Risky Business: Getting Payback on Partnerships

Although the risks are high, these days insurers can't afford to ignore the benefits of alliances and partnerships. Here's how to improve the odds of success.

Alignment of Vision

This illustrates what ultimately may be the most important success factor. An alignment of vision among the partners makes the establishment of goals and objectives—especially during the negotiations process of a partnership—much easier. Insurers must remember that these discussions are not one-sided and should not be focused only on what their own companies will gain. ""It's not a typical insurer and its vendor negotiating their contract,"" says Business Development's Etzler. ""It's more about 'How we are both going to win from this? Do we have a value proposition that meets both of our needs? And, if so, what kind of business model and structure can we put around that?'""

The members of the dedicated alliance teams must share ideas with their counterparts at the partner companies, just as they would internally within their own firm. ""It's so important that communications be open, have a candid quality and create trust,"" says Parsells. ""It must go up, down, around and across the organization."" Parsells advises that members of alliance teams ""make a religion about being accessible."" Face-to-face meetings are also important. ""Have hours of eyeball-to-eyeball communications to be sure that you really understand each other,"" says Parsells.

Finally, a challenge with which many partnership participants struggle is measuring the venture's successes. Etzler advises insurers to establish key performance indicators so they can eventually be measured and reported properly throughout both (or all) organizations. This process should take place during the establishment of goals and objectives, so that members of alliance teams are able to ""move the ball"" from day-to-day, if necessary. The partners also need to ask (and answer) questions such as, ""How do we break goals and objectives down into measurable pieces? Who owns those pieces in terms of making them happen? And how are issues being resolved?"" adds Etzler. It is important to establish clear governance roles and processes upfront and follow them through all stages of the alliance because, according to Accenture's report, they can sometimes be forgotten. Like a leaky roof, when things are going well in an alliance, it's easy to overlook the detailed plans for governance; when things go bad, no one feels like addressing the underlying governance problems, says the study.

Regardless of how quantified the steps of an alliance or partnership are, insurance companies are bound to run into some snags during the pursuit of such initiatives. ""You have to fail early and often to succeed,"" says Fusura's Parsells, who advises insurance partners to continue to test, learn and expand intelligently as they grow. ""The goal of a partnership is to have both sides gain from each other,"" he says. ""If all companies involved don't win, then it has failed and everything will fall apart.""

---------------------------------------

INSURERS COULD TAKE LESSON FROM TECHNOLOGY VENDORS

Partnerships among insurance technology vendors are more frequent than those among financial services companies, due to the nature of the technology business. Because they are more dependent on alliances to stay competitive, these link-ups occur with some frequency. Accordingly, vendors generally are more prepared and have a higher success rate with partnerships.

For example, S1 Corp. (Atlanta), a provider of Internet-based applications for the financial services industry, has taken part in several types of alliances. It has pursued competency alliances, which are made with vendors of specific niche products, and legacy alliances, which are made to develop a set of interfaces so that S1 can link its front-end applications (such as rate quoting capability) to a customer's legacy system. S1 also has formed alliances with the vendors of the platforms that its technology is based upon. Finally, client/customer partnerships help S1 define the requirements of a solution and predetermine ROI for customers, before new or updated products hit the marketplace.

One fact in S1's successful partnership track record is that it dedicates employee resources to these relationships. ""Several resources are dedicated to one partnership,"" says Gordon Sanders, vice president of global insurance, S1. ""They live and breathe that alliance.""

S1 has metrics in place to try to measure each venture's success, although Sanders concedes that some alliances are more successful than others. ""We make service level agreements, which are quantitative, and we developtarget numbers for successful implementations,"" he explains.

Not all the benefits from vendor alliances are tangible, however. Although most participants will reap the rewards of enhanced revenue, according to Amy Wohl, president, Wohl Associates (Narberth, PA), some of the ROI will be less direct—such as the intellectual property gain associated with a partner.

Ultimately, no matter how quantifiable the return, Wohl cites unrealistic expectations on either side of the pact as a partnership's kiss of death.

----------------------------------------------

ACCENTURE'S FIVE TENETS OF GOOD GOVERNANCE FOR PARTNERSHIPS

Tenet 1: Create a Shared Vision

Because an alliance is not the end, but the means to an end, alliance partners must decide together on the common goal—something that will reside outside the structure of the alliance itself. There will be marketplace, financial and customer goals toward which the partners are moving, as if on a journey.

Tenet 2: Operate on a ""We"" Model

Alliances often fail to live up to their value or may completely disintegrate when one side attempts to treat the other as anything less than equal. In alliances, no subordinates exist, regardless of the actual relative size of the partners involved. ""Alliances are most successful for both partners when they provide a 'win-win' for both partners,"" reports one executive.

Tenet 3: Understand the Other Organization

This serves as the underpinning of the ""we"" model. Understanding the partner's strategic plan, politics, relationships and business operations is critical for success. One successful alliance manager reports, ""We share corporate plans in full with our alliance partner. Out of that comes a development plan that is agreed on in advance for the following 12 months.""

Tenet 4: Build Personal Relationships at the Executive Level

Almost universally, the people with whom Accenture spoke talked about the need for personal involvement among the executives of the alliance partners. One interviewee put the matter elegantly: ""Unquestionably, the most important success factor for our most important alliance is the depth of the relationship from the top down. By that, I mean that you must touch your partner 'from shoulder to ankle'—the CEO must match to the partner's CEO, the directors to the directors, the operations to the operations people.""

Tenet 5: Create and Nurture High-Level Sponsorship

This tenet concerns the type of ongoing sponsorship needed to oversee a successful alliance. As one executive put it, for an alliance to work ""you need to get the leaders in the room, not the lackeys.""

2 of 2