Alliance: Best Practice
BEST PRACTICE
Simple Rules for Making Alliances Work
Conventional advice about alliances hasn’t reduced their dismal failure rate. Success requires shifting your focus to a complementary set of principles.
by Jonathan Hughes and Jeff Weiss
I
122 Harvard Business Review
|
Studies show that the number of corporate alliances increases by some 25% a year and that those alliances account for nearly a third of many companies’ revenue and value – yet the failure rate for alliances hovers between 60% and 70%. And despite an abundance of advice on how to make alliances work, that dismal record hasn’t improved in the past decade. The conventional advice from the experts is quite consistent: Create a solid business plan backed up by a detailed contract. Define metrics for assessing the value your alliance delivers. Seek common ground with partners and pay close attention to managing your interface with them. Establish formal systems and
T’S A REMARKABLE PARADOX:
November 2007
|
hbr.org
Ken Orvidas
structures. The recommendations are all sensible; you’d apply them to any business arrangement. Alliances, however, are not just any business arrangement. They demand a high degree of interdependence between companies that may continue to compete against each other in the marketplace. They require the ability to navigate – and often to actively leverage – significant differences between partners’ strengths and operating styles. These characteristics make the common wisdom about alliance management both incomplete and misleading, causing companies to ignore or underemphasize other, potentially more important drivers of success. To begin achieving reliably higher success rates with their alliances, companies need to shift their focus to five principles that complement the conventional advice. This means:
PLACING LESS EMPHASIS ON .
Principle 1
Focus less on defining the business plan and more on how you’ll work together.
. . . AND MORE ..
EMPHASIS
Simple Rules for Making Alliances Work
Conventional advice about alliances hasn’t reduced their dismal failure rate. Success requires shifting your focus to a complementary set of principles.
by Jonathan Hughes and Jeff Weiss
I
122 Harvard Business Review
|
Studies show that the number of corporate alliances increases by some 25% a year and that those alliances account for nearly a third of many companies’ revenue and value – yet the failure rate for alliances hovers between 60% and 70%. And despite an abundance of advice on how to make alliances work, that dismal record hasn’t improved in the past decade. The conventional advice from the experts is quite consistent: Create a solid business plan backed up by a detailed contract. Define metrics for assessing the value your alliance delivers. Seek common ground with partners and pay close attention to managing your interface with them. Establish formal systems and
T’S A REMARKABLE PARADOX:
November 2007
|
hbr.org
Ken Orvidas
structures. The recommendations are all sensible; you’d apply them to any business arrangement. Alliances, however, are not just any business arrangement. They demand a high degree of interdependence between companies that may continue to compete against each other in the marketplace. They require the ability to navigate – and often to actively leverage – significant differences between partners’ strengths and operating styles. These characteristics make the common wisdom about alliance management both incomplete and misleading, causing companies to ignore or underemphasize other, potentially more important drivers of success. To begin achieving reliably higher success rates with their alliances, companies need to shift their focus to five principles that complement the conventional advice. This means:
PLACING LESS EMPHASIS ON .
Principle 1
Focus less on defining the business plan and more on how you’ll work together.
. . . AND MORE ..
EMPHASIS