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A Time To Consider Strategic Alliances

Written by: Kenneth C. Halkin

Article Overview: In any economy, strategic alliances can make good economic sense. Strategic alliances can strengthen the depth and/or breadth of an organization’s capabilities, giving it competitive advantage, while often reducing overhead and improving the bottom line. In a challenging economy, such alliances can be a crucial survival strategy. However, a poorly conceived, poorly planned or poorly executed alliance can be a disaster for all involved. This article covers what issues to consider and how to proceed with exploring and executing a strategic alliance.

A Time To Consider Strategic Alliances

In any economy, strategic alliances can make good economic sense. Strategic alliances can strengthen the depth and/or breadth of an organization’s capabilities, giving it competitive advantage, while often reducing overhead and improving the bottom line. In a challenging economy, such alliances can be a crucial survival strategy. However, a poorly conceived, poorly planned or poorly executed alliance can be a disaster for all involved.

Strategic Alliances come in many flavors. It may involve a corporate affiliation such as an acquisition, merger, consolidation or a number of other variations on the theme. It may involve a joint venture or co-branding agreement around a specific product or service. It could be a joint marketing arrangement or simple cross-referral agreement. The alliance might involve an organization with complimentary products and services or it might involve a direct competitor.

There are many forms of collaboration designed to meet different strategic needs and outcomes. The particular form chosen by an organization, should be driven by a thoughtful strategic planning process with a clear vision and set of goals to be accomplished by the alliance. Opportunities that present themselves should not be pursued, simply because they presented themselves, but because they fit well with an organizations defined needs and overall business plan. An organization should decide what kind of a collaborative relationship(s) they are looking for and proactively seek out appropriate partners, looking for the same thing.

The first step in evaluating a potential alliance is a preliminary due diligence process designed to determine whether this is a good fit for both or all parties. This is not yet the level of due diligence where you are examining one another’s insurance policies and claims…that may come later, if you make it past the first stage.

In the early stage it is important to flush out whether there is a shared vision and mission and values; whether there is goal congruity; and whether there is a realistic win-win synergy to be achieved. Usually this process evolves into some level of preliminary negotiation over roles and finances.

If the discussion survives these first two steps, then it is worth entering into a more detailed due diligence and negotiation process. The extent of the due diligence necessary will depend on the nature of the alliance. The issues to be addressed in this process should be laid out and agreed-upon in advance with an understanding that new issues may arise which need to be added to this list, as the process evolves. The more thorough the better. You can almost never be too thorough. In the end you should have a written agreement that was properly constructed with expert legal input.

In general, unless you are an expert in the process, one should not attempt to negotiate and implement such an agreement without some form of outside expert advice. As stated above, legal input is a must. Often the input of a qualified accountant and/or insurance advisor is important. Having a general business advisor quarterbacking the process can assure that you both follow the right process and bring in the appropriate other advisors at the appropriate point in the process.

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Article Tags: affiliations, business advice, business news, business planning, business strategy, mergers, Strategic alliances, strategic planning



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