Sustainable Growth:

Developing Partnerships

Strategic Alliances

Why and How To Build Them

Alliances versus Transactions1 In transactions: Negotiations may be divisive between neither firm cares about the other's well-being. Wise Agreement Finger pointing, rather than creative problem solving, is encouraged... More Forms of Strategic Alliances

Direct cooperation, the most common form. Joint ventures, where partners create a separate unit they own and control together. Minority investments, in particular corporate venture investing in young rapidly growing firms.

Ten Reasons to Create a Strategic Alliance By Rupert Aarons, Profit Glory

You could offer your customers a larger variety of products or services. This will allow you to spend less time and money developing new products to sell... More

Structuring a Strategic Alliance 10 Questions To Answer

Do you have a strategic architecture which employees understand?... More

Developing Business Partnerships 10 Reasons To Create a Strategic Alliance Alliances vs. Transactions Structuring a Strategic Alliance: 10 Questions To Answer 10 Key Features of Effective Partnerships Core Competencies Trust as a Source of Competitive Advantage Developing Trust Between Two Organizations Mutual Creativity Joint Ventures Common Reasons for Joint Venture Difficulties Causes for Joint Venture Failure Forming a Successful Joint Venture Choosing a Joint Venture Governing Structure Joint Venture Human Resources Strategy HR Action Steps to Prepare for a Successful JV Joint Venture Agreement: a Checklist Mergers & Acquisitions Venture Acquisitions Getting People Issues Right in Mergers and Acquisitions Innovation Strategies Strategic Innovation Case Studies Toshiba: Strategic Alliances as a Key Element of Strategy Partnership Between TraveLinx and ICit Alliance Between Canon and Hewlett-Packard New Tool Development by British Petroleum and Shlumberger Progroup's Various Sources of Knowledge Joint Engineering Design by Ford and ABB AT&T: Developing New Credit Card Service Harnessing the Power of Diversity Synergy Effective Negotiation Wise Negotiation DOs and DON'Ts Principled Negotiation Separate the People from the Problem Negotiation Tips How To Sell Your Ideas To Decision Makers Negotiating Transfer of Technology Cultural Intelligence Cross-cultural Communication Corporate Culture Managing Cultural Differences Jokes Cross-Cultural Differences

Alliance Defined

Alliances can be structured in various ways, depending on their purpose. Nonequity strategic alliances, equity strategic alliances, and joint ventures are the three basic types of strategic alliances.

Why Strategic Alliances?

In the new economy, strategic alliances enable business to gain competitive advantage through access to a partner's resources, including markets, technologies, capital and people.

Sustainable Competitive Advantage - Synergy of Capabilities

Teaming up with others adds complementary resources and capabilities, enabling participants to grow and expand more quickly and efficiently. Especially fast-growing companies rely heavily on alliances to extend their technical and operational resources. In the process, they save time and boost productivity by not having to develop their own, from scratch. They are thus freed to concentrate on innovation and their core business.

Many fast-growth technology companies use strategic alliances to benefit from more-established channels of distribution, marketing, or brand reputation of bigger, better-known players. However, more-traditional businesses tend to enter alliances for reasons such as geographic expansion, cost reduction, manufacturing, and other supply-chain synergies.

As global markets open up and competition grows, midsize companies need to be increasingly creative about how and with whom they align themselves to go to the market. 

Functioning as an Alliance

Alliance is defined by its synergistic outcome – results must exceed the sum or the parts. This definition implies needed behavior. "For superior results you can't simply call each other partners. You must function as partners. Alliances go beyond doing things between firms that become transactions afterwards – like licensing, co-locating resources, starting to outsource, or trading a lower price for a longer term. Such tactics may be involved in alliances; alone they produce one-time gain. In an alliance, continued joint creativity leads to regular improvement, outperforming what any single change can do."¹

Planning for a Successful Alliance

Before entering into a strategic alliance, enough thought is to be placed behind the structure of the relationship and the details of how it will be managed. Consider the following in your planning process:

• define expected outcomes from the relationship for all the parties in the strategic alliance

• define and document the elements provided by each party, and the benefits a successful alliance brings to each

• identify the results that will cause the alliance to be most beneficial for your business and define the structure and operating issues that need to be addressed to achieve these results

• protect your company's intellectual property rights through legal agreements and restrictions when transferring proprietary information.

• define the basics of how you will operate

• be certain that the company cultures are compatible, and the parties can operate with an acceptable level of trust... More

Some Pros & Cons

Strategic alliances can allow your business to meet its objectives, while maintaining the flexibility to adapt quickly by switching partners, as appropriate.

However, such a partnership may be too informal if your corporate strategy requires the long-term certainty of a joint venture, merger or acquisition. In this case, if your success depends upon a strategic partner's continued cooperation with your business - and not your competitor's business - a strategic alliance might be a trial phase before committing to such an arrangement.

The Seven Dimensions of Strategic Innovation

 Case in Point  BP Partners with Schlumberger To Develop a New Tool

British Petroleum wished to measure the effectiveness of their horizontal well drilling processes, but there was no available device to do so. BP pooled their intellectual and financial resources with Schlumberger, the oil field services company, to build such a tool. The result was that BP got a tool that has taught them a lot about making horizontal wells even more effective, and Schlumberger got a new business... More

 Case in Point  Partnership Between TraveLinx and ICit