Summary

READING 1: ASAP HANDBOOK

Alliance: a close, collaborative relationship between 2 or + entities that share assets, strengths, risks,
rewards, and control to create increased value or competitive advantage for their customers and their
own organizations that would be difficult to achieve independently.
There are 2 Categories:
1. Strategic alliances: Long term/ have significant consequences if they arent successful.
2. Tactical alliances: Short term/ one single objective/ formed with a specific end point in mind.

Successful alliances are the result of a complex set of precesses, cultural attributes and
competencies.
The best performing companies follow alliance best practices. They have implemented the tools
and practices.

Characteristics of successful alliances

1. Strategic fit: successful alliance partners have realistic expectations regarding the time it takes
to build trust, structure an alliance and manage it to the realization of a strategic outcome.
2. Synergy: the 2 allies should have + strength combined than they would have independently.
(1+1>3)
3. Great chemistry: companies must have managerial ability to collaborate efficiently and
effectively with another one.
4. Reciprocity: operations, risks, rewards ad cost of an alliance must be fairly apportioned. (win-win
reciprocity)
5. Transformational flexibility: allies must have the willing to assume new risks, be creative, flexible
and creative. They have to accept changes and take advantages of the opportunities.
6. Effective governance: its dependent upon right operational linkages at multiple levels within both
partnering organizations so that decisions can be made at the appropiate operating level.
7. Trust and commitment to mutual benefit: without trust alliances fail. They have to overcome
conflict and adversity.
8. Executive sponsorship: the alliance must have leadership and this beginds at the top with an
engaged and empowered executive sponsor, or champion.
9. Joint planning: this is the process of translating strategic vision to reality, it creats the road map
that derives value from the resources, commitments and efforts dedicated to the achievement of
the alliance objectives.
10. Continuous innovation: bringing new ideas into the alliance and find ways to adapt to evolving
shifts in the environment. The alliance has to be fresh and enlivened.
TYPES OF ALLIANCES
TYPES
Market facing alliances

Research alliances

Distribution alliances
Coproduction alliances

Supplier alliances

OBJECTIVES
Expand market share, enter new market niches,
boost market presence, expand customer
base,increase sales, provide added value to
clients.
Innovate the industry, share risk in innovation,
reduce time to market, access external
innovation
Reduce logistical costs, access new
costumers
Manufacture cost-effectively, create
flexible manufacturing capacity, share
fixed costs
Reduce overhead through sharing costs,

Outsourcing alliances

establish supplier relationships

Focus on the core business, adapt to
change, share risks to maintain a win-win
relationship

Alliances are essential because companies will need to find opportunities to leverage and
expand their core competencies into leading-edge markets.
The overall reliance on alliances is increasing and becoming a critical component if
companies ability to generate revenue and sustain growth.
Alliances have the potential to outperform other strategic investments. WIN-WIN-WIN (value
for customers and both partners involved)
They are quicker to form and adapt to changing business requirements. They are also less
risky than acquisitions.
Disadvantages of alliances: lack of control. They are managed through shared control and
acknowledgment of common interests.
By ensuring peer-to-peer functional reviews and empowering employees closest to the
problem, companies can resolve issues quickly in alliances.
3 basic ways to grow a company: Internal growth, mergers and acquisitions and alliances.
In situations with low risk, slow speeds of expansion, and high resource availability -> internal
growth or build
Situations of low resources, highly differentiated business types/cultures/extensive changes in
the environment-> ALLIANCE!
To select the right form of alliance you need to consider: customer needs, competitive
advantages and long&short term objectives.

