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Monthly Business e-Tips Vol 6
Issue 6

The Good, Bad and the Ugly of Strategic Alliances, Part 2

"Their business model includes no services, and ours includes no manufacturing. There are no conflicts built into this relationship. The fit has been incredible, because we have a common market and a common foe."
John Wilkinson (VP, EDS on alliance with SUN))


Last month in Part 1, we explored why strategic alliances are an important strategy in growing your business. This issue will help you to identify the right partners necessary for building successful relationships.

Recently I met a new business owner and prospective client who planned to build a great business in his field of expertise. The complex nature of assignments required a variety of talents for his business model to succeed, so he identified other professionals who were complementary. He envisioned his partners working together with him to create this new business opportunity.

However, issues surfaced with one of his partners early on. As we talked further, more issues came up. The partners, all professionals, were venturing into projects that were only slightly related to the business model. I observed mushrooming chaos as it became clear that everyone had a personal agenda: chasing good projects trumped establishing and growing the joint business. Personality conflicts and disagreements abounded. My client grew increasingly frustrated as his business slipped out from under him, and he is job hunting, at least for now. Although I lost a client, I perceived the founder to be in a no-win situation, paddling in a row boat upstream against strong currents.

Why did these relationships fail? Successful alliances and partnerships require core alignments in the following areas:

  • Trust and respect. Partnerships must be built on a stable foundation with people you trust and respect. Your reputation depends on it.
  • Unified goals. Shared goals provide motivation to commit to the relationship. Both parties must benefit from the joint venture's success.
  • Shared values and culture. Look for synergies in how the companies operate. If you are working in collaboration with mutual customers, the consistency is essential.
  • Clear roles. Decide upfront who leads on which issues, and spare the partnership from unnecessary confusion. Even competitors can collaborate, if the boundaries are well defined.
  • Balanced risk. Both partners must share in the risk to stay motivated and committed to the collaboration.
  • Structure. Clarify to both customers and employees how the joint venture operates. Establish a decision making process, a compensation structure, a way to measure success, and consistent use of communication channels. Draw up legal documents, too protect both parties. This is critical if the partnership involves substantial investments and in case the alliance doesn't work out.

My former client had not addressed all these factors, and the dynamics spun out of control. If he decides to try again, he will probably select his partners more carefully and build more structure into the relationships. With due diligence, we can learn from his painful mistakes and build successful partnerships on the first try. Once you get it right, repeat!

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