This week’s reading happened to coincide with some interesting conflicts that arose with one of my company’s “strategic partners”. I had the opportunity to sit with the owner of our company, Bill Baquet, for an informal interview during which we discussed the topics of Alliances and Networks (Gulati, 1998) , collaborative advantages( Kanter, 2010) and  trust (Barney & Hansen, 1994). While we talked about these issues Bill shared a little bit of his business experiences which I will share here as well.

Bill has had a long history, 38 years in fact, in the contract furniture business. During this time he has started and/or acquired several different companies. Each of these companies has been structured in slightly different ways. At one point he was the sole owner of an organization that “employed 14 manual drafters, a couple dozen commissioned sales people, and an enormous installation crew that along with other administrative and warehouse staff totaled over 100 people” (Baquet, personal communication). After suffering a loss of over $300k in a single month, Bill began to reorganize the company to return it to profitability and then sold it to take a break from the business. He’s never been away long though and he is now a majority owner of a smaller company that does nearly as much business (in terms of annual sales) as that behemoth company he sold off many years ago.

The difference between that company and our current organization is that we now rely on outsourcing to strategic partners for a great deal of the services that make up our business. Bill has created, through years of networking, a pool of other business owners in complementary businesses that he draws upon to create key alliances (Gulati, 1998). For example, he has a long list of architectural firm Principals who introduce him to their new clientele. This keeps Bill working in a warm market where strong levels of trust are already established and hence transferred by association (Barney & Hansen, 1994). In fact, we can’t have lunch in Pasadena without running into at least one person in Bill’s long list of contacts.

From an operations stand point, Bill also enjoys a long list of “go-to” companies with whom he has had longstanding and successful relationships. This brings me to that interesting conflict I spoke of in my opening sentence. One of these strategic partners is the installation company that we’ve had as our primary installation team for nearly ten years now. The owner of this company has made staffing changes, which is to say he’s fired people, which greatly reduced the quality of his services. He was seemingly forced to do this as a result of the economic down turn. Unfortunately, adding to the complaints of unsatisfactory performance on the part of his current staff, he’s added a business developer who has erroneously contacted Bill’s existing customers. This could have been forgiven except that in a conversation about the matter with the owner of the installation company that owner “didn’t see anything wrong with pursuing a delaer’s clients” (Baquet, personal communication). This just goes to show that for however much strong form trustworthiness (Barney & Hansen, 1994) there is between entities, the almighty dollar takes precedence in the end. Bill told me at the end of our conversation, "trust, but get it in writing".

References:

• Barney & Hansen, (1994). "Trustworthiness as a Source of Competitive Advantage." Strategic Management Journal, Vol. 15, pp. 175-190.
• Kanter, R. (2010). "Collaborative Advantage: The Art of Alliances."Harvard Business Review. pp. 1-16. (Full Article)
• Gulati, R. (1998) "Alliances and Networks" Strategic Management Journal, Vol. 19, pp. 293-317