How to Identify, Form and Capitalize on Strategic Alliances

By: Andrew C. Nester

The last decade has been a decade of change in how businesses
manage their resources, obtain funding, and do business. This
change has been fueled by: the Internet, innovation, competition,

available human resources, market conditions and the capital
required to build a business. Strategic alliances have become the
vehicle of choice for supporting this change.

Today's businesses are wholeheartedly embracing strategic
alliances. Indeed, 80% of businesses surveyed viewed alliances as
a means to:

Rapidly gain new strategic capabilities and advantages in
the marketplace.
Reduce the investment cash and ongoing operating expenses
normally required to increase revenue and profits.
Create less dilution and debt, thus more owner value.

Larger corporations are adapting this business strategy and adding alliance
specialists to their staff as a key organizational function. Internet businesses
grow their revenue faster when joint ventures are formed. These two trends
give credibility to the strategic alliance as a superior business model.

What is a Strategic Alliance?

An alliance is a relationship between two or more firms, or
individuals, involving the sharing of complementary disciplines,
technology, products, services, organizational structures,
marketing and/or financial resources.

Types of Alliances

There are five fundamental types of alliances:

Funding
Joint Venture
Merger/Acquisition
Product/Services
Cooperative

Each type of alliance is usually subdivided into several special
categories to fit specific business needs.

Each strategic alliance uses varying types of agreements, from
hand shakes and letters right up to tightly-defined legal
documents. The needs of the parties involved, the depth of the
involvement and the duration of the alliance all play a role in
the type of agreement needed.

Every alliance has its own unique blend of economic, strategic
and cultural circumstances. Each relationship is unique and
should be executed according to its own set of guidelines and the
core values of the alliance partners.

In order to determine what type of alliance is needed to support
your business' goals you must first assess your business'
strengths and weaknesses, your competitive position, emerging
opportunities and the resources needed to achieve your goals.

Alliance Ownership

The ownership in the alliance can take many forms depending on
the type, contribution, tax and legal ramifications and the goals
of the alliance partners.

Alliance Strategy

After you have defined the type of strategic business alliance
needed a strategy and plan can be put into place. The strategy
and plan should define the following:

Alliance needs
Core competency
Alliance goals and objectives
Criteria for success
Partners' roles and relationships
Characteristics of good and bad partners
Potential candidates
Operational details
Deal structure with exit plan.

With your business plan and an alliance strategy plan in place a
proactive search for an alliance partner can be implemented.

By establishing your own business alliance strategy then working
with potential partners to jointly develop the alliance operating
plan you lay the foundation for a mutually beneficial
relationship.

Qualifying Potential Alliance Partners

Once potential alliance partners have been identified, the next
step is to qualify them for:

Complimentary strengths and available resources
Cultural and values compatibility
Organizational planning
Management structure and commitment to plans
Flexibility and willingness to truly establish a win/win
situation.

Reasons Alliances Fail

Alliances fail because of:

Cultural incompatibility (largest reason)
Inflexibility in adapting to changing needs
Not understanding the time commitment required to
establish and maintain an alliance
Lack of a written plan
Poor day to day management of the relationship.

Reasons Alliances Succeed

Alliances succeed because of:

Good planning (begin with the end in mind)
Proactivity
An early start (it takes longer than you think)
Relationship building
Synergistic thinking
An early "win-win" or "no deal" decision
Proper staffing
Timing and follow through (these are key).

The end result of any alliance should be that "the sum has
greater value to all participants than the parts."

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Andrew C. Nester is a Business Management Consultant providing business strategy processes and support to companies of all sizes. Visit our web site at http://www.bizstrategies.biz/strategic-alliances.html for additional information on the Strategic Alliance Process and to get your free copy of our white paper, "Business Management Coaching: Who Needs it Anyway?" You can email Andrew at andrew@bizstrategies.biz or reach him by phone at 707-355-9221.