Over the last four months I’ve heard an increasing chorus of voices buzzing about business alliances. Much of what I hear is focused on the activities of larger institutions. Think:
- Redbox & Verizon joining forces to upset Netflix
- ABC/Disney & Nielsen’s aspiration to capture iPad user
databehavior and parlay it into more precise messaging
- PepsiCo & Ocean Spray to extend their respective portfolios into Latin America
This big entity spotlight shouldn’t be surprising since they have a massive footprint and let’s be real… we’re impressed by large numbers.
What Are They Good For
Alliances are an extremely effective way to embrace new strategic opportunities, pursue sources of new growth, and contribute to the businesses bottom line by gaining the luxury of jettisoning the responsibility of engaging in non-core activities. According to Booz Allen & Hamilton strategic alliances are arcing through nearly every industry and are becoming an increasingly important component of any business growth strategy.
Why is this? The economic events of the last few years have increased everyone’s risk profile. And, being sound fiscal managers – well at least a lot more conscious of our assets – outsized risk is always addressed. The best ways to mitigate growth risk is by:
- Picking the brain of someone who has ‘been there and done that’
- Pooling of resources so each has less to lose
- Securing superior competencies in your areas of mediocrity
All hallmarks of strategic alliances.
Can It Work For Me
A word of warning, the very characteristics that make alliances attractive also impose strict constraints on their usefulness. So, how can one know when a strategic alliance, or partnership, is appropriate or not? Especially if you’re a SMB where the road to success is full of deadly pit falls.
I would suggest asking some tough questions. Ones that focus on two aspects, your risk profile and operational expectations.
What’s Our Risk Tolerance
- What is the true status quo (do nothing) business trajectory?
- Are our alliance assumptions conservative or aggressive?
- What’s our confidence that the initiative can be achieved?
- How can we accurately track progress & measure results?
- How have our contemporaries faired in similar situations?
What’s Our Vision of a Successful Alliance
- Does our partner have the same strategic direction for the alliance?
- Are we able to capitalize on the strengths and weakness of each other?
- Do we truly believe that we’ll have an open communicative relationship?
- How can we avoid top-level decision gridlock?
- Are they will to sign an Alliance (Partnership) Agreement?
Alliances aren’t for everyone. But, when the right foundation is laid building a SMB via alliances can be highly rewarding and profitable.