5 Keys To Creating Successful Strategic Alliances

Did you eat any fresh corn on the cob last weekend? Or cool down with a
Frappacino? Sneezing from allergies this summer? Maybe you considered
packing up the kids or grandkids and making a summer visit to one of The
Walt Disney Co.’s properties worldwide?

Larraine Segil Forbes.com

Then, knowingly or not, you have benefited from a successful strategic
alliance. Despite Bill Robinson’s comments in an earlier column (see: Why
Strategic Alliances Don’t Work), trust has little to do with creating a profitable
alliance. Companies have proven that they can forge successful partnerships
with those they don’t trust and with which they compete.

How? By following through on a disciplined approach:

1. Select The Proper Partners For The Intended Goals

An alliance between Seattle-based Starbucks (nasdaq: SBUX – news –
people ) and Purchase, N.Y.-based Pepsico (nyse: PEP – news – people )
created the popular coffee-flavored drink, Frappacino. The relationship moved
Starbucks into the bottled-beverage market while PepsiCo gained an
innovative product with a well-branded partner. Each met their strategic and
operational goals. A perfect match.

2. Share The Right Information

You don’t have to trust your partner in order to share information with them.
You just have to decide what not to share. An alliance could involve intricate
interweaving of intellectual property from different research and development
labs owned by multiple partners. Many pharmaceutical companies have
marketing alliances. Eli Lilly (nyse: LLY – news – people ) and Takeda
Chemical Industries of Osaka, Japan, have joined together to develop a drug
for the treatment of type-2 diabetes. Philadelphia-based GlaxoSmithKline
(nyse: GSK – news – people ) and Elbion of Radebeul, Germany, have recently
announced an alliance–the results of which will clear up your stuffy sinuses.
Companies have proven that they can have successful alliances with those
they don’t trust and with whom they compete. The real issue is follow-through.
Did their partner do what they said they would? If so, even without trust, the
alliance can succeed. Kraft’s (nyse: KFT – news – people ) Maxwell House
brand and Starbucks–direct competitors–created an alliance for Starbucks to
place its coffee into supermarkets. Starbucks benefited from Maxwell House’s
extensive network of shelf space in major chains nationwide, while Maxwell
House profited from customer desire for Starbucks-branded coffee.

3. Negotiate A Deal That Includes Risk And Benefit Analysis (Not
Necessarily Equal) For All Sides.

Some companies have changed strategies to focus on alliances as key
revenue generators. Currently 30% of IBM’s (nyse: IBM – news – people ) $86
billion in revenue comes from a wide variety of alliances. IBM is able to
succeed on this scope because they have a process, structure, approach,
metrics and a strategic commitment to make alliances work from the highest
levels in the company. IBM changed strategies a few years ago and embraced
alliances, seeing them as the best way to offer their customers the most
valuable and appropriate solutions to their needs–not just the IBM-created
option. In some instances, they decided to partner rather than compete with
certain independent software vendors. IBM’s alliance with San Mateo,
Calif.-based Siebel (nasdaq: SEBL – news – people ) to jointly develop, market
and sell integrated e-business solutions included also Siebel’s choice of
IBM’s DB2 Universal Database as the company’s primary development
platform and the decision to port Siebel’s e-business applications to the
AS/400e server platform. The latter is significant because IBM has more than
200,000 loyal customers using AS/400e technology. This global strategic
alliance has been extended to midmarket companies and continues to grow
as opportunities for new markets and products evolve.

4. Come To A Realistic Agreement On The Time To Market And Corporate
Expectations

Computer maker Hewlwett-Packard’s ) alliance with The Walt Disney Co.
(nyse: DIS – news – people ) has shown great results as HP provides major IT
solutions and innovation to Disney’s varied divisions with co-branding as a
critical part of the relationship. This alliance was well negotiated and
structured, with a clear understanding of what each partner had to contribute
and could expect to derive from the relationship and how that would change
over time. Both partners are complex organizations and integrating their
alliance goals only happened due to solid planning and manageable
expectations regarding implementation. Disney’s marketing calendar is a key
element of every Disney partnership. The success factor in any alliance–and
especially one with a mega-branded company–is coordinating brand
exposure, joint marketing and customer experience. HP, like every other
Disney partner (Kodak (nyse: EK – news – people ), McDonalds (nyse: MCD –
news – people ), Coca-Cola (nyse: KO – news – people ), etc.) paid particular
attention to understanding the time-to-market issues and how they fit Disney’s
plans, as well as the management of both partner’s expectations as to what
results could be expected when.

5. Mutual, Flexible Commitment On What’s Appropriate To Change,
Measure And Share Within Each Partner’s Culture

Many fresh fruits, corn and vegetables as well as their processing are the
results of alliances. Pioneer Hybrid International, the Des Moines, Iowa,
division of Dupont (nyse: DD – news – people ), creates and implements
agricultural research and development alliances that have contributed
substantially to the world’s food resources and our general well-being. This
means often partnering with small companies, individual scientists and
academics–where results of experiments don’t always appear right on time
and flexibility is needed to reshape the investigation–probing for other
outcomes requiring customized solutions. This kind of alliance management
is not easy for a large organization. But Pioneer has an average employee
tenure of 20 years and their culture supports loyalty, persistence, flexibility and
customization.

These qualities work well in resolving joint research alliances. Lesser-known
entrepreneurial companies like Irwindale, Calif.-based Ready Pac Produce
packages salads for your convenience with technology developed in a
strategic alliance with Scaline, a French company. Egos had to be put aside to
manage through the cultural, language and personal differences in this
alliance. My research into over 200 companies at Caltech, where I teach
executive education in alliances, found that cultural incompatibility (whether
differing company size, corporate culture, management personalities or
national cultural differences) caused alliance failure more often than the
business or financial considerations. Both Pioneer and Ready Pac used
flexibility, open-mindedness and a keen sense of the cultural issues to make
the relationship bear fruit.

Larraine Segil is a board member of ASAP, partner of The Lared Group, a
strategic alliance consultancy, and has authored four books on alliances and
leadership. She can be reached at her Web site.

http://www.forbes.com/2002/07/18/0719alliance.html