The Age of Alliances
In the 1990s, corporations went on a mergers binge, committing to expensive marriages that often turned out to be unhappy unions. Today, the rush toward mergers has slowed, but another form of corporate relationship – the strategic alliance – seems as popular as ever. These partnerships have become the corporate equivalent of "just living together," offering businesses the best of all worlds: mutual financial benefit without lifelong commitment.
According to Thomson Financial Securities Data Corp., there were 5,200 new strategic alliances formed in 1996. The number nearly doubled by 2000. "M&A is a blood sport," said Accenture associate partner Dominic Palmer in Forbes magazine last year. "It gets all the press, but strategic alliances are more important for growth."
More than half (53%) of businesses engage in strategic alliances, according to Bain & Company's 2001 "Management Tools & Techniques" survey, based on interviews of 451 senior executives working in firms in 22 different countries. These relationships can be lucrative and may become more so in the near future. CEOs projected that 20% of their firms' 2002 revenues would be linked to their involvement in strategic alliances, according to a Booz Allen Hamilton survey of 2,000 top U.S. and European firms. By 2005, the CEO respondents estimated, their firms will derive 40% of all their revenues from such alliances.
This optimism about alliances is supported by the findings of a 2001 study conducted by the Conference Board of Canada. The nonprofit research group published a report called "Partner or Perish? The Case for Strategic Alliances," which gives an account of the Board's investigation into the experiences of TELUS Corporation, Motorola, FedEx and Sun Microsystems. Each of these firms has entered into strategic alliances with successful results.
The study concludes that companies that participate in strategic alliances produce, on average, higher returns on investment and on equity than other companies. "In today's competitive business environment, every organization should have an alliance strategy and be prepared to 'partner or perish'," said Brenda Chartrand, Director of Organizational Effectiveness at the Board's Center for Management Effectiveness, in a press release. "Strategic alliances can be a cost-effective, flexible way to promote growth, penetrate new markets, and offer new products or services." The study found that those companies that derive the greatest value from strategic alliances create structures to support their alliances and devote time and energy toward nurturing their relationships with allies.
But not every alliance is going to succeed. This may be especially true when an alliance calls for companies to standardize and integrate their business processes. "With partners, the truth is that most so-called alliances fail," claims James Champy, who coauthored the bestseller Reengineering the Corporation. "I can take you to almost every major company and show you a huge amount of alliance work that's going on: people in endless meetings, accomplishing nothing. They launch the alliance, and nothing comes of it." In a sense, though, that's the beauty of some alliances: unlike mergers, alliances may fail without causing serious harm to an organization. Nonetheless, Champy believes that businesses will need to get considerably better at integrating and "x-engineering" their business processes in order to take full advantage of future alliances.
Of course, not all alliances are truly "strategic." The director of strategic alliances at a large computer manufacturer admits, "We have 452 documents that say 'strategic alliance' at the top of the page; but we have two alliances that are really strategic." The real news, according to management guru Peter Drucker, is the boom in alliances of all kinds: partnerships, big businesses buying minority stakes in small ones, agreements for cooperative research or marketing, joint ventures and, often, "handshake agreements" with few formal and legally binding contracts behind them. The sheer growth and diversity of such alliances may be a sign that a healthy business ecology is evolving in today's richly networked economy.
Various companies sponsor the Association of Strategic Alliance Professionals (ASAP), a nonprofit organization that maintains a Web site at http://www.strategic-alliances.org/. The association serves businesses from all industries as "a central forum for the collection and dissemination of resources to support the professional development of its members and to advance the state of the art of alliance formation and management," according to its mission statement.
For a discussion of how HR can help improve the odds of success in a strategic alliance, read "High-Speed Connections," by Christopher Cornell, in the October 15, 2001, issue of Human Resources Executive.
For more on Champy's concept of "x-engineering," see
http://www.twbookmark.com/books/38/0446528005/
According to Thomson Financial Securities Data Corp., there were 5,200 new strategic alliances formed in 1996. The number nearly doubled by 2000. "M&A is a blood sport," said Accenture associate partner Dominic Palmer in Forbes magazine last year. "It gets all the press, but strategic alliances are more important for growth."
More than half (53%) of businesses engage in strategic alliances, according to Bain & Company's 2001 "Management Tools & Techniques" survey, based on interviews of 451 senior executives working in firms in 22 different countries. These relationships can be lucrative and may become more so in the near future. CEOs projected that 20% of their firms' 2002 revenues would be linked to their involvement in strategic alliances, according to a Booz Allen Hamilton survey of 2,000 top U.S. and European firms. By 2005, the CEO respondents estimated, their firms will derive 40% of all their revenues from such alliances.
This optimism about alliances is supported by the findings of a 2001 study conducted by the Conference Board of Canada. The nonprofit research group published a report called "Partner or Perish? The Case for Strategic Alliances," which gives an account of the Board's investigation into the experiences of TELUS Corporation, Motorola, FedEx and Sun Microsystems. Each of these firms has entered into strategic alliances with successful results.
The study concludes that companies that participate in strategic alliances produce, on average, higher returns on investment and on equity than other companies. "In today's competitive business environment, every organization should have an alliance strategy and be prepared to 'partner or perish'," said Brenda Chartrand, Director of Organizational Effectiveness at the Board's Center for Management Effectiveness, in a press release. "Strategic alliances can be a cost-effective, flexible way to promote growth, penetrate new markets, and offer new products or services." The study found that those companies that derive the greatest value from strategic alliances create structures to support their alliances and devote time and energy toward nurturing their relationships with allies.
But not every alliance is going to succeed. This may be especially true when an alliance calls for companies to standardize and integrate their business processes. "With partners, the truth is that most so-called alliances fail," claims James Champy, who coauthored the bestseller Reengineering the Corporation. "I can take you to almost every major company and show you a huge amount of alliance work that's going on: people in endless meetings, accomplishing nothing. They launch the alliance, and nothing comes of it." In a sense, though, that's the beauty of some alliances: unlike mergers, alliances may fail without causing serious harm to an organization. Nonetheless, Champy believes that businesses will need to get considerably better at integrating and "x-engineering" their business processes in order to take full advantage of future alliances.
Of course, not all alliances are truly "strategic." The director of strategic alliances at a large computer manufacturer admits, "We have 452 documents that say 'strategic alliance' at the top of the page; but we have two alliances that are really strategic." The real news, according to management guru Peter Drucker, is the boom in alliances of all kinds: partnerships, big businesses buying minority stakes in small ones, agreements for cooperative research or marketing, joint ventures and, often, "handshake agreements" with few formal and legally binding contracts behind them. The sheer growth and diversity of such alliances may be a sign that a healthy business ecology is evolving in today's richly networked economy.
Various companies sponsor the Association of Strategic Alliance Professionals (ASAP), a nonprofit organization that maintains a Web site at http://www.strategic-alliances.org/. The association serves businesses from all industries as "a central forum for the collection and dissemination of resources to support the professional development of its members and to advance the state of the art of alliance formation and management," according to its mission statement.
For a discussion of how HR can help improve the odds of success in a strategic alliance, read "High-Speed Connections," by Christopher Cornell, in the October 15, 2001, issue of Human Resources Executive.
For more on Champy's concept of "x-engineering," see
http://www.twbookmark.com/books/38/0446528005/