In today’s business world, organizations partner with each other to leverage their strengths for better business outcomes. Many of them call it a “partnership” or an “alliance”. An alliance is a close, collaborative relationship between two or more entities that share complementary assets, strengths, risks and rewards to create increased value or competitive advantage for their customers and their own organizations, that would be difficult to achieve independently. There are two broad categories of alliances: strategic and tactical.
Strategic alliances produce a powerful competitive advantage, impact organizations long-term destiny, and have significant consequences when they are not successful. Tactical alliances tend to be shorter term, more project oriented and formed with a specific end-point in mind. Both types of alliances can be valuable in achieving business outcomes, however this blog is on strategic alliances and its typical characteristics.
Successful alliances are a result of a complex set of processes, cultural attributes, and competencies. No matter which industry you’re in, the following alliance characteristics are essential for the success of any alliance.
- Strategic Fit – Every company periodically defines its goals and objectives and there is always a strategy to achieve it. Not every alliance partner, no matter how attractive they may appear, will be aligned as per your organization’s strategy. So, be extremely selective in choosing your alliance partner. Ensure that the driving strategic forces for both companies are complimentary. Both the partners can be looking at the same industry segment but from a different perspective and with complementary strengths. This is where shared vision, objectives and interests between alliance partners comes into play. Creating a fit, feasibility and attractive matrix is one of the best ways to derive strategic fit. Apart from strategic fit, the operational fit and cultural fit also plays a key role in determining your alliance partner.
- Value Creation – If two companies coming together cannot create compelling value for their joint customers, then the very purpose of alliance is lost. For creating value, the two allies should have more strength when combined than they would have independently. We must clearly understand how value exchange is not value creation.
- Joint mission – Each of the alliance partners will have their individual vision and mission statements for their respective organizations. But to define the very purpose of the alliance, and effectively communicate it to the rank and file, a joint mission statement is needed. This will always act as the guiding point and support the joint planning sessions. Once the joint mission is carefully crafted, every activity in the alliance can be monitored as per this mission and course correction can be done if needed. Having said that, the mission must be flexible enough for accommodating changing market trends and leveraging new business opportunities.
- Collaborative Spirit – The two alliance partners must have a culture of collaboration and they must be equally eager to engage with each other. Just one partner being more enthusiastic about the alliance doesn’t help in building a successful alliance. Another very important aspect is that both the partners should have an alliance manager, otherwise it’s a one-sided effort. If the alliance manager from one partner company has to deal with the sales team of another partner company, then the navigation for the alliance manager would be difficult and the outcome of such peering level would not be desirable.
- Trust and Reciprocity – Trust is something in which you can never over-invest in any relationship. The more seeds of trust you sow, the stronger will the alliance grow. Along with trust, comes transparency. Be as transparent as possible with your partner. It always helps in the long run. The relationship between two partners must be reciprocal. The alliance in which one partner is active and brings most of the leads, will eventually not survive for long, because it’s a game of active and equal participation from both the partners. Also, the operational risks and rewards must be fairly apportioned.
- Governance – To ensure that the alliance performs and delivers the desired results as per its mission statement, a system of checks and balances is required to manage the risks and performance. This governance model must ensure that decision making as well as escalation happens at the right time. Its objective is also to maintain operational efficiency at multiple levels within both partnering organizations. Choosing the right metrics to measure the performance of the alliance, is a key task of the governance council.
- Executive Sponsorship – A successful alliance will always need a senior executive who is engaged and empowered to champion the alliance. Executive sponsors are ideally very senior within the organization and can promote cross-functional collaboration. Mostly, the role of an executive sponsor would also include to be the alliance spokesperson, provide strategic guidance, assist organizational navigation and be the escalation point for conflict resolution.
- Keep it fresh – Alliances need continuous renewal so that they don’t lose their edge in the market place. So, identify new opportunities while adjusting the needs of the existing ones. As per market demands, the alliances must proactively evolve, to remain fresh, vibrant and relevant.
Regardless of industry, when any alliance follows the above set of essential characteristics, the chances of success are very high. Any alliance missing these characteristics will likely be beset with problems. So, one can use the above checklist to assess current and prospective alliances.