But risks abound. The failure rate among new alliances runs as high as 60%. What if your large partner loses interest or, even worse, walks away with your company’s trade secrets?
“Since the sharp falloff in alliance creation after the dot-com bust in 2001, companies have learned much about how to design and manage these partnerships more effectively,” says Howard Muson, author of a Conference Board report on alliances. “Alliances are making a strong comeback, and companies have more realistic expectations about what they can achieve.”
Alliances often are confused with mergers or acquisitions, which are permanent structural changes. Strategic alliances are business-to-business partnerships formed by joint marketing, joint sales/distribution or joint production. Alliances can be formally established in joint ventures or partnerships.
Choosing a big brother: 3 mistakes
The only good strategic alliance is a properly managed one. Here are three common mistakes to avoid:
1. “Drive by” partnerships. Example: A quick deal is made informally by business leaders on a golf course before any actual research and planning can take place. Do your due diligence first. Look at behavior in past alliances and whether the company has kept the trust of its past partners.
2. “Relationship” relationships. Business alliances are often anchored in individual relationships. Avoid one-on-one deal-making. Get all interested parties in the room to talk philosophy and goals. Establish relationships with more than one decision-maker.
3. Loss of intellectual property. How much information will you share with a partner— and vice versa? Alliances often involve sharing proprietary info. Seek legal counsel and address this issue upfront.