Strategic alliance, strategic partnering or strategic network — no matter what you call it, whether it’s formal or informal, joining forces and resources can reap mutual benefits. As much as 18 percent of their revenue comes from their alliances, report companies participating in alliances. On average, each fast-growing company is engaged in five different types of strategic alliances, says PwC (formerly PricewaterhouseCoopers) in their Trendsetter Barometer.
As early as 1992, IBM alone had joined in over 400 strategic alliances with various companies in the U.S. and abroad. In today’s economy, “For smaller businesses it’s the only way to survive”, says Lynn Oliver, CEO of American Security Programs. His firm is highly regarded for its professional protective services including security officers; Mr. Oliver participates in several alliances including the Coalition of Government Contractors and the National Security Alliance, formed to provide Best Practices review and as a national referral so its’ 16 strong regional contract security companies stay ahead of the competition.
My firm was recently able to add another revenue stream by offering the service of pricing security guard services bids. Simply by aligning with a fellow entrepreneur, my Proposal Writing/Management firm can now offer a service which:
- definitely benefits our clients in today’s economy;
- complements and increases interest in other services of our firm; and
- provides a ready source to fulfill other specialized unique bid requirements in that industry.
And, because my fellow entrepreneur doesn’t specialize in Proposal Management, we’ve added another referral source.
How To’s and Best Practices can now be easily found for this ever evolving business model in many articles and through many colleges and associations. The longest running business school program of its kind was initiated in January 1991 by the Wharton School of Business, currently called Strategic Alliances: Creating Growth Opportunities program by Wharton Management Professor Harbir Singh. Strategic alliance professionals even have their own association; the Association of Strategic Alliance Professionals was founded in 1998 as “a professional association dedicated to the practice of negotiating, planning, and executing strategic alliances in the business world.”
>> RELATED: How to Build Strategic Alliances
One of the key considerations is that a chain is still only as strong as its weakest link; one company could fail to live up to its part of an Agreement but still receive its portion of the gains — without having done the work. “In alliances, as in marriages, there is no recovery from selecting the wrong spouse” warns Gene Slowinski, Director of Strategic Alliance Research at the Rutgers Graduate School of Management.
Many successful alliances hire an impartial manager to monitor alliance performance, identify potential trouble spots and take the quick action necessary to de-escalate situations, as did the National Security Alliance; their Managing Director is security industry expert Gary Kuty of Kuty and Associates. Hewlett-Packard developed 60 different tools and templates, included in a 300-page manual for guiding decision-making in specific alliance situations. The manual contained such tools as partner evaluation forms, a negotiations template outlining the roles and responsibilities of different departments, a list of ways to measure alliance performance and an alliance-termination checklist.
>> RELATED: How to Cultivate Strategic Alliances and Win-Win Partnerships
10 Tips for a Successful Strategic Alliance
But since most of us are not IBM or Hewlett Packard, here are 10 basic tips from the experts to consider:
1. Take the steps that build each alliance just as you did when building your company – due diligence on your potential partners, on the competition etc. But also include solid research into HowTo successfully set up and run a Strategic Alliance.
2. Focus less on defining the business plan and more on how the partners will work together, will examine opportunities together and make the decisions together that create a repeatable process – and retain each firm’s good reputation.
3. Promote an atmosphere of learning; everyone in the process is learning as the Alliance grows.
4. Be clear about what benefits your business seeks; then define the legal structure and operation methods that will best achieve the defined results for all partners
5. To clearly identify up front potential benefits and challenges, include a representative from every relevant department — marketing, research and development — in the initial discussions.
6. Be sure the legal structure protects your own firm’s intellectual property rights.
7. Assure that managers with the day-to-day responsibility for executing the partnership have the time and spend the time on communication, trust-building, and coordination with all stakeholders.
8. Develop benchmarks not just to alliance goals but also to alliance progress.
9. Define the point at which you develop specific Alliance processes or add independent management.
10. Definitely plan for the end; any agreement should completely define exit procedures and arbitration methods that protect your firm from losing essential expertise.
Recommended Books on How to Increase Your Revenue through Strategic Alliances:
- Strategic Alliances: Three Ways to Make Them Work (Memo to the CEO)
- Alliances: An Executive Guide to Designing Successful Strategic Partnerships
- Mastering Alliance Strategy: A Comprehensive Guide to Design, Management, and Organization
- Finding Allies, Building Alliances: 8 Elements that Bring–and Keep–People Together
- The Collaboration Challenge: How Nonprofits and Businesses Succeed Through Strategic Alliances
About the Author:
- How to Cultivate Strategic Alliances and Win-Win Partnerships
- How to Build Strategic Alliances
- How to Work with Competitors
- Protecting Your Business From Substitutes: Strategic Alliances
- How Strategic Collaboration Can Benefit Your Business