READING 2: THE EIGHT STEP ROADMAP

READING 2: THE EIGHT STEP ROADMAP
4 stages of alliance formation: identification,valuation, negociation and implementation.
Companies experienced in strategic alliances done at least 9 alliances. ROI at least 25%
Relative novices done 1 or 2 alliances, ROI less than 10%.
1. Defining strategy and objectives
Companies w/ experience take time to determine what there are looking for:
They reach a clear consensus on why the form cant succeed on its own. Alliances can fill the gaps
better that in-house development or acquisition.
They study the resource requirements and assess wheter they have the motivation and the
predisposition to deliver those resources.
They know that an alliance cal fill some capability gaps but many alliances fail because those gaps
arent addressed.
The most successful alliance companies have learned that and ad-hoc or soft evaluation places an
alliance in a precarious position from the start.
2. Screening for partners
Screening, identifying and approaching partners is one of the most difficult hurdles in alliance building.
Successful managers say that the most important practice here is to take an active rather than a
reactive stance.
An active posture enables a company to screen out unsuitable partners and to study at length the
strenghts prospective partners and the options that different partner choices would offer.
Managers should articulate the alliance drivers for both their company and the prospective partner
companies as well.

Many companies have complementary drivers but doesnt mean they are =.
Taking each others needs into account helps build trust and starts the relationship building and the
bargaining on a solid basis.
3. Assessing tradeables and leverage
Potential partners determine just what they have to offer and what they stand to gain. This process
involves:
Assessing which capabilities have the potential to be differential in the alliance.
Understanding the potential advantage of the alliances products over existing ones. Examining things
from the customers perspective.
Quantifying value creation and its source. Many alliances fail because they arent explicit enough on
how they will create value.
Acknowledging all the disadvantages so that surprises can be avoided and disappointments dealt with
a professional manner.
4. Defining opportunities
We have found that alliances feasibility study seed more dependent on faith than on analysis. The
most common failing is in gaugin the likeyly reaction of competitors, customers and stakeholders.
Quantifying the size of the opportunity is essential to successful negotiation and implementation of an
alliance.
Some negotiations fail to determine that the opportunity may be quite limited and not worth the effort.
5. Assessing impact on stakeholders
The assessment should be broad, covering not just the converns of the obvious parties but also of
unions and regulatory officials.
On any given day when an alliance is announced, share prices will be influenced by many other factors
as well, from broad economic news and general market moves to investment analysts.
Alliance do create value and also that the stock market reacts differently ti different types of alliances.
6. Assessing bargaining power
5 best practices that stand above all others when a company undertakes an assessment of its
bargaining power:
a) Clearly defining the contribution of key capabilities and resources needed to make an alliance
successful
b) Protecting the companys core resources and making clear to a prospective partner what these
are and why you are protecting them
c) Studying a prospective partners negotiating style and history by analyzing other alliances that
the company has entered into.
d) Knowing why the other company is at the table
e) Making judgments on the type of and depth of resources and commitment that the prospective
partner will bring to the alliance.
Each company should also be aware of any other alliance arrangements in which the other companies
are involved, in case restrictions previously negotiated hinder the alliance under the discussion.
We suggest that the guiding memorandum of understanding be in effect for a limited period time, to
create some urgency among the track 2 team members to work out the details.
All participants agree on how much power the chief negotiator on each side wields.
Any agreement should include:
Clear objectives and defined levels of commitment
Organizational structure that fits the alliance strategy
Investment and compensation rewards tied to clear performance measures
Finance, tax and legal considerations.
Detail penalty, arbitration and divorce clauses

The ability to accommodate changes

7. Planning integration
Doing the planning to make the partners capabilities function together. Experienced companies place
heavy emphasis on planning integration in order to get the alliance off to a fast start.
Sructuring the alliance to meet the needs of the alliance rather that those of the partners
Assigning high-caliber managers
Clearly defining divorce procedures, penalties and exit obligations
8. Implementing
An alliance requires a flexible and lean management style. It must have a structure based on the
challenges it faces. It needs to be nurtured (measurement tools and timetables that will help managers
locate the difficulties to resolve as well as the opportunities of advantage of.
Creating a flexible and lean organizational structure
Basing alliance structure and processes on alliance strategy and requirement
Tracking competitors reactions to the alliance along with tracking the progress of the alliance itself
Preparing detailed timetables and measurement tools with periodic reviews
Relying on open communication to provide flexibility in resolving issues
3 additional best practices: Defining early the management roles, providing managers the power
needed to accomplish goals, and making lessons learned anywhere in the alliance available across the
alliance on the real time basis.