Alliance Governance; Embrace the Diversity

I like to call alliance success, Partnering for Profits. Unfortunately, a frequent alliance success pitfall is attempting to make your partner in your image—do things the way you do, think the way you think, and follow the same methodology. While it may appear in the short-term, to ease the rocky road of alliance governance, what it really does is minimize the value your partner delivers in the alliance relationship. What it was that attracted you to your alliance partner in the first place were their core competencies and the belief that together, value added synergies would be created and deliver benefit to both; and now you want them to change? How much sense does that make?

First the Process of Working Together

When you set up your alliance expectations in your alliance agreement, the first success should be successful organizational alliance integration—a strategy to collaborate in developing a cooperative process with which both organizations can successfully implement and integrate into their current processes and methodology. First you have to successfully cooperate and collaborate before you can implement the actual stated alliance function.

Cultural, Strategic, and Operational Fit

For any alliance to be successful there is the need for a reasonable cultural, strategic, and operational fit. However, there is not a need for exact cultural, strategic, and operational duplication. The cultural fit is about how compatible the management teams and corporate cultures overlap. The important question is can they successfully work together? The strategic fit is determining how well aligned are the objectives of the participating partners. Opposing corporate strategies can greatly handicap, even a well implemented alliance. Operational fit is the tricky one. How complementary are the business models, processes, and methodology? Notice I stated aligned, and not, the same? With alignment there can be differences, yet cooperation and collaboration.

Partner Due Diligence

I truly believe that due diligence is the Achilles heal for most organizations in the alliance development process. During this very important alliance development step, you really do need to be honest with yourself and your potential partner(s) as to your partnering expectations, your own capabilities, and the partner capabilities you seek. For years I have been saying, “People do not change after marriage.” What I mean by this in the partnering arena is the, all too frequent, misguided belief that one’s partner will get better after the alliance is implemented. How wrong can a person, committee, or organization be? Pick the correct alliance partner from the beginning. Trying to change them after is a fool’s errand.

New Alliance Tools for Smaller Organizations

When I first started writing about alliance development, many of the tools were financially only available to the larger corporations. However, with the preponderance of today’s social networking capabilities, many savvy smaller companies are using Facebook and Linkedin for alliance success, especially in the areas of governance and implementation capabilities. As the social networking sites are now allowing greater control over privacy, they become even better alliance tools for smaller business alliance success. You will find that with a small amount of creativity, social networking sites can truly be a boon to alliance governance, implementation, and success.

Making Your Small Business Alliances Profitable

The most important question you will ask when looking at collaborative business relationships, Is the synergy worth the energy?

The reason I ask this question is because, developing successful and profitable alliances is rarely easy. If it were, everyone would be doing it successfully. Many alliance consultants, and myself included, have determined that about 50% of the alliances created in the United States fail for one reason or another.

The reasons that you may select to enter into alliance relationships are varied, and generally based on need and competencies. The need side is usually represented in areas where we may consider ourselves or our organization to be lacking or weak. The competency side is the opposite, the strengths that we have to share. An ideal alliance situation is with a person or organization that exhibits competency in our weaker areas and weakness or need in our personal and/or organization’s areas of competency. This is where our circles of interest strongly overlap—where we have the greatest chance to be of service to one another.

Building Competent Collaborations

To be successful in building competent collaborations, at least a sprinkling of the following six personal qualities should be encompassed within you and your alliance partners: Curious, Vision, Communication, Leadership, Organize, and Compassion. Let’s look at these individually.

Curious. While you’ve undoubtedly heard is said many times, “Curiosity killed the cat.” We’re not cats. We’re business people searching for leading-edge methods for which we desire to improve our capabilities and hopefully our profits. Curious means you are open to new, and frequently, unsuspected opportunities. You must be curious to alliance possibility in order to simply get started.

Vision. Where is it, which you want your alliance to help you reach? What synergistic goals do you visualize being possible? Simply developing an alliance because it appears the trendy thing to do is hardly a reason to put forth the effort. Additionally in the area of vision, you must be able to see into the future and not become dependent upon your alliance partner—doing this will make you weak. On the other side, if you become too independent, you will no longer be desirable ac an alliance partner to others. Your vision needs to be to work toward that proverbial, and many times elusive, sweet spot where you become interdependent and develop time effective synergies.

Communication. Through my research, I have discovered that the leading reason for alliance failure is communication. While communication does cover a number of issues and situations, this is the key area for which I’d suggest you focus greatly.

A great example of the need for quality communication is the fact that Eli Lilly, the pharmaceutical giant, writes into many of their alliance agreements a mandatory quarterly face-to-face meeting of the principals from each company in the alliance. While the Lilly executives sometimes complain they do not have the time for these meetings, the meetings are contractually mandatory. Generally there is a social dinner the evening before the meeting where many of the current issues and problems get brought out in the open in a non-threatening manner.

Following the 911 attacks and resulting travel challenges, some of the Lilly alliance executives tried fulfilling these contractual obligations via videoconferencing. It seemed to work well and continued substituting videoconferencing for the mandatory face-to-face meetings. It did not take long for alliance problems to start magnifying. As soon as they went back to the live face-to-face meetings, they started again solving challenges before they ever became alliance relationship problems.

