17th March 2022

Look before you leap into a strategic alliance

Most businesses I have worked with have embraced the need for alliances with likeminded companies at some time, but very few get it right. Those that do have one major thing in common, they have taken the time to identify why they need an alliance, what that alliance should look like and what any partnership entered into should involve. They have looked before they have leaped into a relationship that could quickly go wrong. 

In the second of my series on Strategic alliances I want to help you select the right alliance for the future by sharing with you ten key questions every business should ask itself before they establish a strategic alliance or continue with an existing relationship.

1.     Why do you need this alliance 

The first and most fundamental question you need to answer for any strategic alliance is 

“Why should you work together”. 

Do both companies  have complementary skills and add extra revenue to each other? 

You need to understand the strengths and weaknesses of not only your own business but the prospective alliance. Be clear how the alliance aids your business plan. 

However, most of all be completely clear why you're entering into the partnership and what you expect to gain or what you may need to give up.

2.     How does the potential partner operate?

It's critical that you look objectively at management styles, work ethics and values, and identify where potential clashes could occur. Identify issues such as how are major decisions made? Who owns the relationship with the client? And critically who is paying whom?  

Answering these questions honestly leads to a better match and a more harmonious ongoing working relationship 

 3.     What are your joint goals and objectives?

For any relationship to work there has to be a shared vision with goals and objectives which reflect what both parties in the arrangement hope to achieve together. 

Clearly defined and communicated goals are the key to success as strategic partnerships have to foster an environment in which both parties gain something; otherwise, they're not partnerships.

 4.     What roles and responsibilities are needed? 

In business I have found that many potential problems can be avoided if people set their expectations up front. Many strategic alliances fail because of poor relationships, so document clearly what's expected of everyone involved. Be specific: Decide how many people from each company will be involved in the alliance and what their particular roles will be. Each party has to dedicate resources to the relationship, and both parties need someone within their business who will champion the relationship.

5.     How to communicate effectively 

Clear communication is key to creating an enduring partnership. Any relationship must be developed to the point where both parties can be honest when evaluating progress and offering recommendations for improvement, both of which should be done on a regular basis. For example, you might want to exchange weekly sales reports.

6.     How will you resolve any conflict that arises?

Any business relationship has the potential for conflict.  Misunderstandings, compromises, and disagreements are natural. It is critical to have a conflict resolution process in place and for this to be transparent and open. This allows you to focus on solutions not apportioning blame. 

This might sound negative, but it is also useful to agree at outset how the strategic alliance can be ended, so that acrimony never arises and both parties can go their separate ways without any issues around money, data and client ownership. 

 7.     How will both sides benefit?

Successful and long-term strategic alliances are built on trust, dedication, and mutual interests. So, at the outset identify what benefits any partnership will bring for both parties. 

8.     Who will lead the alliance? 

Management in both parties need to be willing to champion the alliance and  dedicate resources and energy, and face risks to make the venture work. They need to visibly support the relationship and be willing to work together to resolve any issues that may arise. Without top level buy-in, any relationship is doomed to fail. 

9.     How enthusiastic are your potential partners? 

Strategic alliances take time to develop and maintain. Success is more likely if you have a committed and enthusiastic partner. If they lack enthusiasm at outset, it is highly likely that when difficulties arise, they may be reluctant to work with you to resolve them. If you have a choice of strategic partners their desire to success and work with you should be a major factor in deciding who to go forward with. 

10.  Do you have a formal written agreement?

You need a document which details what everyone has agreed to, the goals you have set and the objectives you will carry out together. This is an outline of expectations and protects you and your alliance if those expectations aren't met. If a disagreement arises, there is a document you can refer back to in order to get the relationship back on track.

I hope these questions have proved useful and I would urge you to answer these when deciding on new relationships or igniting a strategic alliance that has perhaps not worked as well as you hoped. 

Next time I will look at communicating a strategic alliance to your clients and the customers of your new partner.

John Joe McGinley Glassagh Consulting March 2022 

John Joe McGinley, Glassagh Consulting, Business Development