Business writers typically define a strategic alliance as a merger or acquisition. This is a narrow view. It's also inadequate because, these days, strategic alliances are taking on unfamiliar shapes among organizations. There's a more compelling interest than profit. And joining two (or more) companies to make more money isn't so much a strategic decision as it is a business tactic.
Strategic alliances are, at least in theory, meant to give each organization a return which they could not otherwise achieve on their own. In the business context of a corporation or partnership, this is a financial return. In the case of a charitable organization, it may be an affiliation with like-minded NGOs. One example is the relationship between universities and literacy or community-development charitable organizations. The university's strategy in supporting a community effort may be to increase its local presence within a community, or to raise its profile and, indirectly, help its graduates find work in their communities.
Some of the most fertile strategic alliances have come from the public sector. And, to provide a balance among a crowd of voices, it's worth exploring some of the interesting strategic alliances that public (and some corporate) organizations have implemented over the years.
Strategic alliances typically begin as ideas to build market share, brand, profits, service reach, product design or quality, or new market penetration. One organization very often realizes it can't achieve this all on its own. It may have committed resources to other, revenue-generating businesses or clients. It may not have the necessary intellectual capital to achieve one of these goals, and so, it searches for an alliance as a means to foster its own knowledge growth. Whatever the case, we learned a great deal from the merger and acquisition fever of the past thirty years.
Crudely speaking, there are three things to evaluate when considering a strategic alliance. First-and most important-start with a clear analysis of the business environment. What market trends have emerged? How are your customers changing? What are competitors offering that you aren't? Is the market too mature for your products? How do competitors win new customers: by design, by features, by continuous innovation, by price, by reliability? Do competitors beat you to the market? Are there many substitutes for your product or service? Which groups support the future of your product? (Be careful here-we all know who won the VHS/Beta battle).
Having identified a broad range of market factors, turn to your second item. Your organization. And answer-with honesty-the question, "What are this organization's needs?" These are important to define. Not only by oneself, but in front of an executive team. Build consensus amongst your team to discover what it is you need. Consider strengths and weaknesses in manufacturing, operations, functional areas (such as human resources, finance, business-development, engineering, design, marketing, etc.), and corporate strength. Define why and what you need to build.
Then ask yourself which organization is capable of providing these. Start with your local or regional area before moving to a national level. There is a very strong positive correlation between the physical distance between two companies and the success of their merge. NGOs almost always rely on other local organizations to help their interests.
Third, evaluate the candidate organization in a similar way to yours. Does it have the management strength that you do? Is this an organization that gets things done? Is yours? Are there significant brand differentials (their brand is either significantly stronger or weaker than yours)? If so, how will you manage these? A common mistake is to overlook an organization's flaws or shortcomings because you're dazzled by its brand. Does your alliance need to be made known amongst the public? If so, are there risks to making it public? Let's not forget the confusion Vivendi/Universal caused recently-it rattled investor confidence significantly. Strategic alliances can often be made very quietly. A former client wanted to partner with a better-known not-for-profit client to launch a campaign. The campaign was a complete success-both companies won increased market share and profitability by sharing information about contacts, business processes, and consumer patterns across different industries. Neither organization's customers knew about the alliance, but they recognized the improved service.
In terms of developing and building the alliance, each organization needs a dedicated and shared team. Commonly, organizations and their inexperienced managers, think in absolute terms. In other words, they don't think of sampling a candidate organization's resources, culture, skills, or strengths by entering into a collaborative project with them. In business these are misunderstood by the media, and can be seen as tip-offs to competitors. Experience suggests that this is unfounded, and, in many cases, can further weaken competitors' positions by forcing their hand.
Setting project goals are vital, as are contingency plans. In strategic alliances, there is often a tendency to escalate commitment-even when all indications suggest stopping the project. It is therefore vital to know both what success and failure will look like. A wise mentor once said that leadership is very often about saying no, and having the strength to manage the backlash colleagues will feel in an alliance. Just as there are signs of success: increased market share, etc., there are signs of trouble.
Finally, it is important to manage expectations. Project milestones, as every PMP (or consultant, MBA, etc.) knows, help track progress and preclude costly errors. Those very leaders who prompted the strategic alliance initiative will want to know of its successes and shortcomings. It will help them appraise the initiative's outcomes, management skill, shortcomings, and build learning into their organization. Few corporations are as skilled at alliances as GE, and few public sector organizations are as skilled at forming alliances as hospitals. After all, both have extraordinarily intricate stakeholder maps, and both run operations which cannot afford to stop for reflection.