Pitfalls to Successful Strategic Alliances
By Ed Rigsbee, CSP,
Pars, partners beware!
as with any activity, has its unexpected challenges and pitfalls. Actually,
this is probably more so than in traditional adversary relationships. In
adversary relationships you must always
watch your back. In relationships based on trust or what is perceived as
trust, one can be lulled into a false sense of security. While you need to
protect yourself from these dangerous situations, you do not want to create
them by exhibiting the wrong attitude.
keep your alliances healthy, conflict should be dealt with immediately. This
is your best chance for moving forward in any relationship. But, improperly
challenged, conflict can be the death sentence to an alliance.
conflict emanates from five core areas:
doesn't have to be a roadblock to a successful alliance if you and your
partnering alliance members are willing to resolve the conflict at the core
level, in a timely manner. In fact, the resolved conflict can lead to a
stronger relationship through improved communication. Unfortunately, conflict
that is left unresolved will lead to fatal flaws that will erode the
of the more common areas of conflict in alliance relationships are
accessibility, culture clashes, hidden agendas, management tenure, poor
communications and unrealistic expectations. Many advocates and consultants
for alliances believe that the alliance mortality rate is around 50 percent.
you wait to build partnering relationships until all the potential pitfalls
are unearthed, your industry will pass you by. Others, who you might have
considered as possible members for strategic alliances, might be aligned with
your competition. Be realistic though, as with a spouse, partnering alliance
members don't change with time. They do not become, who and what, you want
them to be. But rather, evolve to whom and what they desire. If you suspect
core problems, you probably are accurate in your assessment and the chances
for a successful alliance is greatly diminished. Partnering,
like marriage, will not change people. What it does do, is to remove the
facades, and exposes the good and bad.
Trust in others and
the belief that alliance Partnering starts at the top are crucial elements to
your success. These two topics are frequent causes for failed Partnering
agreements when they're not followed. Also, in alliance agreements, be
cautious of things you can't see now but may experience later. Little things
like the small print in a detailed alliance contract. Don't let your
enthusiasm cloud your judgment.
because you're working with a company of integrity, it doesn't mean they will
look out for you. Even in a Partnering relationship, you are still accountable
for your own success and well-being. Make sure your bottom-line expectations
take into account that servicing the partnering agreement is going to require
extra resources. Be certain of everybody's alliance partnering goals. Here are
examples of potential Partnering pitfalls. Be aware of them before you enter
an agreement. Your chances for success will increase.
for example, forfeited $60 million in lost revenue and learned about the
challenges of Partnering overseas. You could say it took a licking and kept on
ticking. After 18 months of frustration, Timex wanted out of the partnership
it created in India. It all started a decade ago when it was illegal to export
watches into India. Timex wanted into the market and proceeded to select a
local watchmaker as its partner. Unfortunately Timex should have spent more
time on due diligence and asked around a bit more about the partner to be.
Timex assumed it could dominate the relationship and have the Indian
manufacturer carry out its manufacturing needs on cue.
Timex surprised? The head of Timex’s joint venture in India, Robert Werner
was quoted in a Los Angeles Times article as stating, “Until its
Indian joint venture, Timex had been accustomed to owning companies outright,
and its problems in India were a learning experience for many at Timex.” He
said It took Timex six months of negotiations and an undisclosed settlement
before the company could rid itself of the partner.
Timex is happily partnered with Indian watchmaker Titan Industries, which is a
subsidiary of Tata Group, one of the largest corporations in India. The Timex-Tata
joint venture went to market in late 1992 and in its first year sold 400,000
watches. Two years later annual sales leaped to 1.9 million watches.
in 1905, Donnelly Corporation started as a glass mirror manufacturer and
supplier for the turn-of-the-century (1900) furniture industry. Today, through
joint ventures and strategic alliances, they have operations in 12 countries.
With net sales in 1998 of over $763 million (13.7% increase over 1997), they
are successfully Partnering around the globe.
Baumgardner, chairman & CEO at Donnelly feels strongly about what it takes
for Partnering to work. When we visited at their Holland, MI headquarters he
said to me, "If you have management that is not operating on the basic
believe, that it has to start at the top, those beliefs have to be held and
permeated throughout the organization. For example, with employees
(approximately 5,500 in 1999), if you have to believe your people can be
trusted, that they want to work together in a supportive and cooperative
fashion. The same must be true with another company; you have to believe when
you form a strategic alliance that they will operate with the same motive that
you operate. If you don't have those beliefs, I think you're going to run into
Values Based Pitfalls
looking at the issue of values, frequently partners of an alliance will have
core values that are conflicting. This is especially a problem with issues
like trust and integrity. Corporate culture clashes; employee turf protection,
and resistance of certain employees to new ideas can wreak havoc on your
efforts to maintain a prosperous alliance.
one of the alliances partners does not completely embrace the principles of
Partnering, big challenges occur. This can include top-level executives or
even supervisory and functional employees in departments, divisions or regions
within a Partnering organization. As an example, DuPont believes that if a
contractor is looking just to maximize his profits, on just one job, then
Partnering with that contractor is not for DuPont because they know there will
be problems in the relationship.
the dynamics of alliance relationships are constantly changing, inflexibility
of partners can kill an alliance quickly. Each member must be willing to give
a little, especially in times of change for a Partnering agreement to
work. Just as devastating is a partner making a Partnering commitment, and
having a hidden agenda that would be destructive to the alliance. Not quite as
bad is a partner deciding they don't want to follow through, or one that does
not have the capability to fulfill their commitment.
relationships can become challenging, especially when business is great.
