The Risks of Collaboration Work Between Organizations

The first risk when committing to a collaboration is that there may be conflict between the organisations involved, potentially resulting in unsatisfactory cooperation between the firms. This can result from the perception of relationship asymmetries; when one or both companies perceive their side of the deal to be unfair and as a result, disagreements arise. An example is when Disney and Pixar decided not to renew their successful 12-year partnership in 2004 due to contrasting cultures, insufficient commitment and conflicting goals (Simoons, 2012). In 1991, Disney and Pixar established a joint venture to produce up to three movies. With the release of the first film “Toy Story”, Pixar Films became one of the most profitable animation companies in the world. Over the years of the collaboration, Steve Jobs, the CEO of Pixar and Michael Eisner, the CEO of Disney, had public disputes regarding the amount of control and money Pixar was entitled to in the partnership. Pixar’s animation has been a financial and creative advantage to Disney, and Jobs felt that Eisner did not recognise this enough. Arguably, due to Pixar’s huge growth and successes, Disney couldn’t offer a better deal than that of other studios, which is why the disagreements began. According to Dyer (2001) and Spekman (1998), termination of an alliance means that the partnership has matured and is starting to display signs of tension. This then results in a strategic assessment and the organisations must make a decision of future directions. In the case of Disney and Pixar, the strategic assessment resulted in the decision to terminate the alliance due to ongoing disagreements. Perhaps this termination demonstrated that the 12-year partnership was in fact successful but had naturally reached the end of its life cycle. This case demonstrates that conducting activities for alliances is much more complex that managing single firms, predominantly because of the extra factor of managing the relationship with the partner firm. As a matter of fact, studies have continually demonstrated that the failure rate of alliances can reach up to 50% (Beamish, 1985), (Harrigan, 1998) and (Park, 1996).

Disney attempted to manage the relational risks with Pixar through contractual control. Contractual control involves identifying the details of utilization of properties in the alliance contract. Disney agreed to produce up to three films with Pixar, during which Pixar’s creative suite gained tacit knowledge about how to create a story for a feature-length film. Disney’s strict contract terms were that unless the first film was a huge success, Pixar’s earnings would be nothing. It is arguable that the contractual control used by Disney in fact worsened relations and therefore were ineffective in reducing risk. Disney’s uncompromising attitude possibly contributed to the tensions between the partners as Pixar became frustrated with Disney’s strict rules and the trust between the companies deteriorated over time. Perhaps equity control would have been beneficial in managing relational risks between Pixar and Disney during their joint venture agreement. Equity control refers to enforcing desirable behaviour in an alliance through equity ownership, where each partner owns a share of the other company. This may have increased Disney’s commitment to Pixar, as Disney may have put more focus on its relationship with Pixar instead of its collaborations with many other companies. Equity control could have converged the motivations of partners, so creating mutual commitment that minimize the need for control (Das & Teng, 1999).

To conclude, in the case of Disney’s successful collaborations with both Siemens and HP, the benefits of collaborating have surpassed any risks which Disney may have considered before entering the partnerships. Disney is very active in managing partnerships from the first stage, which is partner selection, as they often choose partners who have convergent goals. It appears that in these collaborations, both Disney and the partner perceived their outcome of the collaboration to be fair. With Pixar, this was not the case, as relationship asymmetry was the eventual reason for the end of the collaboration. Possibly, the disagreements and lack of trust between Disney and Pixar was due to them being players in the same marketplace. This is a key reason why collaborations between companies in different industries, such as Disney with Siemens, are often more successful than partnerships with competitors. Some of the risks discussed in this essay are extremely difficult to anticipate and manage. For example, it is difficult to always choose a right company to collaborate with as the other company may be deceptive about their intentions. Possibly, a company is more likely to engage in successful partnerships over time as they gain collaborative know-how on choosing partners and negotiate contracts. It is important to note that although Disney appears to have many successful partnerships, there are limitations to the sources used in this essay. Press releases often only include information issued by the company itself, which inevitably is provided with the aim to appear successful and prosperous to the public. Disney therefore would be eager to emphasise successful collaborations with Siemens and HP, as arguably this acts as a marketing tool to build brand image. However, when there are issues with a partnership, for example with Pixar, Disney most likely restricts public information as it can negatively affect their reputation and therefore financial success of the company.