Strategic Alliances: Why and How to Build Them
A strategic alliance makes sense when you need to offer more value to the customer, but you cannot completely do it on your own. An alliance or partnership offers you a competitive advantage through access to a partner’s resources and capabilities. In fact, alliances are used more and more often for Innovation, Research and Development.
Alliances have the potential to create value, but most are difficult to manage. When this happens, the alliance is not delivering its full potential value. Partnerships and alliances work best when all parties agree on and work together to implement a common strategy to achieve business objectives. If you want the partnership to be successful, you have to plan for it.
Planning for Success
- Define the expected outcomes for each partner
- Define the contribution of each party, and the benefits they get
- Identify the results that will cause the alliance to be beneficial
- Define the structure and operating issues that need to be addressed
- Protect intellectual property rights through legal agreements
- Be certain that the “company cultures” are compatible
- Be certain that the parties can operate with an acceptable level of trust
Shared goals and objectives
Choosing a partner based on who they are – their reputation, performance record, strengths and weaknesses – is a logical place to begin. It is just as important to compare their goals for the partnership or alliance with your goals. In a strategic relationship, both companies make decisions and take actions. But often, the overall goals for each company are different enough to cause conflict. For example, is the alliance a major requirement for implementing your strategy? If “Yes”, you need to make sure that potential partners will view your agreement with the same level of importance that you see it.
Dealing with problems and disagreements
In any alliance or partnership, many types of problems can pop up. Finding the source of each problem and working to resolve it will keep the alliance alive and moving forward. One of the most common problems is lack of clear responsibilities and performance measurements. Without the proper oversight and review, one company can fail to live up to its part of the agreement. It could continue receive its portion of the gains without having done the work required of it.
Hidden sources of conflict
Unspoken expectations about how the partnership needs to operate can lead to conflicts. This is especially important in partnerships with companies from different parts of the world. For example, what is the nature of your relationship with your customers? Many European companies see the relationship differently than companies in parts of Asia. Yet, most companies don’t discuss this as an issue. They assume that everyone understands how to treat the customer. These issues are not obvious. They are subtle. When they arise, they need to be dealt with carefully and with the overall strategy in mind.
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