Alliances originate in every shape and size, and then evolve to meet the requirements of the partners. Strategic alliances are high-maintenance commitments towards particular purposes. Do not consider them to be spontaneous, nor short-term. Strategic alliances in the technology world start at 5-10 years. For the pharmaceutical world, the time from conception to market is very long and expensive. Therefore their strategic alliances exist closer 15-20 years. In my local community, the mayors of more than 25 communities created an alliance in the 1980’s to grow the whole community. The fruit of their efforts are now blossoming.
Collaboration is changing the focus of individual enterprises. Strategic alliances are a priority item for top management. An article from Jason Wakeam of Hewitt-Packard in Ivey Business Journal describes five central traits of strategic alliances. A strategic alliance, whether bilateral or within a larger constellation, encompasses most of the following traits:
- Core business goal supported by critical alliance:
Revenue is a core business goal, as is market share for the marketing and sales department. One central business goal is to be one of the top 3 companies in a market. What impact does the alliance upon that goal? The R&D divisions focus on key products and differentiators as essential business goals. Is the alliance being critical to the section’s goals?
- Core competency develops or maintains with alliance:
Will the alliance enhance your competitive position in the market? The alliance must evolve to seize the core competency and build upon it. The correct alliances strengthen market position.
- Competitive threat becomes blocked:
How do you stop a competitor? Create a strategic alliance with their competitors. Or create an alliance that is so strong, the competitor loses market share. This type of strategic alliance generates a better total solution for the customers. The rest of the market becomes vulnerable and maybe unstable.
- Strategic choices expand:
A strategic alliance opens new markets, such as geographical regions. International distribution alliances assist with new market annex. The properly planned alliance creates new revenue for an untapped market. The fixed costs of using an alliance partner are significantly less than developing your own team to capture these new customers.
- Mitigates risks:
Strategic alliances can be created with any company. When developed with a supplier, cost increases can be mitigated. One manufacture of silicon used a supplier of gold as partner. Instead of purchasing the gold, the manufacture rented the element until it was actually used and shipped. This mitigated risk of fluctuating gold prices.
Since I want to deliver more then I promised, let me add a 6th key trait:
- Time to market
Companies have 3 choices when entering a market: build the product; buy a company making the product; create a strategic alliance. Every product experiences a different time span for the womb to tomb. Fastest time to market is to create a strategic alliance. If the alliance proves to be invaluable, then the companies may merge.
Once the strategic alliances are established, and proven successful, less critical ones start to emerge. Remember, strategic alliances need ongoing attention to succeed.
At your company, do all alliances become strategic and involving senior management? What common trait do you see in your alliances? Did I miss one?