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Forming strategic alliances: 9 tips

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Steve Steinhilber, vice president of strategic alliances for Cisco, says that half of all strategic alliances fail.

So why has he made a career of them? Because customers expect products that are well integrated, but you need to focus on what you do best. Alliances made it possible for Cisco Systems to grow and move into new markets such as wireless technology.

Here are nine ways to think about and plan alliances:

1. Start with a strategy, not a partner.
Ask what you need to accomplish, including the value proposition for a targeted customer base.

2. Manage alliances like businesses.
They need to bring together the right people and run on efficient, repeatable processes. Sketch out delivery, service and support strategies early for the joint offering.

3. Look for ways both partners will win. Negotiating hard to “beat” the other folks will jinx your alliance. Steinhilber tells of a CEO who measured a partnership’s success in how many purchase orders it generated for his company. That alliance died.

4. Set up parameters your organization can live with. For instance, Habitat for Humanity uses a review tool that assesses potential fit, including wiggle room in matters of governance and decision-making, but also employs three criteria called “deal makers,” “deal breakers” and “deal enhancers.”

5. Establish agreements for each part of the process. An alliance agreement maps out aspirations, scope and governance. A manufacturing agreement establishes the manufacturing model, pricing and rights. A joint development deal covers intellectual property. And a marketing agreement sets out commitments for the launch.

6. Make sure to align the organizations’ goals.
Ferret out any liabilities. Do your due diligence.

7. Consider culture.
A partnership between Lilly and Amylin Pharmaceuticals almost melted down over personality differences that became obvious through BlackBerry versus land line conflicts. Your alliance leaders must be able to work in unstructured and ambiguous circumstances.

8. Ask how both sides will measure success.
Create a “common dashboard.”

9. Think big.
A good alliance grows the market for everybody involved.

— Adapted from Strategic Alliances, Steve Steinhilber, Harvard Business Press.

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