Sunday, July 04, 2010

How to Build Winning Alliances

If you are a corporate executive or a small business owner, alliances are even more instrumental to your economic success. In a business world that is increasingly global, volatile, and fast, alliances have become a more and more prominent aspect of business strategy, but many executives still aren’t paying enough attention.

Too often, firms enter into business with the wrong partner or for the wrong rationale, and they end up regretting the decision. An alliance may look great on paper but cultural differences between the parties or misaligned expectations can end the relationship sooner than later.

Here's how you can develop eduring alliances by focusing on three crtical success factors:

1. Selecting the Partner:

I have been deal-making for over 15 years in different geographies with companies of various sizes and I can’t emphasize enough the following:

Understand clearly why you need a partner – to access new clients, markets, technology, capabilities.

Determine the tradeables – for a sustainable alliance, both firms must benefit from it. You need to be able to articulate what your firm will uniquely trade in return for the other firm’s assets or capabilities.

Investigate your partner candidates - You should always choose the one with most balanced tradeable picture and best reputation possible. You will never get a second chance to make a good first impression.

Remember to invest as much of your time in selecting the right partner upfront. It is not companies that do business but it is the people!

2. Making the Deal:

Once you have selected the right partner, it is always a good idea to put everything in writing. In my experience, this is the most mechanical step in the process. However, you should always plan for an exit in a meaningful timeframe in any alliance.

Discuss and agree upon the arrangement - determine the scope of the partnership; goals, roles, and responsibilities for each party along with key milestones and other details; rules for intellectual property and financial arrangements.

Ensure line of business accountability upfront – If you work for a large firm, it is always a good idea to involve a sponsor now from a line of business who will be held operationally accountable for the success of the alliance. A best practice deal should include financial and operational targets that are tangible and trackeable.

Hire a great lawyer – You are inking the deal for the bad times. Recruiting the best lawyer you can afford could make a big difference if things go sour with your new partner.

3. Managing the Alliance:

New partners often find it difficult to work together especially in the early days of the relationship. There are several critical success factors to maximize the economic returns from the alliance:

Meet and greet all your partners - As soon as the alliance is signed, plan a series of events to introduce every member of the partner within your company. Never underestimate the human element of face to face contact and relationships. Talk about the alliance and explain its purpose and how it will work.

Identify and communicate who will manage the alliance and how - As early as possible, you and your ally from the partner firm should discuss how often you will meet, what process and project plans you will oversee along with the key people, targets, due dates, key deliverables, control mechanisms, etc.

Select a sponsor - Your chances of success with partnering particularly a large company rests on your ability to recruit a champion for the relationship. Select a senior individual who is exceptionally motivated about the alliance who can evangelize the alliance and mobilize resources and dollars in the partnered firm on your behalf.

Secure quick wins early – Winning alliances deliver results early so both alliance sponsors can proudly communicate the economic value of the tradeables internally. Remember that both sponsors have taken a personal career risk as well. If you are partnering with a large firm, there will be many other alliances competing for resources, dollars and management time. This is the best way to get your firm higher on the priority list.

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Anonymous said...

Aviva ve Ak Emeklilik bu tür bir ittifaka iyi bir örnek oluşturuyor. Post-fact tesbitettiğin eksiklikler var mı?
Burada yanıtlaman doğru olmayabilir, başka örnekler verebilir misin?
Nüzhet Atabek

joost said...

Thank you for summarizing your extensive experience with building strategic alliances in this blog post.

Your descriptions show the crucial aspect of why alliances fail: not enough understanding of how building and managing alliances is largely dependent on people. People, understanding people: their needs, motivations etc.

That said, many companies now rely on alliances and partnerships to such a large extent, that it is no longer wise to rely on 'start players' only. Companies must begin to move to establish Alliance and Partner Management as a corporate capability that touches everyone: a change in mindset and practices that resembles the change to 'teaming' in the 90's. I call it 'Teaming 2.0' and my company Allinnova supports companies that recognize this need with online tools and services.