WINNING ALLIANCES
WHY JOINING FORCES WITH THE RIGHT PARTNER IS NOT ENOUGH
WHY ALLIANCES ARE SO IMPORTANT
An alliance is an engine for growth and progress. Two or more parties join forces when they realize that their combined resources and talents will produce better outcomes than if the parties were to act on their own.
Today's decision makers are finding that the right alliances enable them to reduce project investment costs, rapidly enter new markets, more reliably increase initiatives' success rates, better keep pace with market changes, and more assuredly thwart off competitive threats than if they were to attempt to navigate these challenges alone.
THE 6 TYPES OF ALLIANCES
EXPANDING OPPORTUNITIES BY USING A SPECIFIC ALLIANCE AS A TOOL
Among the common assumptions and misconceptions about alliances is the notion that organizational alliances are restricted to "partnerships", "mergers", and "acquisitions".
There are actually 6 different forms of alliances, each with varying levels of commitment and providing different benefits to their allies.
Armed with the right terminology and some basic knowledge about establishing alliances, you can be in the ready position to capture and create opportunities that may otherwise elude you and your organization.
Source - Paid to THINK: A Leader's Toolkit for Redefining Your Future
Ad Hoc
An impromptu committee that fulfills a specific purpose and disbands as soon as that purpose is fulfilled.
Short Term - Low Resources
Consortium
A band of groups or individuals who pool limited resources like dues in pursuit of leverage and shared outcomes.
Long Term - Low Resources
Project Joint Venture
Two or more parties contribute specific resources for the duration of a particular project and part ways once the project is completed.
Short Term - Medium Resources
Joint Venture
Two or more parties who maintain individual ownership and management structures but who share resources, risks, and equity for a particular venture.
Long Term - High Resources
Merger
Two or more groups unite into a single legal entity sharing ownership, leadership, assets and resources.
Long Term - High Resources
Acquisition
One entity takes complete control over another through takeover or buyout proceedings.
Long Term - High Resources
THE POWER OF ALLIANCE TERMINOLOGY
Hey, David here. I wanted to share a story with you to illustrate the benefits of knowing the 6 types of alliances.
Years ago, I walked into a client's office. He was on the phone with a business colleague, and he was struggling to persuade this person to "partner up" with him.
I motioned for him to end the call and say that he would call the person back momentarily.
During the interim, I explained the 6 alliance options to him. He selected the the form that best suited his needs and called the person back.
Using his new vocabulary, he was able to clearly communicate their joint objectives, expectations, and anticipated outcomes.
And in less than ten minutes, he had secured the largest contract of its type in his industry!
Alliances - Acquisitions
WHY JOIN FORCES?
In the late 1980s and early 1990s, the number of business alliances quadrupled, prompting several researchers to find out why. Researcher E. Zajac uncovered four common categories and their breakdowns by percentage.
35%
25%
NEW TECHNOLOGY
20%
ECONOMIES OF SCALE
20%
LEGAL OR REGULATORY
COMPETITION/
DISTRIBUTION
Source: Lorange & Roos, Strategic Alliances: Formation, Implementation, and Evolution.
ALLIANCE PILLARS CHECKLIST
Identify the form of alliance that best meets desired outcomes and strategy.
Evaluate risk assessment to decide if the alliance is worth the effort.
Select the right ally using the "Development Funnel".
Set clear objectives and commitment levels for all parties.
Agree on financial contributions and draws for all parties.
Outline the budget and develop a financial management plan.
Establish controls, metrics, milestones, and how parties will develop alliance.
Determine your who, what, and where in regard to human resources.
