Businesses may form many alliances for a variety of reasons. They often find themselves managing a number of them. Alliances contribute to the value of the firm, but not all alliances are strategic alliances. Companies manage true strategic alliances differently than others.
In an article in the Ivey Business Journal some years back, Jason Wakeam describes the criteria for a true strategic alliance. Strategic alliances are critical for success in achieving core business objectives. In addition, strategic alliances maintain core competencies, block threats, open strategic choices, or mitigate significant risks.
Wakeam described strategic alliances as vital to the business goals of a company. He also makes a point about the understandings an organization share with a strategic ally. If either partner, he says, misunderstands the other’s expectations regarding the alliance, it is likely to fall apart. According to this idea, each member of the strategic alliance must understand the motives of the other.
Type of Partnership
An alliance involves a partnership among companies to achieve mutually beneficial objectives. To that end, companies share resources, information, capabilities and risks. The mutual business goals shape the strategic alliance. Legal agreements, if needed, state the objectives of the alliances. Review contracts continuously or include a “sunset” date. Good practice consists of creating “Conditions of Success (CoS)”. To start the alliance, a CoS contains the objectives of both sides for the relationship for the next 3-5 years. Then the alliance understands those mutual goals.
“Loosness” of the legal ties can be one of the advantage alliance has compared to other forms of partnership. These alliances can enable a business to achieve its objectives while maintaining flexibility. However, they may be too informal, if long-term objectives require the certainties of a joint venture, merger or acquisition. An alliance can also be a trial for more predictable and permanent forms of partnership.
The interpersonal steps in the establishment of an effective strategic alliance become very subtle and tentative. 3rd Eagle instructs, mentors and advises companies on how to structure, launch and manage strategic alliances that complements their corporate strategy. Please contact us to discuss your plans.