Conditions for success
Experience shows that some basic rules must be observed to ensure the success of an alliance or partnership. Here are a few success factors:
- The goals of the allied companies must be compatible. If the goals (formal or informal) are similar, conflict will be imminent. For instance, if an allied company’s informal goal is to penetrate the market and then develop a broader range of products, while the other allied company is already in business with an extensive range of products, the alliance will only exacerbate conflict since one of the companies will feel wronged by the business partnership. The goals and interests of each allied company must be clearly established from the start.
- The agreement must bolster the allied companies’ position vis-a-vis their current or potential competitors. In other words, the agreement should not create an additional competitor but rather reduce the number of competitors for each allied company.The agreement must bolster the allied companies’ competitive position.
- The partnership should not make the clients’ work needlessly difficult. They must know whom to contact; they must not be confused when dealing with the areas that concern the partnership. Generally, it is simpler to provide a procedure whereby the client always contacts the same entity and to subsequently address the requests to those concerned.The partnership should improve customer service, not make it more difficult.
- The agreement should allow each partner to adjust along the way, and in some cases change strategies. It must therefore allow the partnership to be quickly terminated in the event of major problems, along with revisions based on changes in the industry, in the various markets, and in the partners’ companies.The partnership agreement must be flexible.
- The operational procedures and allocation of tasks and duties must be clearly defined. The partnership must fit into daily reality.
- Insofar as possible, the alliance must be balanced both in terms of the relative importance of the investments and the development efforts that are made. For instance, if the mission of two allied companies is to satisfy a client’s business needs, the two allies should provide a similar effort in product maintenance and development. Otherwise, the company making the greater investment will feel wronged.The partnership must be balanced.
- In a partnership, interpersonal relationships are key. You need to look for chemistry in that regard.A certain chemistry is required.
The potential pitfalls of an alliance are often underestimated or ignored.
- When one or more of the success factors listed above are not present, the alliance may quickly prove to be a costly failure.
- An alliance is a choice that is limiting with regard to other possibilities, such as an alliance with another company, an in-house development, an acquisition, etc.
- Alliances are sometimes difficult to manage. Administrative constraints may result in excessive costs.
- An alliance that is a poor match may result in an overly slow response to the market. Examples include cases of product development or new technological directions.
Alliances are complex strategies, in particular from a relational standpoint.