Academic journal article The McKinsey Quarterly

Give Alliances Their Due. (This Quarter)

Academic journal article The McKinsey Quarterly

Give Alliances Their Due. (This Quarter)

Article excerpt

Corporate alliances have never been more popular. Their numbers have grown by more than 20 percent a year over the past two decades, while the way they are used has changed dramatically: the cross-border and technology agreements of the 1980s and the early 1990s have given rise to the much broader range of alliances seen today--outsourcing agreements, consolidation ventures, start-ups, channel partnerships, and other co-branding and co-marketing deals.

At many companies, a quarter or more of all revenues now come from alliances, but the debate still focuses on whether they work instead of how to get more Out of them. Those who favor alliances argue that they should be used broadly to gain access to the assets and capabilities of other companies without assuming the burden of an acquisition premium. The naysayers, countering that it is foolhardy not to keep full control of important ventures, relegate alliances to the corporate margins. The truth, of course, lies in between. (1) In "Managing an alliance portfolio," James Bamford and I argue, not whether alliances are the right or wrong strategy, but that companies should take a more disciplined approach, integrated into corporate and business unit strategies. Although alliances are hardly the right way to organize every new venture, CEOs should at least consider them as a potential solution. The choice in executing corporate strategy shouldn't be "build, buy, or sell?" but rather "build, buy, ally, or sell?"

Companies must therefore stop pursuing alliances reactively, on a one-off basis, as many do now. Instead, managers should determine when alliances can be used to shape industry networks, to fill key gaps in technology and skills, to reduce the intensity of assets, or to exploit unique capabilities. …

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