Could Your Small Business Benefit From Alliance Management?

Books and coffee go together like peanut butter and jelly. That natural synergy can be used to drive strategic business growth. Barnes & Noble and Starbucks leaders recognized that, by joining forces, they could reach new customers faster -- and ultimately increase revenues more quickly -- than by working alone.

Vehicles and outdoor clothing don’t roll off the tongue like PB&J. But in 1984, Ford and Eddie Bauer created an alliance for the Limited Edition Eddie Bauer Bronco luxury SUV. The agreement lasted 26 years and benefited both companies by increasing their brand exposure to new customers.

As part of the agreement, Eddie Bauer manufactured luggage with the Ford logo, and the Eddie Bauer name appeared on the vehicles that featured premium leather seats and luxury upgrades.

Both are examples of companies sharing assets, strengths, risks, rewards, and control for a competitive advantage in the marketplace. Known as alliance management, the strategy gives the entities involved an opportunity to leverage each other’s client base for growth.

Overview: What is alliance management?

Alliance management is a strategic agreement between two companies with a specific vision. In some cases, the companies may even compete with one another in certain business areas, but they recognize that working collaboratively on a separate line of business can maximize long-term value for both organizations.

Each individual business has expertise, talent, and capital that contribute to the company’s sustainability. Organizational alliances bring these assets together for even greater success than either could achieve on their own. Another example is the 2018 partnership where Toyota invested $500 million in Uber so that the companies could work together to develop a self-driving car.

When is alliance management needed?

Alliances create an opportunity for innovation in the development of products and services while also mitigating the risks of expansion. Knowing when to embrace an alliance is key to its success.

Part of that decision-making process includes evaluating a company’s current status in the marketplace and assessing if its brand platform is enough to achieve the next goal or a partnership is needed. Considering these three questions can clarify whether a partnership is the right choice.

• Can the business build its way into the new marketplace using existing resources?
• Can a company buy into a new market to achieve its goals?
• Can an alliance maximize resources to achieve a vision faster?

There are multiple factors to consider when exploring a strategic alliance. A 2019 report from Deloitte summarized when the right conditions exist for a strategic partnership rather than buying or building into a new market. Limited capital, timeliness, and partner availability are three conditions that may signal when the time has arrived to form a partnership.

Limited capital

Typically companies have fixed assets, including finances. A strategic project alliance takes advantage of what each partner brings to the table to make the other stronger, including in the capital department.

Timeliness

When companies are looking to rapidly bring a product to market, a strategic alliance may help expedite a product launch. Leveraging the technical, innovative, and financial assets of two companies can speed up the introduction of a product or service and reach both customer bases simultaneously.

Still another example is the partnership between GlaxoSmithKline (GSK) and Propeller Health, a technology startup. Through their research and development alliance, Propeller developed a sensor for inhalers, which tracks when a patient takes the medicine.

The data are sent to GSK for use in studies to better understand asthma and COPD (chronic obstructive pulmonary disease). The collaboration launched in 2015 and received eight U.S. Food and Drug Administration approvals in just two years.

Partner availability

Corporate alliances can be great opportunities for companies to expand their brands, but they don't work in all cases. They work best when there's a natural alignment, or overlap, between the two companies' products, services, or customer bases. Without this overlap, the alliance could seem unnatural to customers and might need to be reconsidered.

3 benefits of utilizing strategic alliance management

Cooperating on a project or initiative can benefit companies in multiple ways. These are three benefits to utilizing a strategic alliance.

1. Offers access to new markets

Forming a partnership with a well-established business offers quick entry into a new market and takes advantage of existing expertise to keep entry costs down.

Reaching new customers and new markets drives growth. However, customer acquisition is costly and can be time-consuming. A strategic alliance provides faster market penetration through the existing resources and expertise of the selected partner.

This is helpful in any marketplace but can be extremely beneficial for companies interested in international expansion. An organization selling overseas has an established reputation and distribution channel, which offers a partner a leg up on breaking into a new space.

2. Leverages knowledge and resources

As the cliche goes, “Two heads are better than one.” Combining the intellect and talents of both organizations offers opportunities for even greater innovations.

3. Elevates and expands the brand

Some companies become well-known in their field of expertise. Sometimes that can be a specialized, narrow niche. Smaller businesses can increase visibility by partnering with companies known for broader products or services by gaining exposure to a new market.

Brand reputation works both ways. Larger organizations can leverage partnerships with smaller ones to create a more grounded, personalized image rather than one of a large and faceless corporate structure.

Best practices for alliance management

A strong house is built upon a solid foundation. Strategic alliances also need strong foundations, which is why planning in the early phases of development is so important. A clear definition of the goal, vision, and resources establishes a sturdy framework that serves a larger purpose.

Select the right partner

Well-executed strategic alliances create synergistic impacts for both partners. Those with complementary assets tend to experience the greatest chance for long-term success.

Develop the agreement

Both partners must participate in decision-making processes. An alliance director can lead the development of the agreement and guide the creation of shared goals and vision. Both groups involved must realize they will be thinking differently and must be willing to accept that some concessions may be necessary.

Share a vision

Without alignment on a goal, success is unlikely. A vision should be well-defined and resonate with both parties in the agreement. Clarity, communication, and documentation of that vision can help to keep it in the forefront for frequent check-ins and project risk management.

Nurture strong relationships

All relationships need nurturing. Hiring an alliance manager ensures that the partnership is well- managed and mutually beneficial for the length of the agreement.

Alliance management jobs often require the individual to be a well-rounded business person who has project management skills. This makes it more likely they can analyze what’s happening internally while staying apprised of what is happening with the alliance partner. The person should be well-versed in financials, business principles, sales, and development.

Evaluate equitable returns

It’s necessary to establish performance metrics to assess the effectiveness of the partnership and make adjustments as needed. Including stakeholders at all levels of seniority is essential for evaluating the returns both partners experience. Project management software can be helpful in collecting data points that can be evaluated against the metrics outlined in the agreement.

Partnerships for driving growth

Forming a strategic alliance is one tool businesses can use to drive growth. By combining assets, such as talent, facilities, funds, etc., both companies in the partnership can achieve greater success than they could alone.

Creating an alliance is part of a larger change management plan, and it’s a step that must be fully evaluated and managed to deliver value. As organizations come together for a shared vision, cross-collaboration is central to making the agreement work.