The new realities of successful alliance management
During the past five years, the number of corporate alliances has increased dramatically - and the trend shows no signs of slowing. Executives today are forming alliances to help their companies reach new customers, compete more effectively and expand into new markets. As the marketplace continues to transform from an industrial economy to an electronic economy, it is clear that alliances will provide an opportunity to extend the reach of aligning organizations and create a vibrant new market dynamic.
Yet, an amazing 61 percent of alliances have been outright failures, or are limping along in some state of underperformance according to recent research by Accenture.
Myth 1: Alliances Are Like Marriage
Most observers compare alliances to marriage, and some valid parallels make the analogy tempting. But good alliances are driven by enlightened self-interest - not by emotional attachments and conventional forms - and actually have a stronger resemblance to diplomacy. Through them, firms seek and benefit from things - like multiple partners, collaboration with competitors, and short lifespans - that would never be aims of a good marriage.
Myth 2: The Integration Task for an Alliance is the Same as for a Merger
Poor integration is the number one cause of failure for mergers and acquisitions, and most managers understand it is also a major issue in alliances. The problem, however, is that managers tend to apply the same approaches to integration that work in merger situations. But good post-merger integration is all about speed. Ideally, it's done fast and is a one-time event. Most alliances are not like this. In fact, more than 90 percent of today's alliances are what we term "continuous integration" models, which require resource contributions from the corporate parents throughout the life of the venture.
Myth 3: One Governance Model Fits All Alliances
With alliances still a relatively new business form, most companies are still casting about for the right governance model - and believing that once they have found it, it will work for all subsequent alliances. The reality of alliances, however, is that they are formed for many different reasons, and in many different ways. Governance can't be decided once and for all, but must fit the circumstances. .
Myth 4: It is Adequate for Alliance Expertise to Reside Within an Elite Corps of Dealmakers
Many firms have developed a handful of functional super-specialists inside their corporate business development, legal, and tax departments who understand the intricacies of alliance negotiations, contracts, and valuations. Alliances are often thought best left to the super-specialists to worry about. It should hardly be surprising when alliances flounder because the people who will live an breathe them everyday are not deeply familiar with their workings.
Myth 5: Alliance Performance is Impossible to Measure
Executives typically believe that alliance performance is hard to measure and impossible to benchmark. Alliances, after all, succeed largely on the power of intangibles - and in any case, each one is unique. We find that only 51 percent of alliances use formal performance measures, where there are such measures, only 20 percent of executives consider them reliable barometers of success.
