Business Week

http://www.businessweek.com/smallbiz/content/feb2004/sb20040210_2316.htm
By Karen E. Klein in Los Angeles

A strategic partnership can make a lot of sense, but only after all parties agree on some basic rules and protocols

Small companies, squeezed by the pressures of internal growth and the economic uncertainties of mergers and acquisitions, are increasingly turning to strategic alliances for competitive advantage. The problem, however, is that the majority of business alliances fail. In fact, Vantage Partners, a Boston-based consultancy, has done research showing that 60% of alliances fail midway through their expected lifetimes.

How can your business increase an alliance’s chance of success? Larraine Segil, an author and partner at Vantage Partners, shares her “golden rules” for successful alliances:

Establish an “executive sponsor” in both your organization and your partner’s. If the alliance concept is just the idea of a visionary manager, it will become dependent on the personality of a single champion. Identifying an executive sponsor of the alliance emphasizes that the alliance resulted from a collaboration that will keep it going. Executive sponsors must be kept informed of alliance activities (good and bad) and pulled into the discussion only when needed to show priority for the alliance relationship, or to emphasize corporate commitment and resource allocation.

Analyze the priority of the alliance. The alliance will require active management of resource allocation and conflict resolution. If organizations assign different levels of importance to the project, they will wind up with lopsided staff, money and time committed to the project. Remember, an alliance that is of fundamental — perhaps even survival — importance to one company, may be just a sideshow to the other.

Create an implementation plan that has legs. Your alliance implementation and operating plan must include “scenario-building” in order to be realistic. This is a process in which the partners participate in simulations of what-ifs that could happen during the partnership. The great part is that scenario-building is risk-free, since none of the scenario conditions and events have happened yet.

Create metrics that take into account the different stakeholders. All stakeholders in the alliance can be clearly identified by conducting a “stakeholder analysis.” Stakeholders include each partner organization, the senior management of each partner group and the alliance function itself, as well as the other alliance managers, the other functions in each partner group (such as legal, finance, marketing etc), and external stakeholders, such as like analysts, competitors and the market as a whole.

Doing a stakeholder analysis will help you determine which entities could sabotage or benefit the alliance, as well as those who might be tracking its results. You will then be able to create and implement a plan to leverage, diffuse, report to or manage these people — as required.

Consider your partner’s partners. Strive to build a network of partners, rather than bilateral relationships. Every partner an organization brings in has its own interlocking relationships with other partners, stakeholders and players in the value chain. Creating a successful network of partners requires the disciplined approach of ranking each network member for risk and value, allocating appropriate resources to manage the risks and leveraging the value derived from integrated relationships.