B2B Customer

CREATING THE

B2B CUSTOMER

Alan/Anthony July 2002

Six Keys to Successful Strategic Alliances

About 100 years ago, the Western world gave up on the idea of arranged marriages. Instead, we invented dating. We engage in premarital sex. We move in together and see how it works out.

What works in love also works in business. Strategic alliances can enable your company to access new markets, create new capabilities and plug gaps in your line of products and services — all with relatively low risk. If things go well and your companies are compatible, you can deepen the relationship. If they don’t, you can disengage with relatively little pain.

But few companies succeed in reaping the full benefits of the strategic alliances they enter. The most typical outcome is the “press release alliance,” where you make a big announcement, get a few paragraphs of coverage in the trades…and nothing whatsoever comes of it.

Improving the Odds

Companies fail at the alliance game because they don’t bring to it the same level of discipline and execution they bring to internal operations. But following a few basic steps will significantly improve your odds of success:

1. Know Yourself. According to research by McKinsey, alliances are more successful when the two companies involved have some overlap in their core competencies and markets — enough to understand each other well — but also large areas where they do not overlap. The same research indicates that alliances between two financially strong companies, or one strong and one weak company, are successful more often than alliances between two weak companies. In other words, an alliance is not a solution to business decline; it is a bet on a growth opportunity. To get the odds working in your favor, you need to start by understanding clearly where your company fits in the market. You need to express in simple language its core competencies, vertical markets and geographic reach. You also need to know what your company doesn’t do well, and where an ally might contribute.

2.Know What You Want, and What You’re Willing to Give. Before you hit the road looking for allies, you should define clearly what you want from them. Is it a good sales organization? Is it products and services that you can sell for them? Is it technology expertise? Is it a minority investment in your company? Just as important, think about the alliance from the other company’s point of view. What do they get out of it? What kind of terms will they require? How generous can your company afford to be?

3. Dress for Success. If you were trying to sell the company, what would you do? Develop a prospectus, right? The same thing works in the alliance game. Create a brief and focused presentation of your company that can be shared with potential allies. It should not only sell the strengths of your company but also present your intentions and expectations for an alliance in general terms.

4.Structure Your Search. A business development executive or marketing director should perform the first-level search for potential allies. Or an outside consultant with industry experience may be a better choice. This person should assess candidates from the outside first, then hold exploratory talks and outline preliminary terms with their counterparts in high-potential companies. Only if talks go well is it time to bring in senior management to do the deal.

5.Set Clear and Achievable Objectives. A general agreement to work together in pursuit of new opportunities is not worth the paper it is printed on. An alliance must have clear and achievable objectives by which performance can be measured. These may be technology milestones, or co-marketing achievements, or even sales objectives.

6.Give Managers Authority as Well as Responsibility. A major pitfall for strategic alliances is that the companies involved fail to assign responsibility for performance to somebody. Or having selected a manager, they fail to assign any resources or decision-making power. It’s like a romantic relationship: if you don’t put anything into it, you can be fairly sure that it will turn out badly.

Want to know more? Learn about Gateways service from Alan/Anthony, the partnership of business development consultants with decades of experience at growing companies in tightly-focused B2B niches.

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