How to Get the Best Results from Alliances: The Secret to Good Alliances Is Simplicity Both in Terms of Collaboration and Strategic Autonomy. A Simple Matrix Is Proposed in This Article
Dussauge, Pierre, Garrette, Bernard, Mitchell, Will, European Business Forum
Alliances with other companies are an integral part of corporate life. No matter what industry or country, alliances are essential tools by which companies reduce costs and gain access to technology, products and markets.
Recent research shows that alliances are growing in frequency and importance, both among new and traditional businesses (Dussauge and Garrette, 1999). The glass technology leader, Corning Corporation, for instance, has long relied on alliances with European, Asian, and American firms to achieve and maintain its strong positions in fibre optics, television components and other global markets. Alliances are particularly common in the internet economy, where agreements, such as the wireless communications partnership between Vodafone AirTouch and Vivendi, help firms attempt to gain quick access to new resources in rapidly changing markets. The internet networking industry leader. Cisco, has been involved in over 15,000 partnerships with other companies. Similarly, the wireless communications industry leader, Nokia, has used hundreds of alliances to extend its business around the world. No company in any industry can survive for long without an effective alliance strategy.
At the same time, though, alliances are highly risky. Research shows that unsuccessful alliances often contribute to major business problems (Singh and Mitchell, 1996). The recent break up of the Global One telecommunications alliance, for instance, has interfered with the pan-European expansion of its partners, Deutsche Telekom, France Telecom, and Sprint, leaving them at least temporarily vulnerable to competitive strategies from other telecoms companies. Moreover, the fastest growing type of alliance is the highly volatile link alliance in which partners each contribute different types of resources to a partnership (Dussauge, Garrette, and Mitchell, 2000). Glaxo Wellcome, Rhone-Poulenc Rorer, Eli Lilly, and other pharmaceutical industry leaders, for instance, rely heavily on link alliances involving R & D and marketing resources to develop and sell new pharmaceutical products. Link alliances create many learning opportunities for the partners, but are often short-lived and require quick alliance management action to achieve their benefits.
Despite growing recognition of the importance of alliances and the need for quick effective management, it remains an open question why some alliances succeed and others fail. Most analysts insist on the implementation process as the major determinant of success, but there are few conclusive studies on how to manage alliances successfully. Too often, firms simply view alliance management as similar to mergers and acquisitions integration or, even worse, completely ignore alliance management once they have formed the alliance.
As firms rely more and more on their networks of partnerships with suppliers, distributors, franchisees, competitors, foreign partners, and other allies to achieve superior performance, managers are frustrated that they have little more than their intuition as a guide. As the network economy becomes increasingly prevalent, traditional models of strategic thinking, which emphasise the integrated firm acting in isolation to leverage proprietary resources, lose their relevance. New thinking that combines competitive and co-operative strategies is required. This article highlights some of the management mechanisms that we have observed in our studies of alliances and suggests ways that managers can increase the success of their alliance activities.
Defining alliances: autonomous co-operation
We start by defining strategic alliances as collaborations between companies that commit resources to a joint activity while retaining strategic autonomy. Each part of this definition is important. 'Collaboration' means that people from the different companies must work together. 'Commit resources' implies that each company places assets at risk in the collaborative venture. …