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. Information sharing is limited to what is needed to close the deal, because divulging more could yield an advantage to the other side. Finger pointing, rather than creative problem solving, is encouraged. In an alliance: You can't define every detail. No contract can anticipate what two groups must do to be creative together. Success depends on creatively joining the ideas and energies of two firms, sometimes more. Though negotiations may be trying, there is an understanding that it is in neither firm's interest to hurt the other. Relationships depend on trust. 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.

Alliance Defined

A strategic alliance is when two or more businesses join together for a set period of time. The businesses, usually, are not in direct competition, but have similar products or services that are directed toward the same target audience.

Alliance means "cooperation between groups that produces better results that can be gained from a transaction. Because competitive markets keep improving what you can get from transactions, an alliance must stay ahead of the market by making continuous advances."¹

Strategic alliance is a primary form of cooperative strategies. "A strategic alliance is a partnership between firms whereby resources, capabilities, and core competences are combined to pursue mutual interests."²

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.

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. 

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.

The Seven Dimensions of Strategic Innovation

The Strategic Innovation framework weaves together seven dimensions to produce a range of outcomes that drive growth.

Core Technologies and Competencies is the set of internal capabilities, organizational competencies and assets that could potentially be leveraged to deliver value to customers, including technologies, intellectual property, brand equity and strategic relationships... More

 Case in Point  Partnership Between TraveLinx, Canada and ICit America

TraveLinx Inc. is a leader in tourism – related internet technology, marketing, e-commerce and database information management solutions. The core of TraveLinx's competence comes from developing and implementing its proprietary Destination Management System (DMS) that warehouses and serves tourism-related rich content such as accommodations, attractions, festivals and events, etc. through the Internet to a variety of different users. It currently provides the content for Tourism Ontario. TraveLinx was originally founded in 1993 by telecom giant Bell Canada.

ICitAmerica's core product is the iCit TeleCenter, a custom hardware, software and targeted services design developed exclusively for the needs of the hospitality industry. The iCit Telecenter provides broadband ISP, content applications, advertising, maintenance, service and customer support. Their technology is designed to cater to every guest in every room irrespective of their level of technical literacy.

ICit America and TraveLinx have entered into a cross - marketing and supplier agreement to deliver Travelinx travel and tourism content as well as a reservations and ticketing engine to TeleCenter installations in hospitality and retail locations. In addition, TraveLinx deploys TeleCenter solutions in retail locations where destination marketing and transactions are complimentary to the retailer's products and customers.

Some Pros & Cons of Strategic Alliances...

Strategy Management...

New Systemic Approach to Strategic Management...

Functioning as an Alliance...

 Case in Point  Alliance Between Canon and Hewlett-Packard...

 Case in Point  New Tool Development by British Petroleum and Shlumberger...

 Case in Point  Progroup's Various Sources of Knowledge...

 Case in Point  Joint Engineering Design by Ford and ABB...

 Case in Point  AT&T: Developing New Credit Card Service...

Bibliography:

1. "Trusted Partners", Jordan D. Lewis,

2. "Strategic Management: Competitiveness and Globalization", Edition 4, Thomson Learning

3. "Strategis", Canada's Business and Consumer Site