What Does a Business Alliance Mean

Start by finding the best possible product or solution that can be deployed, the best possible product or solution you can offer, and what you need to bridge the gaps between the two. Send your proposal to key stakeholders and agree on a time to discuss it in detail. Remember that strategic alliances are supposed to be win-win relationships. Therefore, your proposal should include the value they have in forming a partnership with you. What`s more, what you learn from another company`s expertise can often be adapted and applied to your own business. The need to cultivate collaborative behavior among alliance partners may seem obvious, but it is often not met. According to our study on success factors for alliance management, more than 70% of companies have developed formal management systems for at least some of their alliances, but less than 10% have initiatives to promote the type of collaborative behavior we describe. This is especially surprising given that 90% of alliance managers cite collaborative thinking and behaviors as critical to success. If companies can make such a shift in direction, they significantly improve their chances of success – a conclusion based on our 20 years of experience working with successful and failed alliances and systematic research we`ve conducted over the past six years.

In this article, we will illustrate the five key principles of this approach to alliance management using several companies we have worked with as examples. A strategic alliance is a clearly defined partnership between two companies with common goals. In these business relationships, each company remains independent while pooling its resources to reach new markets, strengthen both brands, increase market share, and achieve results it may not be able to see alone. One of the best-known examples of a strategic alliance is the partnership between Starbucks and Target. In fact, you`ve probably seen this example of a strategic alliance many times. As soon as you enter Target, a Starbucks counter is waiting for you to mix your favorite drink. Strategic alliances can be flexible and some of the burdens that a joint venture could bring. The two companies do not need to merge their capital and can remain independent of each other. Uber`s competitors don`t have a similar personalized music experience, giving the driver a competitive edge over Lyft and other similar services.

And since not all Uber drivers have Spotify and not all Spotify users drive Uber, both brands have access to a wide new audience in this business alliance. People who have been involved in the hundreds of failed alliances we`ve seen over the years have repeatedly pointed to breaches of trust and communication, and the inability to resolve an inevitable sequence of disagreements as the most common causes of failure. Better business planning was rarely mentioned – and more carefully drafted contracts almost never – as something that could have saved these alliances. As an entrepreneur, you`re always looking for a competitive advantage, and one of the most effective ways to do that is to join a business alliance. A business alliance, also known as a strategic alliance, is a formal business relationship between two or more organizations that pursue similar short- and long-term goals. A business alliance structure may include joint ventures, franchising, cross-licensing, cross-marketing, and co-manufacturing. While strategic alliances have advantages and disadvantages, they usually allow your business to realize its potential faster than if you pursued a single goal. There are three types of strategic alliances: joint ventures, strategic alliances with shares, and non-equity strategic alliances. Perhaps the hardest behavior to overcome in alliance teams is the tendency to assign blame as soon as things go wrong.

This very human inclination needs to be replaced with something most people don`t take for granted: an unbiased analysis of how both sides have contributed to a problematic situation and what each can do to improve it. The emphasis on investigation rather than judgment recognizes that in a complex and interdependent relationship, difficulties usually result from the actions (or inaction) of both parties. When considering the pros and cons of strategic alliances, remember that risk mitigation is one of your main goals. The competitive landscape of the modern economy often results in businesses that last only a few years before closing. In this environment, sharing economic risk between two or more companies can help you reduce your exposure to unexpected downturns and changes in customer demand. This is especially true if you form an alliance with a company that has established itself in a market that you consider desirable. Strategic alliances can take many shapes and forms: When drugmaker Aventis and biotech company Millennium Pharmaceuticals formed an alliance, the companies jointly created a list of problem-solving protocols, including “When we discuss challenges, we present possible solutions, not just problems.” Compliance with protocols helped partners achieve their goal quickly. When partners sit down together to create alliance dashboards, they typically choose goals like revenue growth, cost reduction, market share gains, and more. They immediately begin measuring Allianz`s performance against these goals, often up to once a month. At first glance, a strategic alliance seems like a great business strategy to scale quickly and with minimal risk. Once an agreement has been reached, the company enters into a systematic “alliance relationship”. This process, which typically takes four to six weeks, includes meetings where partners explore potential challenges to collaboration, review differences, develop common protocols to address those differences, and establish mechanisms for their day-to-day work.

Time is spent on how each company makes its decisions: what approval steps are required for different types of decisions? Are there formal review committees that make specific decisions and, if so, how often do they meet? Is the day-to-day decision-making culture consensual or hierarchical? Such conversations are valuable in avoiding frustration and conflict later on, but Schering-Plough takes the discussion even further: among other things, he describes in detail the most important decisions that are likely to occur and determines who in the alliance team will make them; contact persons; which must be separately approved by the directors of the partner companies; And so on. The resulting clarity has allowed decisions to be made faster, frustration reduced, and better follow-up once decisions have been made. Strategic alliances have become a popular way to grow businesses. In Robert L. Wallace`s Strategic Partnerships, he explains three reasons why this type of partnership works so well: As we have seen, strategic alliances are formed to drive growth and profits for both companies. However, how these results are achieved depends on what each strategic partner brings to the table. Let`s take a look at some high-level examples: However, it is rare for an alliance to produce significant results in the first few months or even in the first year or two. It is in the nature of things that alliances usually require significant investment and effort before a large profit is made. When faced with reports that no payment is paying, partners often lose confidence in the company. Senior management`s attention is diminishing, resources are redirected and morale is declining, all too often leading to the downfall of the Alliance. All industries are prone to disruption, and leaders must look in unlikely places to get the edge they need to keep their organizations relevant and successful.

Blurring the lines between competitors and industries is essential to enter new markets and bring new products and services to market quickly. However, it`s important to remember that you won`t be able to effectively share economic risk unless you choose to form an alliance with a company that has similar goals and an organizational structure that works well for yours. But what is a strategic alliance, what are the types of strategic alliances, how can they be a blessing – or a burden – for your business, and why are they now critical to success in today`s marketplace? According to Accenture, 76% of executives surveyed agree that current business models will become unrecognizable in the next 5 years. Ecosystems and strategic alliances will be the most important agent of change.