Suppliers can make the relationship mistake of conveniently forgetting about
the loyalty of smaller long-term customers, and snubbing them for the larger
orders. This is short-term profitability and long-term disaster. When those
large order companies go out of business or are consolidated, the supplier
could be left without any customers.
of either partner is an insidious relationship-killer. Continuously ask your
alliance partner questions in a way that encourages them to relate performance
problems and shortcomings. Ask, "What haven’t we done lately?" And
ask, “What is it you really need from us?”
on your alliance partner can put your business at a similar risk. If you
become the weak link in the alliance and your alliance relationship no longer
delivers value to your partner, more than not, they will discontinue the
you or your alliance partner is not relationship oriented little problems can
easily escalate. Then anger comes and the blaming others for your current
situation. The not invented here,
mentality often exhibited by senior management is a result of low relationship
tolerance. Also the lack of commitment to the alliance or innovations
developed by alliance partners can easily slay your relationship.
is the situation where you might lose control of a technology or best practice
to an alliance partner who later becomes a competitor. Staples and Office
Depot were going to merge but it did not work out. A problem for Office Depot
was that Staples learned of an Office Depot best practice during the merger
talks. Office Depot was delivering COD to small businesses in the northeast
and getting most of the business. After the failed merger, Stapled duplicated
Office Depot’s practice and took away Office Depot’s competitive advantage
in the area.
Goals Based Pitfalls
situations where a customer is the driving force behind a Partnering
arrangement, you can be left holding the bag. Be sure to examine each
Partnering proposal in the context of your company's overall business
strategy. This challenge was recently apparent to IBM and it discontinued its
alliance with Somerset PowerPC and Motorola, in producing microprocessors for
sitting down at the Partnering table a partner might find the relationship seat
uncomfortable. It could be that your partner has a different level of emotional
and physical comfort, or sometimes it is simply a change in corporate strategy
or a restructuring which leads away from a partner's product and/or technology
causing the partners distress. It is important that you know the short and
long-term goals of your alliance partner.
you try to partner with a potential or current customer and have them renege on
the promise of purchasing from you, the disloyalty challenges that can occur can
be wasteful. Be cautious, as there is also the possibility of your partner being
unethical and attempting to capture your technology or trade secrets. This is a
difficult area from which to protect yourself, but if you do your due diligence,
your chances for success increase.
Facts Based Pitfalls
some control with the expectation of greater shared returns can be a difficult
waiting game. Additionally, your resources can get pulled in too many directions
based on collective alliance decisions. Be certain you can spare the resources
you devote to your alliance. Otherwise you may put the success of your entire
operation in harm’s way.
lack of third-party cooperation can be a true relationship problem. All the
primary members of a Partnering agreement will have to give a little for your agreement to work. Worse yet is your partner
receiving unfavorable or harmful media coverage. This is because you are usually
pulled into the picture and believed guilty by association. Real or perceived,
image and reputation are critical to any company's success.
careful in global alliances. Contracts with an overseas market, for instance,
often take a long time to finalize. By the time you get going, in the technology
industries, your competition may have already gotten started. If you are already
behind and you have developed an alliance with a partner organization that is
weak and bleeding, they will only bring you down faster and harder.
Procedures Based Pitfalls
is easy to underestimate how much time, energy and resources will be necessary
to commit to your new alliance. Then not having access to your alliance
partner’s employees is an important issue. The closer the planned relationship
between the two companies, the greater the importance of the linkages between
them. You might find yourself in a situation of a small company Partnering with
a large company. A challenge in working together will be that of the
representatives, usually top executives of the small can make decisions on the
spot. Unfortunately, the employees of the giant must take a proposal up the
chain of command. This sometimes slows progress to a snail’s pace.
clash is a frequent Partnering challenge. The failed alliance of IBM and Apple
is a typical example. The heralded fall 1991 announcement promising cooperation
eventually spawned Taligent Technology and Kaleida Labs. Unfortunately the two
could not coexist so the alliances eventually gave way to a quiet winter
all your alliance relationship eggs in the basket of only one executive or
manager is not a smart idea. The management tenure of your alliance contact can
signal success or failure. If you have a one-person relationship, what happens
if they get promoted out of the area, fired or even die? You are out of luck.
