Are you one of those firms that hear about strategic alliance and automatically think “not for us”? Maybe you’ve heard some of the bad press on a strategic alliance that failed, or perhaps it just seems a bit daunting to get started.
The truth is that many strategic alliances are and have been extremely successful — and it doesn’t have to be a huge undertaking. You can partner on a variety of levels and for specific purposes that limit the amount of risk. When compared to mergers and acquisitions, a strategic alliance is a simpler and more effective way to penetrate a new market, create a new product, grow your brand, or manufacture at a lower cost. Rather than go it alone and grow a new business organically, strategic alliances can get you there faster and cheaper.
Let’s look at some popular examples.
Have you ever noticed that Barnes & Noble usually has a Starbucks inside, or maybe next door? Yep, that’s a strategic alliance. When you think of a coffee shop and a bookstore, both of which have the aim of creating comfortable spaces to read, work, and think, the relationship seems obvious. But in 1993, it was groundbreaking. Now others have followed suit with combining books and coffee for a better customer experience and higher revenue. From this example we can learn an important key to successful strategic alliances: you want to take advantage of a natural fit. It may be a new idea, but does it seem obvious now that you say it aloud?
Here’s a lesser-known example. Can you think of why a credit card company and a creator of comic books and superhero movies would create an alliance? When Visa wanted to educate children on financial literacy, they turned to Marvel Comics for help. The two created a comic book to teach money management in a way that spoke specifically to children. We can learn another key to success from this example: Visa and Marvel partnered for a specific objective that benefited both companies. In the case of this alliance, it doesn’t make sense to partner in a big way like Starbucks and Barnes & Noble, but the project-specific alliance seems like a good fit.
Hopefully these examples help shed some light on the “what” of a strategic alliance, but just in case, let’s spell it out. A strategic alliance is an agreement between two or more parties to pursue a set of agreed upon objectives while remaining independent organizations. Two key points here: “a set of objectives” implies a limited scope and also the two remain independent organizations. Organizations can partner within different parts of the business: products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property.
Organizations enter into a strategic alliance to create benefits that would be greater than their individual efforts. Typically either to increase sales, penetrate new markets, improve time-to-market, or to create larger or faster profits. Barnes & Noble and Starbucks likely partnered to increase sales and penetrate new markets. If your grandmother liked to go to bookstores in the 1990s, this alliance may have turned her into a Starbucks coffee drinker when she previously thought Starbucks was for a younger generation. With Visa and Marvel, Visa could have chosen to create its own comic book by finding a consulting firm or hiring new employees. Instead they improved time-to-market by partnering with the prevailing comic book leader and also likely increased sales by using existing characters that were already popular with children. The “why” of strategic alliances can vary in the specifics, but the overarching goal is to create benefits for both companies by using each other’s strengths in a way that is faster or less expensive than fostering those strengths in-house.
So how can you identify and implement a strategic alliance for your company? First, look at your company’s goals for the next year, three years, and five years. Identify companies that have synergistic goals or could help you achieve your goals with their existing strengths. Then figure out how an alliance with your business can benefit them. What may benefit you in faster profits may open new markets for your potential partner, or vice versa. Once you’ve identified potential organizations for a strategic alliance, find internal champions within their organization who can spearhead the effort on your behalf and help further identify the benefits within their organization. Sometimes these benefits are obvious; sometimes you will be surprised at what is discovered. These steps will get you started in the right direction — remember that these decisions take time and it’s better to go slow to go fast.
Okay, not so daunting, right? Once you’ve agreed to form an alliance you’ll need to negotiate an agreement and properly manage the partnership. Whether you trust your new partner or not (HP and Oracle both partner and compete) will determine what you’re willing to share and the level of management required. Look for future articles on these topics.
This article was originally published on Linkedin Pulse.
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