In the business domain we hear a lot about ‘strategic alliances’. We hear that they are usually good for both parties. At a micro level we are seeing many professionals team up with like-minded and non-competing professionals to form alliances. Sometimes they share resources and put on an event, for example a seminar. The idea being that sharing the marketing costs and hiring a speaker to deliver a talk or workshop on a relevant topic (for example “How to Use Social Networks to grow your client list”) can create a win-win outcome. Unquestionably a good alliance can be a highly profitable undertaking, but equally a bad alliance can be a nightmare in the making.
So what makes a good alliance?
Rule number one is that the (potential) sum of the total must be more than the sum of the parts. In other words each partner must end up better off than they would individually. It’s too easy to forget that time, energy and money goes into maintaining a successful alliance.
Whatever your motives, here are some things you might want to think about.
Alliances are all about relationships built on trust and mutual interest. They require the respect and interaction of people in each business. Strategic alliances, like good personal relationships, require effort to build.
All relationships are based on a degree of give and take. It is no different for strategic alliances in business or professional services. Each party has to give something and get something in return. If you are the instigator, it’s important to be clear about what you have to offer your potential partner.
Each party needs to contribute resources to the arrangement. This does not necessarily have to be money but each needs to be prepared to dedicate people and time to the alliance. Someone in each business needs to be recognised as having responsibility for the strategic alliance.
Alliances take time to build and also to maintain. The optimal path is to work together on a small project or at least establish a beach head that can be named as a strategic alliance – some activity that can be readily translated and scaled later after some “chemistry” is established and parameters defined.
Good communications are always more about listening than telling. Be all ears. Listen to your potential partners. What they tell you will not only give you clues about their needs but may influence your thinking in ways you’ve never even imagined.
While alliance building does always have immediate benefits (although you should set out with that intention), it can be ruinous if not thought about in a strategic manner. When all is said and done both sides want something out of the deal. The initiator needs to take into account a number of risks:
- Thinking too small. Too often, a business owner or practitioner asks the potential partner for an endorsement in return for putting the partner’s logo on the company’s Web site. That’s not strategic.
- Thinking only of what the potential partner can do for your company. Strategic alliances have to create a situation where both parties gain something; otherwise, they’re not partnerships.
Business owners, professionals and managers like to negotiate. They bargain for who contributes what; haggle over share of revenues (if they are to be shared) and iron out detailed exit clauses. But while the parties might agree to the same terms on paper, they may actually have very different expectations about how the agreement will work in practice. Without their arriving at a true meeting of the minds, the deal they’ve signed or verbally agreed on may sour.
The most common cause of problems with alliances is the lack of clearly defined expectations. The parties invariably form expectations about how the agreement will be carried out, whether they discuss it or not. Even if initially compatible, those expectations can silently shift in response to actions taken, even though no overt negotiation takes place. It’s clearly in the parties’ best interest to make their expectations explicit and negotiable.
Some final thoughts
- Is the arrangement equitable?
- Are you dealing with an “equal”?
- Is your time horizon long-term or a short-tem?
- Is it for a specific project or is it open-ended?
- Is it a likely prelude to a larger or different arrangement?
- How fully, formally, and frequently do you expect to consult with the other side?
- How extensively will you and your partner share or protect intellectual property?
- Who will be involved in decision-making on each side?
- How will disputes be resolved?