How to avoid the headaches often associated with strategic alliances
In recent years, forming alliances - even among competitors - has become a preferred strategy for many organisations. In 2002, more than 35 per cent of participating companies’ revenue came from those alliances. One of the benefits of alliances is that, by studying the experience of others, we can better understand how to avoid many of the pitfalls associated with alliance-building. In fact, best practices in alliance-building have resulted from our growing knowledge and accumulated experience. Here’s a list of such practices...
1. Learn from the experience of others.
Forming strategic alliances is not new so the experiences of those companies who have gone before have alerted us to some of the pitfalls:
- avoid thinking too small - be prepared to give something substantial to get something substantial
- take the time to make sure that you have found the right partner(s)
- make sure that the alliance attracts the best people
- agree explicitly on goals and objectives
- build and continue to develop trust
- focus on making a bigger pie rather than getting a bigger slice of the existing one
- maintain open and consistent communications
- value the independence of alliance members.
2. Be realistic about possibilities.
As one would expect, direction-setting in an alliance is considerably more complicated than in an individual company. A suggested starting point is to develop an analytically sound alliance plan that has the support of key people from all the organisations involved. This would consider variables such as competing cultures, harmonious communications, available and dedicated resources, and strategies pursued. The point of any strategic alliance should be to make an impact, and you can’t do that without the active engagement of the top people involved - yours included.
3. Prepare a risk management plan.
Many companies new to alliance- building pay much more attention to opportunity than to potential problems. Alliance building can involve risks, and it is important that your preplanning considers responses to these. An effective risk-management plan should consider some of the most common stumbling blocks:
- the long-term competitiveness of the parent companies
- trade-offs that might be necessary in order to remain competitive
- interchange of proprietary information
- appropriateness of any new structure
- employees’ resistance to changes
- communication problems between or among companies involved.
