Harness The Power. Of Strategic Alliances. “If you think you can go it alone in today’s global economy, you are highly mistaken.” Jack Welch , CEO of GE. Strategic alliances may be the most powerful trend that has swept North American business in a century.
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Of Strategic Alliances
Strategic alliances may be the most powerful trend that has swept North American business in a century.
“Microsoft can’t make it alone, but together anything is possible.”Bill Gates, CEO of Microsoft
A strategic alliance—which includes joint ventures, partnerships, and consortiums—is a contractual or organizational structure in which two or more organizations share resources and risk in pursuing mutually compatible goals. Some examples include:
Investor/lender syndications and partnerships
New product or service development joint-ventures
Marketing, sales, and distribution channel alliances
Preferred supplier alliances and buying consortiums
On the continuum of corporate transactions, with outsourcing at one end and “change of control” transactions at the other, alliances lie in the middle.
There is only one reason…...to build value!
With globalization and rapid technological evolution, most organizations need to find ways of accessing the strengths and resources of other organizations to remain competitive.
“I think it is impossible, even for a company of HP’s size, to have competence in every area. It is very important to find alliance partners.”Lew Platt, Recent CEO of Hewlett Packard
Although mergers & acquisitions (“M&A”) often represent a viable option for organizations seeking specialized resources, they usually create some unnecessary duplication of resources and are often costly, risky ventures by comparison.
Most organizations today look to some form of alliance strategy as an alternative to outright M&A.
“The alliance strategy is our major thrust and it is clearly a different approach to growth than most people have associated with GM.”John F. Smith Jr., Chairman & CEO of General Motors
Some Alliance Facts
Researchers from the Yale School of Organization & Management and Harvard Business School have determined that alliances outperform mergers & acquisitions, as measured by stock market value creation and return-on-investment.
In a joint study by Columbia University and Ernst & Young, it was determined that Alliances have consistently produced average returns on investment that are nearly 50 percent greater than the average overall returns on investment in corporate America.
An International consulting firm, Booz/Allen/Hamilton, conducted research that found that by 2004, the top 1,000 U.S. companies expect that more than 35 percent of their revenues will come from alliances.
Research shows that most alliances are developed and implemented through an “ad-hoc” approach by a firm’s senior management.
Despite the overall positive performance of alliances in general, studies show that when management does not have formalized alliance processes and best-practices in place (i.e. follows an ad-hoc approach), less that 30% of their alliances ever achieve the synergies for which they were created.
This study also compared this 30% to the 80%+ alliance success rates among companies that do possess best-practices. Through this comparison, they concluded that:
Alliance development and management has itself become a core competency.
To be alliance competent means you possess and follow proven processes that improve performance and increase the success rates of your alliance initiatives.
The following questions allow for a self-analysis of your organization’s alliance competence:
Do you know how to integrate an alliance strategy with your existing business strategy?
Does your management team have the experience to package and market your firm to potential alliance partners?
Does your organization possess the ability to accurately quantify the value of a specialized resource contributed from an alliance partner in a different industry sector?
Do you know how to choose the appropriate contractual or organizational structure for your alliances?
Do you know the types of provisions that need to be considered during alliance structuring? (e.g. exit clauses, buy-out formulas, confidentiality protection, rights transfers, performance metrics, dispute resolution, profit distribution, future capitalization requirements, etc.)
Do you know how to operationally protect your intangible proprietary assets from your alliance partners? If you share them, do you know how to realistically value them?
Does your management team have the ability to conduct due diligence on your potential alliance partners?
Does your management team know how to leverage the specialized resources contributed by alliance partners?
Do you know which types of alliances provide the greatest return-on-investment?
We are Omega Alliance Partners
Omega utilizes proven best-practices in developing and managing strategic alliances for our small and mid-sized corporate clients.
Our compensation is performance-based; which means we don’t make money unless you make money.
If you want to:
We can help.
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