Pitfalls and Benefits of Strategic Alliances

There’s an old saying that “two heads are better than one,” and it has never been truer than today. There are several benefits to connecting with another company in forming a strategic alliance, the corporate equivalent of putting two heads together.

Leverage knowledge and expertise from another company, without having to hire additional employees

Working together with another company in a formal strategic alliance provides your company access to additional experts, without having to hire them. In a world where human resources costs are outrageous, and hiring an expert seems outside of the budget, strategic alliances allow two or more companies to share expertise towards a common goal. Fixed costs decrease, but variable costs may increase.

Increase customer draw along with sales

When Barnes & Noble entered a strategic alliance with Starbucks, it suddenly became possible to get a world-famous cup of coffee in one of the best bookstores in the world. Starbucks and Barnes & Nobles proved it is hard to beat a good alliance. McDonald’s and Coca Cola are also a winning combination, and a very famous one at that. Today no one can go to a Wal-Mart in America without noticing their strategic partner, McDonald’s.

Last year, Apple and IBM announced a partnership. Results started to appear in December. The first wave of IBM MobileFirst applications is available for the Apple operating system. If the computer or the phone companies didn’t have strategic alliances with software companies, where would they be? Apple and IBM have dedicated teams focused on strategic alliances. It is good business.

At one of my companies, we provided solid data backup services through the cloud. I met with an educator/trainer. He introduced me to 8 potential resellers. I recruited 6 resellers from these introductions, which resulted in over 75 new end users sales within 2 years. They all paid me a monthly subscription fee. I am eternally grateful for the chance meeting of this one individual, who became a strategic referral partner and lifelong friend. In my strategic alliance case, 1+1=75.

Try to map out all the strategic alliances Tesla created to re-invent the car industry. They have alliances with competitors, suppliers, customers, distributors, and even state governments.  Time will show the results of their efforts.

There’s a lot at stake

Are you going to bet the farm? There’s a lot at stake in strategic alliances. A good alliance agreement can take months or years to craft. Good alliances, like the ones mentioned above, generate new customers and improve sales. Bad alliances can damage a company’s reputation or kill a business. Who remembers the Swatch, after a failed strategic alliance with Tiffany’s? A failed alliance between Suzuki and Volkswagen resulted in huge legal bills and plenty of bad publicity.

Alliances aren’t for the faint of heart. No results instantaneously appear. They require time and focused energy. With the right energy, outcomes can be remarkable and extraordinary. If you don’t plan on results of at least 1+1=7 (one company working with another company must generate more than 7 times what each could accomplish alone), it isn’t worth it.

Do you have examples where 1+1>50 or >100? Let’s hear your successes and how you do your math.



Comments are closed.