How to Build Business Alliances

BY INC. STAFF, JUN 1, 2010, http://www.inc.com/magazine/20100601/how-to-build-business-alliances.html/2, downloaded 25set13

The basic logic of a strategic alliance is
often clear, but managing it can be tough.
Here's how to forge partnerships that last.
The basic logic o the st!ategic alliance -- a "oint
#entu!e between two companies -- is oten i!!esistible:
$t%s diicult to b!ea& into new ma!&ets, and a
pa!tne!ship can b!ing instant access to new custome!s.
$ 'ou mo#e into a ma!&et m'sel, it could ta&e 'ea!s.
$ 'ou do it with a pa!tne!, it could ta&e months.
( pa!tne!ship doesn%t ha#e to be about b!idging
ma!&ets, o cou!se) it can also suppl' capital o! access
to technolog' o! manuactu!ing p!ocesses. Then the!e%s
the halo eect. *oing an alliance deal with a ma"o!
pla'e! clea!l' adds c!edibilit' to a smalle!
o!ganization, e#en i it doesn%t ha#e a bottom-line
eect.
+hate#e! the unde!l'ing pu!pose, c!eating successul
alliances can be challenging. Too oten, companies
ente! into business with the w!ong pa!tne! o! o! the
w!ong !easons, and the' end up !eg!etting the decision.
,#en when an alliance loo&s g!eat on pape!, cultu!al
die!ences between the pa!ties o! mismatched
e-pectations can unde!mine the a!!angement. The
ollowing pages will int!oduce 'ou to st!ategies o!
establishing a successul alliance.
Profitable Partnering
1. .electing a /a!tne!
(n' compan' that has something 'ou need -- clients,
technolog', capabilities -- is a potential pa!tne!,
p!o#ided 'ou ha#e something it needs as well. 01o! an
alliance to succeed, both companies must beneit !om
it.2 3ut !ecognize that alliances !a!el' come without
costs. (t the #e!' least, the' !e4ui!e an in#estment o
time that 'ou o! 'ou! &e' people could be spending on
p!oitable endea#o!s. .o it pa's to be #e!' selecti#e
about whom 'ou team up with.
Don't settle for more of the status quo. ( business
alliance needs to be unusuall' p!oitable -- an' new
business gene!ated b' the alliance should beat 'ou!
cu!!ent ma!gins in o!de! to "usti' the eo!t. 5the!wise,
'ou should "ust continue to do what 'ou we!e doing.
The halo eect is a plus but !a!el' "ustiies the time and
e-pense o o!ming and nu!tu!ing such a !elationship.
Think long term. (n alliance isn%t simpl' a one-o
t!ansaction. ( deal is tactical, while a t!ue alliance is a
st!ategic !elationship that conside!s how the pa!ties
will e#ol#e o#e! th!ee to i#e 'ea!s. T!' to p!o"ect
whethe! 'ou! would-be pa!tne! will still be a net
beneit at that point.
Investigate reputation. 6es, this is a business
!elationship, but it%s the people behind the business
who will ma&e the a!!angement wo!& -- o! not. $n
alliances, as in ma!!iages, the!e is no !eco#e!' !om
selecting the w!ong spouse. 6ou can b!ing 'ou!
compan' to its &nees using alliances. 7esea!ch whethe!
the p!ospecti#e pa!tne! deals honestl' with associates,
emplo'ees, and custome!s. 6ou! counte!pa!t should do
the same: ( p!ospecti#e pa!tne! ought to be as ca!eul
as 'ou a!e, o! 'ou should wonde! about its commitment
to the !elationship.
2. 8utting a *eal
$n man' !espects, the most impo!tant moment o the
alliance dance is the i!st, when 'ou and an e-ecuti#e
!om 'ou! p!ospecti#e pa!tne! 0usuall' the head o the
compan' o! &e' business unit2 sit down to discuss the
oppo!tunit' at hand. This is 'ou! chance both to la' the
oundation o! a p!oducti#e !elationship and to unco#e!
potential haza!ds. The goal is to establish ea!l' on
whethe! this is wo!th 'ou! time. 6ou%!e t!'ing to a#oid
a long, d!awn-out p!ocess that ends in ailu!e.
Draw the big picture. ,-ecuti#es should i!st assess
whethe! thei! st!ategies o#e! the ne-t th!ee to i#e 'ea!s
a!e aligned. 5the!wise, no cont!act will e#e! hold them
togethe!. The' should also d!at a b!ie set o ope!ating
p!inciples to guide the da'-to-da' wo!&.
Establish subjects and a timetable for the talks. 6ou
and 'ou! counte!pa!t should ne-t set an agenda o!
o!mal negotiations and ag!ee b!oadl' on the elements
o a potential pa!tne!ship. These should include the
scope o the pa!tne!ship) goals, !oles, and obligations
o! each side) milestones and othe! ope!ating details)
!ules o! intellectual p!ope!t' 0which can oten be a
stic&ing point -- see 9:ow to .ha!e $deas,92) and
inancial a!!angements. (t the same time, outline a
!ough schedule o! these negotiations to ollow.
Make sure everbod bus in. ( &e' manage! who is
not on boa!d o! planning the alliance can sin& it when
the time comes o! implementation. +hen it comes
time to negotiate, i it%s "ust the law'e! and business-
de#elopment gu' sitting ac!oss !om 'ou, that%s a huge
wa!ning sign. To p!e#ent that, establish the negotiating
teams in ad#ance, and ma&e su!e the' include a
!ep!esentati#e !om e#e!' !ele#ant depa!tment --
ma!&eting, p!ocu!ement, !esea!ch and de#elopment,
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and the li&e. The manage!s who will ha#e da'-to-da'
!esponsibilit' o! e-ecuting the pa!tne!ship should lead
the tal&s. 5 cou!se, ate! se#e!al wee&s, sa', the
e-ecuti#es should !e#iew the p!og!ess to see i an
ag!eement is easible. :a#ing a law'e! at negotiations
will ma&e it easie! to inco!po!ate the business intent
into the cont!act language 0see 9/ut $t in +!iting,92.
