The Right Way to Make Alliances Work
Jan 24, 2019
Given the economy, it is more important than ever to manage strategic alliances well. A key factor in your success is to construct and manage each alliance for which you are responsible as a business. Your job is to bring the right framework, the right organization, and the right relationships together to move the project forward.
Another point: your approach needs to look at the big picture rather than short-term payoffs. “Winning” and beating the other company in negotiations may doom the relationship from the beginning. One of the biggest mistakes you can make is thinking that alliances are all about hammering out an air-tight deal structure, negotiating hard, and planning for every eventuality. As the vice president of strategic alliances at Cisco Systems, I remember one partner whose CEO said he measured a partnership’s success “in the number of Pos [purchase orders] that get written”—in other words, how much business his company generated from us. That company is no longer a partner.
The right way to think about partnering revolves around negotiating win-win agreements and growing the market for everyone. If you are spending your time in the discussions worried about dividing a pie that is not growing, you are probably not looking through the right lens. Think in terms of building incremental value and creating a bigger pie, not just getting the fattest slice.
In short, we’ve found that successful alliances require three essential building blocks:
1. The right framework. Start with a strategy, not a partner. Clearly identify how and where an alliance will help you achieve your business goals, who might be potential partners, and the short- and long-term wins for the companies involved. Then you need an efficient, repeatable model based on a set of best practices and a coherent strategy. Following an alliance playbook can actually reduce risk, create a platform for making decisions, minimize conflicts (or help resolve them), and dramatically increase returns. And having a truly repeatable process can cut the future rate by more than half.
2. The right organization. Alliance managers are the driving force of your strategy. Sadly, many companies pick the wrong types of people to staff the organization and then systematically fail to invest adequate resources in their employees’ training and development. Alliance managers are a rare breed; they must be equal parts diplomat, salesperson, strategist, and orchestra conductor, and you need to clearly spell out the requirements for their success. Then you must constantly hone their skills.
3. The right relationships. At the end of the day, partnerships are relationships—between alliance managers on each team, between the teams and their executive sponsors, and between the alliance manager and key internal contacts in the business units, sales channels, business development staff, and so on. Strong relationships are the glue that holds all these people together. The biggest reason many alliances fail revolves around trust. Trust between two companies can take years to build but can be destroyed in only a few minutes with the wrong move. It’s important to understand that you must manage relationships with the right blend of both science and art: with first-rate people skills and a systematic process for strengthening connections.
Excerpted, with permission of the publisher, from Strategic Alliances: Three Ways to Make Them Work by Steve Steinhilber. Copyright 2008, Cisco Systems. Published by Harvard Business Press, Boston, MA.