: A working partnership between companies (often more than two) across national boundaries or across industries forms. Often a foreign government is involved.

Step 5: Termination. All good things eventually come to an end. Partners must be realistic about this fact-based cliche. While sustainability is important in alliance formation, what needs to be terminated must be terminated when the time comes. Force-feeding an alliance just for the sake of sustaining a relationship could only lead to a waste of time, squandering of resources and lost opportunities. It is time to terminate an alliance when its objectives have been met or cannot be met, or when a partner adjusts priorities or diverts resources toward other initiatives.

Types of cooperation for extrapreneurship

Cooperation is a basic requirement for resource interaction and integration between partners. More projects fail due to a lack of cooperation and commitment than any other project factors. To secure and retain the cooperation of extrapreneurial partners, the most positive aspects of a proposed partnership should be the first items of extrapreneurship communication. Such structural communication can pave the way for acceptance of the proposal and subsequent cooperation. For extrapreneurial partnering, there are different types of cooperation that can be in effect, as summarized below:

Functional cooperation is induced by the nature of the functional relationship between two partners. The two partners may be required to perform related functions that can only be accomplished through mutual cooperation.

Socially responsible cooperation is particularly common for activities that may impact the environment. The socially responsible relationship motivates cooperation that may be useful in executing extrapreneurial partnership.

Regulatory cooperation is often imposed through some legal authority and expectations. In this case, the participants may have no choice other than to cooperate.

Industry cooperation is fueled by the need to comply with industry standards and build a consensus to advance the overall industry in which partners find themselves.

Market cooperation involves partnering of market players to advance market health.

Administrative cooperation is brought on by administrative requirements that make it imperative that two partners work together toward a common goal, such as market survival.

Print Get the Mag Weekly Updates