Strategic Alliances: A Growth Model for Companies
Jan 24, 2019
Changes in the world economic climate have fundamentally altered not only the way products are created but also the way businesses form and thrive. There are fundamentally three strategic pillars to corporate growth: build, buy, or partner.
In the build model, companies grow and invent organically through their own resources. In the buy model, they acquire new products and revenue streams by swallowing whole other companies through mergers and acquisitions. But, now more than ever, growth for both large and small companies is fostered and nurtured through partnerships—by strategic alliances.
According to a recent study conducted by the United Nations University MERIT, 75% of companies surveyed believe alliances are of very high importance for the realization of their company’s strategy. Furthermore, most companies expect the contribution of alliances to the value of the company to increase from an average of 19% today to 47% in five years’ time.
What Are “Strategic Alliances”?
Companies form strategic alliances to complement their own competencies and capabilities. These collaborative relationships share assets and resources and risks and rewards to create greater value for their customers and for their own organizations—greater value than could be accomplished independently.
Despite this simplistic definition, alliances take multiple forms from highly formalized joint ventures to loose colaborations. Alliances span the value chain from research and discovery to sales and service. In some cases, multiple alliances form value networks that create the competitive footprint for a company in its market. For instance, Star Alliance is a collaboration of 17 airlines that share common services to manage costs, to capture more market share, and to provide a more pleasant customer travel experience.
How Companies Benefit
There are many reasons to patner and the payoffs can be dramatic not only for the partners, but for their customers. Some of the top reasons for partnering are:
- Create greater value for customers
- Leverage new sources of innovation
- Enter new markets or lines of business
- Establish new revenue streams
- Reduce costs or harness economies of scale
- Share risks and rewards in new ventures
- Develop new products or new services
- Expand geographically and internationally
Building a Successful Corporate Alliance
The dramatically high failure rate—estimated at 50 to 75%—suggests that companies often lack the knowledge and skills to determine strategic fit, negotiate win-win agreements, align organizational cultures, and—perhaps most important of all—get people to work together productively. Success is not an accident. There are proven best practices and tools that companies which have consistently successful alliances employ. The ASAP/UNU-MERIT study also indicated that implementing even a few tools can have a significant positive impact on alliance success.
In Search of Alliance Excellence
As strategic alliances become core to many organizations’ strategy for growth and innovation, the capability to manage alliances to achieve results becomes a core competency. We are beginning to see examples where major corporations are betting the farm on their alliance strategy as a major source of new products and to drive sustainable growth. Examples of such companies are among those recognized for Alliance Excellence in 2007, an award presented by the Association of Strategic Alliance Professionals to organizations that are at the top of the profession in alliance management. We evaluate alliance programs for the following characteristics:
- They are exemplary. The alliance management program is tightly linked to the company’s strategy and is built on best practices and well integrated with regular business processes.
- They are innovative. The company has advanced the state of the art of alliance management. It has been creative in its approach and has contributed to learning.
- They are high-impact. The approach to partnering has made a transformational change in the way the company does business and may even extend to how its industry does business.
Find out how AMA’s Strategic Alliance Management portfolio of seminars (Essentials of Strategic Alliances and Partnerships, Launching and Managing Strategic Alliances and Partnerships, and Measuring the ROI of Strategic Alliances and Partnerships) can help you grow your business.