Build relationships with several key contacts in the organization of your
if your partner’s internal or external rewards structure interferes with the
success of the alliance? This could apply to employees, customers or suppliers.
If you are a supply partner and your partner has traditional rewards for their
buyers, the buyers will only be interested in concessions and cost reductions.
On the flip side, sellers usually offer rewards for sales performance and this
also can be challenging in making a relationship work.
certainly is a difficulty in communicating across various time zones. Solving
problems quickly when your Partnering factory is located halfway around the
world is hard enough, but when also speak a different language, that just makes
it more of a formidable task.
not having the emotional ownership in getting started is a true pitfall. Add
this to chaos, seeing too many alliance choices and ways to create an alliance,
some never do get started. The two sides of the sword are, if you wait for
everything to be perfect, they never will. And if you do not put enough energy
into an intelligent choice, your alliance could be doomed from its inception.
Misinformation Based Pitfalls
could easily be guilty of underestimating the complexity of coordinating and
integrating corporate resources, and overestimating your partner's abilities to
achieve the end result. Self-doubt and not believing you have the skills and
tools to create an alliance can crop up here.
Partnering success depends on management’s abilities, skills, commitment,
aspirations and passions in assembling the pieces of the puzzle. When unequal
dependence in a relationship occurs, the partner with the least dependence could
be less likely to compromise and put energy into the relationship.
assigned to words by different cultures can cause serious problems. In one
culture quick delivery could mean one day and in another it could mean one
month. This opens the can of worms often referred to as unrealistic expectations
of a partner's capabilities. The areas commonly include technology, research,
production skills, marketing might, and financial backing.
also have the unexpected inefficiencies or poor management practices of a
partner that can be the demise of a well-intended alliance plan. Also at risk is
the area of developing an alliance with multiple partners, who later become
rivals to one another. This puts a serious strain on the integrity of the
that you've had a view of Partnering from the downside, don't let these hurdles
stop you. Be clear on what alliance partnering is not. It is not instant
gratification, nor a quick fix. It
is not a flavor of the month management strategy. Strategic alliances are
separate entities that have come together to solve their individual problems in
a way that serves the whole mutually. It is sharing core competencies that
overlap and create synergies. The struggle is a necessary part of any
relationship that is valuable and lasting.
reduce the effects of Partnering pitfalls, David Elliott, senior vice president
and chief administrative officer at Technicolor in Hollywood, CA shared his
thoughts with me. "If a partner fails to meet their responsibilities, a
clear agenda is necessary that both sides are operating from. When the agendas
are different or conflicted—that’s a problem.” He went on to say, “We
don't have partnering horror stories because we include an exit strategy, before
going into the relationship.”
advice for others entering into partnering relationships is to do your homework,
know the agenda of all partners in the relationship and measure against it. If
after doing your homework you're still not completely sold on partnering with a
company, start small. Begin your alliance by partnering with another for a
simple or small promotion and get your feet wet. If you do stumble, then having
the ability to regenerate after a fall is crucial, especially if you or a
partner simply make a mistake.
knowledge of the alliance unknown
should keep you from becoming immobilized and waiting for opportunities that
could easily pass you by. Sure, there are some risks, but to lessen the effects,
do your homework, know the agenda of all partners in the relationship and
measure against it. If after doing your homework you're still not completely
sold on an alliance relationship with a company, start small. Begin your
alliance by Partnering with another for a simple or small promotion and get your
you do stumble, having the ability to regenerate after a fall is crucial,
especially if you or a partner simply makes a mistake. Be careful when events
and circumstances are not what you hoped or planned for. You might go to a place of apathy. If you remain in a toxic mind-set, you'll wait and wait for
things to get better before you move into action. The trouble is that things
rarely get better until you propel yourself into a state of activity.
be successful at partnering you must commit to functioning at a higher level. A
level that will allow you to stretch your comfort zone and then commit to moving
into action. Without these two issues in concert, you might not get started or
restart when necessary.
you get back in the action, you can go after small wins to reestablish your
confidence to take risks in pursuit of an even larger prize. The key is to not
wait for all to be perfect before you commence.
It's okay to subscribe to the idea of: ready,
shoot, aim. Do though; take the time to adjust your aim after you begin. Be
like a commercial airline pilot and course correct regularly. Keep your future
focus on the partnering journey. Keep it improving. Be decisive, and show the
qualities of a leader in your industry. You will be rewarded.
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2001-2013 Ed Rigsbee
# # # #
Adapted from PartnerShift-How
to Profit from the Partnering Trend by Ed Rigsbee, CSP,CAE, published by John
Wiley & Sons, New York, October 2000. All of Rigsbee’s books are available from
Ed Rigsbee, CSP, CAE, is the
author of PartnerShift, Developing
Strategic Alliances and The
Art of Partnering and has over 2,000 published articles to his
credit. Ed travels internationally to deliver strategic alliance keynotes
and workshops. When you need a speaker or consultant on partnering, Ed can be reached at
email@example.com or visit www.rigsbee.com.