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Dos and Doníts of Strategic Alliances Published: Sunday, April 11, 2004 By: Dr. Manuel Ńngel Morales

The other day, while offering a seminar on strategic Leadership for Family Businesses, an old founder, who prays for us everyday asked if there were any guiding rules for establishing strategic alliances. I said yes, by all means, and proceed to explain him some of those structuring rules. He went further and demanded me to write on this topic in my San Juan Star column. So, dear friend, here is.

The new organizational design and management knowledge is pointing to the need of businesses and other institutions to form strategic alliances in order to survive and prosper in the future. The concept is simple enough: is better to join them than to fight them; is better to contribute than to destroy.

It is easier to form an alliance with a competitor than to fight with the competitor. Many alliances will not prosper, because they are formed for the wrong reasons. Whenever an organization and its leaders think they must enter into such an arrangement, they should reflect on the researched dos and donít of strategic alliances.

  • Donít form an alliance to correct a weakness. The party that brings a weakness to the alliance will be from the very first day at the mercy of the other party and subservient to the other participant. Even though the alliance can be 50-50, the weak participant will never be equal to the other because weakness donít bring leverage in the market place.
  • Donít form an alliance with a partner that is trying to correct a weakness of its own. If you do so you run the risk of inheriting that weakness. You may end worse off than you were before if you become a dominant partner in the alliance. The worst scenario in an alliance is when you have the two parts, each of which is trying to correct a weakness. This type of configuration (weakness with weakness) is doomed to failure from the start.
  • Never license proprietary technology. The idea here is to avoid giving up control of key technologies or knowledge-sets to a strange party. But in spite of this possibility, if you still want to enter into this kind of alliance or deals think about them as competitive collaboration. The respective organizations should be very clear regarding what they should protect and what they can share. The lesson is very simple: donít let the other participant under work your core technology and knowledge-set. If you do so you run the high risk of creating the conditions for the other party building an ever more complex competency base, and you will be surending even more control over your own competitiveness.
  • Donít form alliances around products or markets. Exploiting the similarities of certain products and markets rarely works. This is why there is a huge list of broken alliances between organizations that have explored such a path.

Thus, let us share the researched dos for establishing strategic alliances:

  • Form an alliance to exploit a unique strength.
  • Partner with a party that has a unique strength of its own.
  • Form an alliance when neither party has the immediate desire to acquire the other partyís unique strength.
  • Form alliances around capabilities.

A final word of alertness based on our research and hundreds of concrete experience: Profit is no replacement for strategic fit.

Copyright 2004 QBS, Inc.
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