3. ;a&ing $t +o!&
<ew allies oten ind it diicult to actuall' wo!&
togethe!, not least because o the die!ences in
co!po!ate cultu!es. The &e' conlict usuall' !e#ol#es
a!ound how decisions a!e made, especiall' with
companies o die!ent sizes.
!lan the decision"making process. (s ea!l' as possible,
'ou and 'ou! counte!pa!t should discuss the i!st ma"o!
decisions on the ho!izon and how each compan' would
no!mall' ma&e them -- the &e' people, the !epo!ting
lines and committees that will ha#e to sign o -- and
how long the p!ocess should ta&e. *ete!mine i each
side can li#e with the decision st!uctu!es in place. $
not, ma&e !ecommendations to senio! management
about how to adapt them to allow the alliance to mo#e
along eicientl'.
Meet all our partners. 6ou can also smooth the
p!ocess o implementation with an o!ientation meeting
o! the !an& and ile o both pa!ties immediatel' ate!
the alliance is consummated. :e!e, the !esponsible
manage!s int!oduce the alliance and e-plain its pu!pose
and how it will wo!&.
#ind a champion. /a!ticula!l' i 'ou a!e pa!tne!ing
with a big compan', in which man' p!io!ities compete
o! sca!ce !esou!ces, a champion can p!otect the
alliance !om ine!tia and indie!ence and see that it
gets the needed people and mone'. .ome companies
ha#e o!malized the !ole o the champion, but oten the
best champions a!e sel-selected -- people who a!e
notabl' passionate about inno#ation o! the alliance.
The' can be at an' almost le#el o the co!po!ate
hie!a!ch', but the' tend to ha#e the ea! o someone
upstai!s.
5 cou!se, 'ou ha#e no sa' in who becomes the
champion at 'ou! counte!pa!t, but 'ou can p!o#ide a
nudge. $, in the inte!actions with 'ou! p!ospecti#e
pa!tne!, 'ou encounte! someone who 9has the same
spa!&le in the e'e that 'ou ha#e, 'ou%#e ound 'ou!sel
a champion9. ,ncou!age 'ou! counte!pa!t to welcome
the inte!lope! to the team. 6ou can ma&e the comment,
%:e o! she seems passionate about this -- $ can wo!&
with that pe!son.%
How to Share Ideas
$ntellectual p!ope!t', o! $/ -- whethe! it%s a new
technolog' o! custome! lists -- pla's a complicated !ole
in an alliance. 5n one hand, it oten lies at the cente! o
a "oint #entu!e. 3ut most companies a!e used to
&eeping sec!ets sec!et -- and suddenl', emplo'ees a!e
being as&ed to do othe!wise. :e!e a!e two wa's to
a#oid $/ p!oblems.
;a&e it clea! what 'ou a!e sha!ing -- and what 'ou a!e
not. /a!tne!ships can be 4uic&l' !ust!ated when !an&-
and-ile emplo'ees a!en%t su!e which intellectual
p!ope!t' the' can sha!e with the othe! compan'.
8on#ene a p!i#ate meeting with 'ou! emplo'ees to go
o#e! the g!ound !ules o! disclosing intellectual
p!ope!t': what must be sha!ed) what ma' be sha!ed,
depending on the ci!cumstances) and what can ne#e! be
sha!ed. (lso e-plain how the compan' will p!otect its
pa!tne!%s intellectual assets. (nd it%s wo!th &eeping
assets that ma' be sha!ed sepa!ate !om those that ma'
not -- on a sepa!ate se!#e!, pe!haps.
/lan o! the end. +hethe! business alliances b!ea& up
o#e! a disag!eement o! "ust !un thei! natu!al cou!se,
man' e#entuall' end. 3ut once $/ is sha!ed, it is oten
ha!d to put it bac& in the bag. The ag!eement should
add!ess this issue in ad#ance. *oes the use o 'ou!
pa!tne!%s assets end with the #entu!e= That is oten the
case when one pa!tne! licenses a new technolog' o!
othe! $/ to anothe!: +hen the alliance ends, so does the
license. 3ut what about client lists= (nd what happens
to the intellectual p!ope!t' 'ou de#elop "ointl'= 3e
ce!tain that 'ou! ag!eement speciies who gets the &ids
in the e#ent o a di#o!ce.
Put it in Writing
$ 'ou don%t ha#e a w!itten ag!eement, 'ou ha#e no
ag!eement. The document should encompass all the
pa!ties% legal obligations. $ the allies ha#e to come to
othe! unde!standings -- o#e!, sa', a mission statement
-- these should be attached to the cont!act in an
appendi-.
Don't jump to conclusions. 3ewa!e$ beginning the
negotiation with a d!at cont!act. The document can
ta&e on a lie o its own and potentiall' upend the tal&s.
%nticipate the worst. The cont!act should completel'
deine the p!ocess o! when things go w!ong -- and be
su!e to allow o! 4uic& e-its. +e thin& ma!!iages a!e
best when the'%!e shotgun ma!!iages. (n escape clause
assu!es both pa!ties that the' won%t be t!apped in an
untenable p!edicament.
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