Partner or a strategic alliance — which is better for business growth? Many business owners want a “partner” to share the load. Partners exert a lot of control no matter how little of the business they own. Use a strategic alliance instead to grow your business and keep more control.
What is a Strategic Alliance?
In 2005, companies reported that 18% of their revenue was generated through strategic alliances. The economy has changed but there are still thousands of alliances formed each year.
I agree with Winston Churchill. “If we are together, nothing is impossible. If we are divided all will fail.”
Kinds of Strategic Alliances
“Walking with a friend in the dark is better than walking alone in the light. . .Alone we can do so little; together we can do so much.” Helen Keller
I have found at least seven different basic forms a strategic alliance can take. These are:
- Networking for career purposes
- Cross marketing ally
- Cooperative advertising ally
- Shared production or operations expense ally
- Joint Venture
- Funding ally
Any strategic alliance can be:
- Temporary or permanent
- Long term, short term, one time event, trial
- Vertical (between a vendor & a customer, competitors, two or more businesses) or horizontal (between employees, supervisors, managers, departments)
- Local or global
Some strategic alliances have legal requirements. Those formed to share expenses and joint venture alliances certainly should not be even considered without some sort of written agreement. In a joint venture, a new business entity is formed. It requires a legal document to set down how this will be run, who’s in control, and how to handle income, expenses, and liability among other things.
Funding strategic alliances are created by agreements with angels or venture capitalists most often. Other potential allies include grant providers, customers, prospects or even the government.
Any marketing alliance will need written clarification to make sure everyone understands and agrees. Are you and your ally going to share out of pocket marketing expenses? Who pays what? Think of the Oreo cookies and Milk Board and their “Got milk?” campaign. The billing for the ads and the paperwork to create this strategic alliance must be very interesting.
“The truth we’re seeing in markets around the globe, the more you share, the more you win.” Brian Featherstonhaugh Chairman and CEO of OgilvieOne Worldwide
All strategic alliances share three common elements:
- Goals — who wants what
- Responsibilities — who does what
- Rules — how it’s done (based on business and personal culture and attitudes)
But the perspective of each is different. A strategic alliance whose goal is just to find a friend to talk to or to network with has a very personal goal. Cross marketing, shared production expense, and joint venture alliances are more business growth focused.
Any alliance has expectations. One primary that they all share is reciprocity. The goal of each alliance is to add value and worth to each person or entity involved. Not only is “No man an island” but no business can survive alone either.
The Right Strategic Alliances
“We cannot enter into alliances until we are acquainted with the designs of our neighbors.” from The Art of War by Sun Tzu
What’s the right alliance for you? The strategic alliance that matches:
- Your goals
Either short term or long term
- Responsibilities you and each ally are willing to take on
The more complicated the alliance, the more the responsibilities of each party. The joint venture because of its legal nature is the most complex.
- Rules you are willing to abide by
There are plenty of rules that apply to alliances. If you are going to try to win a government contract, for instance, there are special rules you have to follow if you and another business are pooling your resources to fulfill a contract.
How to use strategic alliances
Achieve advantages of scale, scope & speed; enhance product development; diversify; skill building; share expertise
Increase market penetration; expand market development; keep competitors out
Enhance competitiveness in domestic &/or global markets; Develop new business opportunities through new products & services; Increase exports
Create new businesses; reduce costs
To be successful:
- Set reasonable, realistic goals
- Choose the right kind of alliance
- Know the rules
- Select the right allies
- Work the alliance
- Measure results regularly
- Have a way out (transfer, transform, exit) and a contingency plan
We call this the Handshake Alliance Strategy™. We use it and teach it to our clients at the Business Success Center and at trade association conferences. It works. But it is work; sometimes even a struggle.
Top successful alliances added $72 Billion in shareholder value over 2 years. Bad alliances cost companies $43 Billion. (Harvard/Accenture study 2003)
Alliances aren’t perfect but they can be a lot better (and safer) than a partnership.
I’m finishing my ebook, Handshake Strategies: How to Grow Your Business or Career. What are your experiences? I’d love to add them to my examples.