Business
Your Strategic Alliances Will be Successful with These 5 Fundamental Attributes
One strategy companies use to accelerate growth is forming strategic alliances with organizations that offer complementary products or services. Instead of investing significant time and resources to develop new capabilities internally, businesses can create partnerships that expand their value and help them reach the market faster. When successful, these alliances enable both organizations to achieve faster revenue growth than they could on their own.
However, nearly 80% of strategic alliances fail.
The difference between success and failure often comes down to understanding the alliance characteristics that create strong partnerships. Before exploring the reasons alliances fail, let me share the experience that shaped my approach to building successful strategic alliances.
Back in the 1980s and 1990s, I worked in the pharmaceutical industry in a variety of sales and marketing leadership roles. In January 1996, I accepted a newly created position as Vice President of Strategic Alliances for a Fortune 100 pharmaceutical company. My responsibility was developing relationships with organizations whose products and services complemented our own, strengthening our portfolio and increasing our competitiveness.
Senior leadership encouraged me to hire a consultant with expertise in alliance strategy to help me learn the process. During our first meeting, he introduced a presentation titled The 4 Fundamental Attributes to a Successful Strategic Alliance. Over the years, I added a fifth attribute based on my own experience.
He told me something I’ve never forgotten: if even one of these attributes is missing, you’re better off walking away because the alliance is unlikely to succeed.
The 5 Fundamental Alliance Characteristics
1. Shared Objectives
It’s critical that both organizations agree upon the North Star they are both trying to reach together, as a result of this new relationship. Here’s an analogy: If two people get into a rowboat and one’s objective is to go to the island to the east and the other wants to row to the west, they will literally go in circles. This is what often happens in strategic alliances, if you don’t take the time to make sure you’re all rowing in the same direction towards the same goals you won’t make progress toward outcomes.
2. Complementary Products and Services
Ideally, you are exploring this strategic alliance to add synergies that you currently don’t have and don’t have the time, resources, or expertise to develop yourself. A successful strategic alliance is one where 1+1 = 5 (or more!). Your math should transition from addition to multiplication. An example of this is Starbucks and Target forming a Strategic Alliance to have Starbucks in Target stores. Starbucks then followed the same model with Barnes and Noble and many grocery store chains.
3. Shared Benefits and Risk
Another essential alliance characteristic is transparency around both rewards and risks.
Each organization should clearly understand:
- The benefits they expect to receive
- The responsibilities they’ll assume
- The risks involved
The distribution doesn’t have to be perfectly equal, but expectations must be understood and accepted by everyone involved.
4. A Foundation Built on Trust
This is probably the most important attribute from my experience. There must be a strong foundation of trust that this relationship needs to stand on going forward. This is accomplished by being intentional about spending a considerable amount of time together before you commit. This isn’t too dissimilar from a marriage. You want to date and learn as much as you can about each other before you commit to a long-term marriage or in this case two companies forming a strategic alliance.
5. Dedicated Champions for Execution
This is where I’ve seen my fair share of strategic alliances fall apart. Senior leaders spend months negotiating the terms and conditions around a strategic alliance, and the people who are left to make it happen aren’t involved at all. Whoever the person is on your team who is going to be responsible for executing this alliance needs to be at the table from day one for input and buy-in.
Attention should also be given to the amount of time, people resources, and the priority each organization gives to this strategic alliance. If one company has this as their #1 priority with a dedicated team of people with resources to make this happen, and the other company is slow to the starting gate with only one person on the project who is distracted with many other projects, resentment will set in and things will begin to unravel. Companies that do strategic alliances well each have dedicated champions (Point People), teams, resources, aligned priorities, and funding poured into these projects.
Reasons Strategic Alliances Fail
If any of the five attributes listed above aren’t in place it will likely fail. Here are some additional factors to consider:
- Differences in culture
- Lack of executive commitment
- Ineffective governance structure
- Poor alliance leadership
- Overestimated market potential
I don’t want to discourage you or scare you from exploring strategic alliances because when they work, they work extremely well. However, you do want to do your due diligence to ensure alignment is in place.
Best Practices for Managing a Strategic Alliance
- Strategic Fit
- Operational Fit
- Cultural Fit
Obviously, you will also need to look at skills and capabilities. At the end of the day, will the time and financial investment generate new value together with a strong ROI? You may want to take baby steps together and do a pilot on a smaller scale before you commit to a long-term relationship.
Following this methodology will undoubtedly enhance your chances of success in building important strategic alliances under your leadership. You can speed up the process of learning how to create and manage successful alliances through a favorite book of mine, The 4-Step Guide to Successful Partner Selection.
Additionally, Convene has several consultants that are trusted resources for assistance in developing strategic alliances. You can learn more about our consulting network here.
About the Author
Paul Aubin
Paul is a Convene Chair as well as a marketing and chair development consultant to Convene. His diverse background as a successful corporate executive, business owner, men’s ministry pastor, and published author gives him a well-balanced and robust set of experiences to draw from as he mentors and develops Christian business leaders in his roles at Convene.