In today’s economy, strategic alliances are a competitive advantage. While attractive rates of internal growth are hard to sustain and fluctuating share prices make acquisition valuations a challenge, savvy companies are increasingly turning to alliances to enable them to penetrate new markets, develop technology, and better manage their supply chain and customers.

Despite the proliferation of strategic alliances, one alarming fact remains true: most business alliances fail. In fact, through my research I have found that more than half (60 percent) of alliances fall apart three years after conception.

There are steps companies can — and should — take to increase the likelihood of alliance success. The following are what I call the Golden Rules of Alliances.

Rule #1: The First Partner Is Not Always the Best Partner

Even if a partner, who appears to be appropriate, approaches you, move from reactive to proactive mode. Do due diligence on strategic fit of this partner and others, and create an alliance implementation strategy.

Too often, alliances are created without equal thought being given to both strategic purpose and ultimate implementation. Execution of alliance intent is far more difficult than the deal making and partner identification and wooing that precedes deal closure. Conduct a thorough assessment of skill and competency gaps between participating partners, and establish a mission statement for your alliance that has both qualitative (for example, “license 50% of new technology”) and quantitative (such as, “increase revenues by 30%”) elements.

Rule #2: Always Speak to the Partners of Your Partner

Every partner in an organization brings in a host of interlocking relationships with other partners, stakeholders, and players in the value chain. These networks of relationships — what I call the Spider Network™ in my book Fast Alliances – Power your E-business represent a web of opportunities and risks that could impact your activities. The key to creating a successful Spider Network™ is not only the basic of listing the network members who are ever changing. Instead, it is the disciplined approach of ranking them for risk and value, and then allocating resources accordingly to manage the risk, and leverage the value that could be derived from more integrated relationships.

Rule #3: Be Sure There Is an Executive Sponsor in Both Your Organization and in Your Partner’s

The sponsor should be part of a team so that if one champion loses interest there will be another one to take his place. Executive sponsorship is only valuable if it has continuing influence on the alliance. This means adding ‘position power’ to the influence that the alliance manager can have across the organization, as well as a conflict resolution mechanism that acts as a deterrent to accelerating conflict above lower levels of management.

Rule #4: Analyze the Priority of the Alliance for Yourself and Your Partner

Partnering companies must take into account what I call the Project Personality Type. An alliance that is of fundamental, even survival, importance to one company may be just a sideshow to the other. This will affect the resources — staff, money, and time — committed to the project.

When an alliance is of different priority to the participating partners, this does not necessarily doom it to fail. Rather, recognition of the differences in advance of alliance implementation will enable the partner for whom the project priority is highest, to adjust their activities and resources so that they will be doing all the work – not just their own work but often the work of the less interested partner. Recognition of varying project priorities should be cause to realign expectations and resource allocation.

The alliance can still become a success as long as the participants do not expect unrealistic and equal contributions from each other. If your priority is higher than your partner’s, it is reasonable to expect that you will contribute more.

Rule #5: Create an Alliance Implementation Plan that Has Legs.

A critical phase in creating the alliance implementation and operating plan is scenario building. In scenario building, the partners participate in simulations of what-ifs that could happen during the partnership. The importance of the scenario building process is that it is risk-free, since none of the scenario conditions and events have happened yet. In the scenario-building exercise, it is reasonable and safe to ask the kinds of questions that might not be asked in a real-life situation.

Rule #6: Identify the Leadership Characteristics that Your Partner’s Team Leader Must Have

Nothing will ruin a good alliance faster than a lack of leadership. If you have the wrong person at the helm, you will have challenges.

Make sure that you are wooing and getting to know — in many ways, not just via e-mail — the other team.

Ten Characteristics that Drive Alliance Success
In researching and writing my latest book, Dynamic Leader, Adaptive Organization: Ten Essential Traits for Managers, I identified the ten characteristics, which are both personal and organizational, that will drive alliance success:

1. Fearlessness,
2. Completion,
3. Commitment,
4. Inspiration,
5. Assuredness,
6. Penetration,
7. Intelligence,
8. Energy,
9. Integrity, and
10. Being in the customer’s head.

Rule #7: Conduct a Thorough Stakeholder Analysis

You must leverage the stakeholders in your alliance for every ounce of value whether internal or external to your alliance. You must leverage these relationships in order to get in front of the right people at the right time. Leveraging these stakeholders will ultimately derive the benefits for them that they collectively want for the success of the alliance. Is it easy? No.

Given the Spider Network™ many partners are rarely managed because they fall into nontraditional partner categories. These partners can be clearly identified only by conducting a stakeholder analysis. Conducting the stakeholder analysis will help you determine which stakeholder could sabotage the alliance.

You will then be able to create and implement a plan to satisfy or defuse these people so they do not come back to haunt you.

Rule #8: Manage Compatibility Challenges

Often partnering organizations are not similar in culture or lifecycle stages. More often they are in differing stages of growth – some in high growth others in decline. Managing corporate cultural differences is a significant challenge.

Through research into 235 companies, which I examined through my teaching of executive education on alliances at Caltech, I found that it was possible to anticipate organizational and managerial behavior by tracking the lifecycle stages of each partner.

This anticipatory knowledge gives all partners the opportunity to allocate resources and manage cultural differences without rancor. The recognition that different managerial personalities tend to thrive or struggle in different lifecycle stages also enables appropriate team selection in order to implement the alliance over time by changing team members and personalities to fit the circumstances. Country cultural issues in cross border alliances, add another dimension of complexity that will require managers with multi-cultural management skills.

By implementing the above 8 Golden Rules, you will be well on your way to alliance success.