Strategic alliances enable companies to use one another’s unique strengths to access new markets, new technologies and new resources, while providing opportunities for innovation, process improvements, and enhanced competitiveness. For all these advantages to be realized, however, an alliance must be designed and managed effectively; otherwise it may ultimately fail. The goal of this document is to explore ways to design and manage strategic alliances so that each side of the partnership achieves its intended goals and enjoys long-term growth.
Establishing Clear Goals and Expectations
For a strategic alliance to be successful, it is important to define the goals and expectations of the relationship from the onset. Both sides of the partnership must have a common understanding of why the alliance was formed and what the expected outcomes of the partnership will be.
- Establish mutual benefits of the partnership by determining how each side of the partnership will contribute to the alliance and how each side will benefit from the partnership.
- Develop measurable objectives based upon the expected outcomes (e.g., market penetration, cost savings, etc.) to measure the success of the partnership.
- Define the respective roles and responsibilities of each side of the partnership to avoid confusion or duplication of efforts during the partnership.
Defining the objectives and expectations at the beginning of the alliance allows both sides of the partnership to remain focused and working toward a common objective.
Choosing the Right Partner with Complementary Capabilities
The success of a strategic alliance depends greatly on the similarity of strength and capability between the two sides of the partnership. It is therefore very important to choose a partner whose capabilities complement those of your company.
- Determine if the partner has the financial ability to support the partnership for the long-term.
- Assess the partner’s technical and resource-based expertise (technology, market knowledge, manufacturing capacity, etc.) to determine how the partnership can be strengthened.
- Evaluate the cultural compatibility of the two partners to ensure good communication, decision making and cooperation throughout the life of the partnership.
A partner whose capabilities complement those of your company strengthens the value of the alliance and insures that both sides of the partnership receive some benefit from the partnership.
Developing a Fair and Transparent Agreement
It is also very important to develop a clearly written and understood agreement between the two sides of the partnership to prevent disputes and misunderstandings from developing during the partnership. Develop an agreement that fairly allocates the risk, responsibility and reward among both sides of the partnership.
- Write a comprehensive contract that defines the scope, time frame, and deliverables of the partnership.
- Develop an agreement that describes the financial terms of the partnership (profit sharing, payment structures, etc.) and how the costs associated with the partnership will be allocated.
- Provide a mechanism for resolving disputes that may arise during the course of the partnership.
An agreement that has been developed through a thorough negotiation process provides a solid base for a long lasting and mutually beneficial partnership.
Encouraging Ongoing Communication and Regular Monitoring
Ongoing communication and regular monitoring are key elements in creating a strong, effective partnership. Regular reviews provide the opportunity for both sides of the partnership to resolve issues and make adjustments to their strategies as needed.
- Schedule periodic meetings with the other side of the partnership to monitor the status of the partnership and to assess whether both sides of the partnership are achieving the desired results.
- Monitor performance metrics that were established during the partnership to ensure that both sides of the partnership are meeting their obligations as outlined in the agreement.
- Create an environment where both sides of the partnership can provide feedback regarding the partnership to identify areas for improvement and to continue to foster a collaborative atmosphere within the partnership.
Ongoing communication and regular monitoring of the partnership enables both sides of the partnership to take corrective action when necessary and adapt to changes in the market or industry.
Conclusion
Strategic alliances provide many opportunities for business growth, innovation and entry into new markets. By establishing clear objectives, choosing the right partner, negotiating a fair agreement, and promoting ongoing communication, companies can form alliances that produce long-term benefits and competitive advantage. A well-managed alliance produces positive results for both sides of the partnership and creates a platform for success.
