Creating strategic alliances and partnerships
I just boarded the flight to Goa and thought about the comments of Prof Yves Doz with his typical French accent:
“try and note the most important lessons learned otherwise you will look back at this seminar as interesting and a place where you had fun but you cannot remember much about it“.
How true. We carry so much tacit knowledge but are often unable to link it to a particular point in time. How much is lost in time I don’t know. Probably a lot. If you don’t note down your most important lessons learned you may forget about it and run the change of making the same mistakes others would. An alliance value creation logic either gains competitive power through co-option, leverages co-specialised resources, or adds value through competence learning. It’s an interesting vehicle to create value. After all, mergers are not always an option nor desirable.
One of the most important concepts that stuck with me is the one of social capital. You may have the number of staff to run an alliance of some sort but do they have the required skills to deal with it? HR capital therefore does not equate to social capital. Make therefore a conscience choice of the selection of social skills required. There is no such thing as Best Practices when running an alliance. One interesting comment shown was where Eli Hurvitz, chairman of TEVA, gave one clear message: “I want to make absolutely sure WR Grace makes as much money as possible from this deal“. In a true partnership, if one is doing well the other will also do well. I wonder how a Marwari would look at this…
Interestingly, JVs and partnerships often have a limited timespan ranging from typically three to seven years. The reason for this is that one engages in an alliance to gain something. This something can be knowledge, hard skills, market reach, market size etc. to jointly accelerate beyond a point which each individual would not be able to reach. Duration should therefore be a function of the objectives. Once aware of this it is important to have intermediate check points to assess the results.
We therefore know, and should be aware of, that by definition a lot of alliances break down. One of the critical aspects is the concept of fair process and willingness to compromise. Often one party tries to dominate which is a recipe for disaster. Clarity and flexibility, and a pragmatic approach are therefore essential. As in any change management process, it is important to walk-the-talk, and to ask rather than to tell. Be prepared and don’t enter an alliance under stress. It’s all common sense but, you only have to read the business papers to realise that this is a lot easier said than done…