Companies & Agencies: New partnership models needed

februari 25, 2020

For the development of digital products and the introduction of agile procedures, companies are increasingly seeking the support of service providers. In the new Lünendonk & Hossenfelder market research magazine, our expert Dirk Lässig (Director Transformation Consulting) shows why digital customer journeys require new partnership models between companies and agencies - from cooperation at eye level to joint ventures.

While traditional advertising agencies have for a long time influenced the external perception of a company, technological service providers and digital agencies have so far been seen more as “workbenches”. Today, however, products such as cars, machines or shoes are becoming connected touchpoints. Digital user experience and data expertise determine product demand. Thought the digital workbenches become important partners for the core business. New partnership models are emerging - from product teams that believe in a shared cross-company vision, to in-house agencies, to joint ventures such as those between Audi and Valtech.

The Digital Customer Journey Requires New Partnership Models Between Companies and Agencies

Attractive user experiences are increasingly forming the crucial competitive advantage nowadays. It is not just a matter of visually "prettifying" existing contact points. The paths that customers follow at and between these contact points represent the differentiating added value – in other words the customer journey. Digital technology opens up new possibilities for designing this customer journey. It also creates new user expectations, such as ubiquitous accessibility, immediate responsiveness or process shortening. Meaningful customer journeys are not a commodity of just one service provider but are a deep adaptation of existing business processes and IT systems.

This task that has to be solved accordingly requires several competencies that were previously found with different service providers:

1. empathy for user needs - agencies
2. technological integration - system integrators
3. business reinvention - strategy consulting

Co-Creation, Product Focus and Integration

To create new digital experiences, different competences have to be brought together. Interdisciplinary work thus becomes the standard. The best solutions are not found when a discipline creates artefacts and "throws them over the fence". Searching for the optimal Customer Journey approach, which is user-oriented and quickly realizable as well as changeable, requires much more a constant exchange between the disciplines. This is why cooperation between customers and service providers should be continuous.

Such projects are often still strictly fenced off between the involved parties. However, a paradigm shift in cooperation is necessary, where all parties have the goal in mind and work together on the product instead of focusing on the fulfilment of a contract for a project. We see a shift from project to product orientation.

Investment in partnerships

This changes the way companies cooperate with service providers. It is no longer a matter of purchasing commodities with a contract for work, but of establishing partnerships with a common value definition. But the establishment of these partnerships is hardly supported by the usual tendering processes. Mutual trust is achieved especially through practical work on the product. The culture of the service provider is decisive and becomes an important selection criterion. To what extent does an agency have the experience and the right mindset for interdisciplinary work? The way the client and the service provider work is becoming more interwoven. All participants must be willing to invest in the development process and improve it further. In the end, not only a product is created as value, but also the jointly functioning organization.

Barriers to cooperation

We often experience that the participants, although they share a common will for a partnership, revert to habitual behavior patterns. The suppliers' mindsets do not always meet the requirements of digital projects. Suppliers try to isolate themselves, to separate themselves by limiting their responsibility and to evade collaborative cooperation. Their focus is on commercial risk minimization. Suppliers have to learn to prioritize collaboration and still consider the terms of the contract.

Nevertheless, a much more critical impediment is the legal framework. The rules for cooperation between companies are oriented towards the age of industrialization with service and work contracts. The delivery of goods, artefacts or limited services does no longer match the necessary co-creation approach. Particularly large companies are afraid of coming under suspicion of illegal temporary employment and bogus self-employment, especially in Germany. As a result, the trend of insourcing can be deduced. In order to avoid these impediments, the companies invest in the skills of their own employees. We observe the emergence of in-house agencies and the development of in-house software development expertise in large companies. Thereby the external view and the experience from other fields are extremely helpful to break new ground. For this reason, the legal requirements for co-creation between companies should not be a barrier. Only in this way the potential for innovation in the digitalization can be unfolded.

However, fixed structures and contrary goals often increase the barriers. The optimization goals of the organization are often not aligned to the explorative nature of digital projects. Strict process guidelines of purchasing, compliance and legislators cannot be transformed for the partnership due to risk minimization.

Development possibilities of the relationship

Assuming that customers no longer rely on work contracts and fulfilment agents, there are several possibilities for setting up a common, cross-service provider organization, depending on the business strategy:

1. "Keep doing it together": If the relationship is already on a partnership level, it can be continued or even expanded. We can see that in trustful relationships between customers and service providers, partnerships last for many years and that more than just one product is developed together. Customers prefer to stay with the good cooperation and continue to use the working common organization.
2. "Just keep me profitable": For the customer in industries with less disruption, the resulting digital customer experience is often sufficient. Customers want to reduce the costs of further development and maintenance. Parts of the organization are gradually being relocated to low-cost locations. The working model will be retained. But by losing co-location a loss of innovative power must be accepted.
3. "Make me independent": In some cases, the customer wants to take over the organization and replace the service provider roles with their own staff. The customer's employees are trained by the service provider so that they gain the know-how to continue the digital product development.
4. "Let's become one": In cases where the partnership becomes very intensive and extensive, both parties can secure the organization and take it to a new level by setting up a joint venture. A joint company underlines the collaborative character of the partnership. With Valtech Mobility GmbH, a joint venture between Audi and Valtech, we see an example of such an intensification.

Conclusion

The change from project to product orientation requires a rethink in the cooperation between companies and their service providers. Companies should create the framework to encourage the exchange between disciplines and give agencies the chance to become real partners in their core business.