Leadership. In order for your alliances to be successful, you must exhibit at least a modicum of leadership qualities. I did not say dictatorship! Here, more than in any other area, your willingness to focus on getting things done, rather than to obsess on being right will determine alliance success. In a corporate environment, the paradigm of partnering must start at the top. The executive must drive the philosophy through both word and deed. Even if you are a single person practice, you must be an alliance champion throughout all the areas of your business.

Organize. Your ability to organize, in the form of alliance structure, procedure and process will have a huge impact on the ultimate implementation and longevity of your alliance relationships. Continuing with Lilly, their alliance implementation process is so sophisticated that they measure (Lilly Web) the perceptions of all of the key players in their alliances—Lilly players and those of their alliance partners. The perceptions that they measure are basically what everybody thinks about one another. This allows Lilly to course correct when they discover that Lilly’s, and their alliance partners’ perceptions of the performance of one another is distorted or out of balance.

Compassion. As you meander through the process of alliance development and implementation, you need to have compassion, and even tolerance, for the foibles of others. This quality will allow you to maintain your sanity in what can sometimes seem like alliance insanity. As you develop alliance relationships, sometimes your alliance partner might, in your opinion, let you down. Since not everybody happens to be as bright as you are; an alliance success secret is to give your alliance partner a break once in a while—especially if your expectations are a bit unrealistic.

Relationship Value Update. For years, I have told my alliance clients, that if they would just complete a Relationship Value Update (RVU) for one another as little as twice yearly, they could head off a number of relationship killer situations. Some have, and succeed but unfortunately many have not and have failed. While using this tool does not guarantee success, but it sure makes alliance success more likely.

There is the long form in my book, Developing Strategic Alliances, (to access this and other helpful additional information from Ed Rigsbee at no charge, please visit www.rigsbee.com/downloadaccess.htm). Here, I’ll share with you my short form. I believe this RVU if used diligently, will make a lasting difference for you as you go through your alliance implementation process.

Below, you will find the three key questions for both you and your alliance partner to answer IN WRITING about the value of your alliance with one another. Then mail your answers to the other. Then each of you can review the information in the privacy of your own office—it’s much better this way. Doing this is far less threatening than is a face-to-face value meeting—that can be done later. Now each of you can quietly read the RVU and hopefully better understand the others’ perspective on the success of the alliance and the value it does, or does not, deliver. This tactic is your best help for avoiding perception challenge issues and dealing with small issues before they get out of hand.

• The value I’m getting from the relationship.

• The Value I think you are receiving.

• Your suggested improvement strategies

Contracts. Written agreements, whatever you call them, are crucial in the success of an alliance. No matter how trusting and loyal each alliance partner operates toward the other—in time people forget their promises. Sometimes they even come to believe they promised something other than they actually did. You have heard it said by any number of professional speakers, “The palest ink is far better than the most retentive memory.” I have found this platitude to be quite accurate. By putting to paper your expectations of one another, along with promises and listing who is responsible for what, you both will have a living document to use as an alliance relationship guide. This guide, contract or agreement, whatever the name, can naturally be adjusted at any time based on new information, market conditions and/or changed alliance partner commitment levels.

In the final analysis, I can honestly tell you that alliance relationships, for a myriad of reasons, can be extremely profitable for all involved. The key is to determine if the synergy is worth the energy. If it were not, why in the world would you want to proceed? But, if you believe the synergy is worth your energy, you can open the door to a new world of business possibilities. With partners that share their complementary core competencies, things can be done that you may never have imagined possible in your career. A truth that I have discovered in my years of alliance consulting, most people are in such a big hurry to build their alliance that they over look the most important alliance issue—pick your partners well. Skip the necessary due diligence, and you’ll be crying about conflict resolution and exit agreements rather than focusing on the opportunities and possibilities.

My Alliance Partner Quiz will help you to get a fighting start in selecting your alliance partners. You may also access this at no charge, please visit www.rigsbee.com/downloadaccess.htm.

Good luck in building your synergistic alliances.

Sell More, Spend Less

The primary reasons that most small business owners will delve into the world of alliance relationships are to sell more and spend less:

For other alliance reasons and benefits, you may access that chapter in my book, Developing Strategic Alliances at no charge: http://www.rigsbee.com/dsa1.htm

Sell More
The key here is to identify other businesses that currently have a good number of the consumers that you want. If you too, have a good number of customers that this other business owner wants--you have a great match for cross promotions and possible co-branding. At the least, this will give you double the exposure for every advertising dollar you spend. Your biggest challenge will be to select another business owner that is willing to first cooperate, then collaborate.

It matters not if you are attempting to build local marketshare or national marketshare the above still holds true. Another frequent technique to sell more is through co-representation/distribution where you actually sell each others' products--this takes a bit more planning and contractual work.

Spend Less
The above example clearly demonstrates the idea of spending less to get more. And, there are other areas where you can spend less such as developing a buying group, sharing part-time employees, equipment sharing, and the list goes on and on.

I have frequently seen regional players, particularly retailers and distributors, successfully build small buying groups to better level the playing field with larger competitors. It is not that hard to do. In the Chicago area, a collective of patio furniture retailers built a group called "Chicagaoland Leisure Group" to make special purchases that would be used as lost leaders, share shipping costs (buy entire truck loads together), and advertising costs (advertised as a collective group in the local newspapers). You too can do this...