A solid alliance development process will minimize alliance failure. While successful alliances require work and process, the benefits justify the effort. To improve your organization’s performance, production and profitability you must do more than just fix a problem. You must burrow deeper and change the system (culture). The following steps will help you to evaluate your system before you embark on your strategic alliance journey:
Select Alliance Type
Alliance Development Process: Monitor
Study organizational needs through self-analysis. Observe, and identify your areas for desired improvement. Develop an organizational evaluation method to be completed by your customers, suppliers, employees and management. This will help you to inventory your core strengths and weaknesses. Which strengths might be valuable to a potential alliance partner? What weaknesses do you want to shore-up?
Alliance Development Process: Educate
- Identify other industries that have embraced Partnering. Study the individual companies that have been successful in building alliances. Study what worked and what did not. If Partnering was not successful, learn and understand why not.
- What will it take to change your organization?
- What are the potential obstacles? Is your culture open or closed? Changing a closed culture organization will be much more difficult than one that is open.
- Has collaboration worked in the past?
- What competencies do you desire in an alliance partner?
- What kinds of (or reasons for) strategic alliances would best work with your culture and/or fulfill your growth needs?
- What criteria will you use to select alliance partners?
- What new training programs will be necessary to help you with your shift to Partnering?
Alliance Development Process: Select Alliance Type
This is the critical step in the alliance development process—all your future efforts will be built on this foundation. Learn about those companies you consider as Partnering candidates. Ask yourself and your management teams these questions: What are their strengths and weaknesses? What affect would they have on our business? Be sure that the company cultures and core strengths are complementary. Can the people who will make the alliance work get along? What is the growth opportunity, short and long-term? Select alliance partners, with knowledge, understanding and commitment. You can only partner with a person or organization that wants to partner. It would be a serious mistake to think otherwise.
Search for the strongest material for your Partnering foundation, the best possible partner. Customer-oriented culture is critical to the success of the partnering alliance. The greater the sophistication of a company and its officers, the more likely the company will enter into. Embrace long-term thinking. Strategic alliances are rarely a quick fix, but rather a sound long-term business strategy. Target companies, large or small, that can aid you in rapidly and efficiently, reaching the goals of research, technology, production and marketing.
Another element to consider is the focus of the individuals involved. Be certain their focus of the Partnering relationship is strategic to the individuals’ goals. Be clear about your and your partner’s critical driving forces that pull each into an alliance arrangement. Can the two organizations work together at the daily operation level? Even though there might be an exceptional strategic fit, the two organizations must compatible on an ongoing operational level.
Outrageously successful alliance relationships take time to develop. Over the last decade too many alliance relationships have failed due to the quickness of selection. Research and due diligence must come first. Selecting your alliance partner well reduces the chance you’ll need to exercise your exit agreement.
Alliance Development Process: Organize
Once you’ve selected your potential alliance partner short list, you can establish mutual goals. You can agree to who gives and gets what, when, where, and how. Mutual performance measuring instruments can be developed. It is time for identifying, understanding, and putting together the possibilities for an alliance. Internal and external personnel should be involved in developing not only your alliance structure, but also your road map as well.
The success of the blending of cultures is pivotal to a successful alliance development process, take great pains to ensure this achievement. Access is crucial—emphasize the importance of understanding and access to each alliance members’ staff. Create a convenient communication system for all partners especially decision-makers. Plan procedures to keep relationships between key people of partnering companies open and constantly alive.
Make sure that all levels of both organizations share the partnering attitude. Stress strong information systems and share information constantly. Agree on pricing with your partners and delete income accounts (accounting practices) that have nothing to do with your business or the real price of your goods and services—things that only make a singular department look successful.
Look into the future, plan for the long-term relationship and encourage strategies that will sustain the relationship through to its conclusion. Phasing in the partnering relationship could be a preferred strategy, as this method will allow partners to have a get acquainted time. This can assist in the identification of reaching milestones, successfully or identify the need to reassess before moving on to a higher level in the relationship. Maybe even institute a pilot program at this point.
Alliance Development Process: Agreement
This is the agreement, handshake or contract. Most who have been down this path would strongly urge that your strategic alliance agreement be committed to paper. For the safety of all concerned, the agreement will be so much clearer six months or two years later. Sometimes people forget what they agreed to or, even worse, they have been transferred to a completely different division thousands of miles away.
The agreement should spell out conflict, dispute resolution, exit strategies, and steps to facilitate the alliance development process. Be ready for it and the conflict can be resolved timely and amiably. Have an agreed-upon set of procedures in place that will help resolve the issues that arise. Inevitably, there will be a need for a mechanism to handle things like price increase discussions, inability to ship and dispute resolutions.
Develop a clear agreement on what your goals are and make sure they are measurable. Have a formal mechanism for alliance members to identify the goals, milestones, and turning points crucial to the success of the relationship. Devise an evaluation that will measure both implementation and performance. The Partnering agreement should establish the terms and conditions under which partners will resolve questions of opportunity, accountability and risk. The final agreement should be reviewed and agreed upon by all parties involved or affected. Check with your national trade or professional association, they may have already developed a standard agreement for you. Alternatively, to reduce development costs, pick up a copy of Developing Strategic Alliances which has an extensive general issues checklist to review before you meet with the lawyers.
Alliance Development Process: Implementation
This is the kick-off of the alliance and kick-off parties are common. Generally, most of the persons from both or all companies that are involved in the alliance will attend. This humanizes the organizations and the people working on the alliance. The difficult work of merging hardware, software, systems, policies and all the elements that differ among the alliance partners from development to production to distribution. This is a deal-maker, or breaker, step in the alliance development process.
Alliance Development Process: Maintenance
Regularly review your mutual goals and performance. Regularly meet with alliance partners to evaluate the status of your relationship. Should the alliance be upgraded, maintained, or downgraded? Should new goals (short and long-term) and performance expectations be established? Are new measurement systems available?
It has been said that in an ideal marriage one partner is blind and the other deaf. To keep your strategic alliance alive and healthy, each partner must overlook some of their partner’s misgivings. At the same time, each must keep an open line of communication to minimize conflict and relationship meltdown. The best way to do this is through regular Relationship Value Updates (RVUs). Quarterly RVUs are preferred, but semiannually can be acceptable.