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Strategic alliances

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  • 1. Jerry R Mitchell 1 Strategic Alliances
  • 2. Jerry R Mitchell 2 What are they? Strategic alliances are contractual relationships formed between forward- thinking business owners. The alliances are composed of individuals who see that, by working together as a team, they become more powerful and successful. In other words, each person becomes an important element of an equation that offers a total solution to clients.
  • 3. Jerry R Mitchell 3 What does this mean to you and your clients? It means your marketing efforts are maximized without added cost and it means your clients benefit from a team that works well together.
  • 4. Jerry R Mitchell 4 How do successful strategic alliances work? First, team members need to trust each other and be willing to take responsibility and risk, much like a marriage. They need to be flexible, show professional respect, be open (and honest) in their communications, and maintain a client focus.
  • 5. Jerry R Mitchell 5 Then there’s the business side where details need to be ironed out before hand, like team member agreements, defined roles, and control mechanisms. The result is a fine-tuned business relationship, one that both partners feel confident in.
  • 6. Jerry R Mitchell 6 Definition of Strategic Alliance Before I continue, I thought it would be helpful to explain what a strategic alliance is. Although "strategic alliance" has become an increasingly popular term, it has no standard definition, perhaps because the concept is still developing.
  • 7. Jerry R Mitchell 7 For our purposes today I have defined strategic alliances as : 1)are strategic not tactical in intent; 2) focus on long-range goals and major economic benefits; and 3) feature tight linkages among partners, vested interests in the partners future, support at the highest levels of each organization, and emphasis on cooperation and collaboration
  • 8. Jerry R Mitchell 8 My intention today is to help you avoid being a statistic. There is no recipe for success and each of you has different circumstances and concerns, but we believe that I can teach you some strategies that can help increase your likelihood of creating and maintaining a successful alliance.
  • 9. Jerry R Mitchell 9 I believe there are four steps to avoiding potential problems: strategic development, partner assessment, contract negotiations, and control/implementation. Let me go into a little more detail on these four points.
  • 10. Jerry R Mitchell 10 Before entering into any alliance, it is essential that your organization or institution have a clear sense of strategic directions and priorities and is able to articulate it to others. These goals should be the driving force behind an alliance, providing the motivation for future actions.
  • 11. Jerry R Mitchell 11 Once you understand what it is you hope to achieve it should be fairly easy to establish a list of likely partners who can help you get there. You and your potential partner need to reach a consensus on how you will measure success and understand the responsibilities and rights that will help you in achieving it. Know your strengths and maximize them to improve your bargaining position.
  • 12. Jerry R Mitchell 12 I believe there are five levels of integration that lead to success: strategic, tactical, operational, interpersonal, and cultural. It is not sufficient for organizations participating in an alliance to work with one another on one or more of these levels. If they want to achieve success, they improve their chances by integrating their two organizations on all of these levels.
  • 13. Jerry R Mitchell 13 GET GOOD ADVICE Strategic alliances offer start-ups the ability to get to the market at "Internet speed," but they must be approached cautiously. An experienced advisor can assist a start-up in realizing the anticipated benefits of the alliance, such as technology, marketing, or distribution, without becoming stuck in a bad relationship that has an adverse impact on the start-up's future.
  • 14. Jerry R Mitchell 14 I believe there are three key components that are essential, whether the alliance is domestic or cross border.
  • 15. Jerry R Mitchell 15 The first is the importance of strong strategic motivation to form an alliance whether it be to access a given market or segment more effectively, to develop products faster and at lower cost, or simply to source products more reliably.
  • 16. Jerry R Mitchell 16 The second is the critical importance of personal chemistry in the development and subsequent formation of the alliance. Alliances are successfully formed via the collaboration and developing trust between two groups of people that grow a creative interfirm team!
  • 17. Jerry R Mitchell 17 Finally, given that the strategic partnership shows promise based on these first two components, there is the eventual operational fit that the firms need to perceive and create bridging gaps that normally exist but finding complementation wherever it can exist..
  • 18. Jerry R Mitchell 18 Although much of my experience in forming alliances has been across borders, I have been fortunate also to facilitate domestic strategic alliance formation. What stands out from all these experiences is that mutual trust, the shared belief that you can depend on each other to achieve a mutual purpose, has to grow from first encounters throughout the process
  • 19. Jerry R Mitchell 19 The advantages of strategic alliances are clear in this fast changing world. When we see how fast an alliance can be built with the right partners to meet a specific market entry or product development need, it is clear that such alliances can save time and lots of money.
  • 20. Jerry R Mitchell 20 However, resources have to be committed to make them happen, but when these are well managed and the alliance is well constructed, benefits are reaped early on and can be grown quickly as well.
  • 21. Jerry R Mitchell 21 Strategic alliances take shape based on the efforts of creative people, strong leaders committed to thevision that is the alliance, and the predictable, repeated behavior of the involved people who earn one another's trust as they create the alliance.
  • 22. Jerry R Mitchell 22 Companies choose strategic alliances in today’s market for many reasons. The most persuasive advantages seem to be that they are less risky, require less cash, are more flexible to operate, and are relatively easily established.
  • 23. Jerry R Mitchell 23 Perhaps the most important advantages, especially in a globalizing world are that alliances allow firms to enter other market's and access strengths of their partners!
  • 24. Jerry R Mitchell 24 As we seem to read every day, cooperation is accelerating on a world scale. These changes are driven by several forces, but two predominate: the rise of technology and the globalization of markets.
  • 25. Jerry R Mitchell 25 Cooperation is not limited only to the high technology, or large global firms. Local firms are often influenced by the cost and quality pressures that their larger corporate customers, who compete in foreign markets, force upon them.
  • 26. Jerry R Mitchell 26 With today's requirements for growth, the speed of change, and limited resources to deploy, firms are looking beyond internal activities, acquisitions and arms-length transactions, and focusing more attention on strategic alliances in order to access outside resources and add competitive strength.
  • 27. Jerry R Mitchell 27 In their most fundamental form, strategic alliances are ones where firms decide to collaborate out of mutual need and share risks in order to achieve mutually agreed objectives. By their very nature, such alliances provide access to far more resources than any single firm owns or could buy.
  • 28. Jerry R Mitchell 28 Alliances/partnerships can take many forms. There are research alliances, manufacturing and sourcing alliances, marketing and distribution alliances, logistical alliances, and the more well known equity alliance or joint venture
  • 29. Jerry R Mitchell 29 Twenty five years ago, when I began my consulting business, the concept of globalization was seen as too broad and menacing to many of my colleagues who were accustomed to the domestic and international divisions of their businesses.
  • 30. Jerry R Mitchell 30 The more common forms of alliancing seem to be: 1)to develop and introduce products or services less expensively, 2) to enter a market more successfully, or 3) to achieve better sourcing to enhance competitiveness.
  • 31. Jerry R Mitchell 31 Although I think we are fairly successful at conceptualizing alliances and even negotiating them with reasonable outcomes, the biggest problems seems to occur in the integration and implementation side of alliance activity.
  • 32. Jerry R Mitchell 32 We could spend days attempting to define the most successful lessons learned from numerous surveys and management speeches, however in my mind these key elements stand out: 1)Be sure the alliance ties into a clearly understood and accepted strategy on both sides. 2.Effective planning should be done to be sure that all expectations are clear, especially in terms of the value to be created.
  • 33. Jerry R Mitchell 33 3. Make sure that everybody involved in management understands who has the responsibility to make itwork - within the venture and on each partner side. 4. Integration and implementation planning must be accompanied by excellent implementation - meeting milestones and resolving process issues. 5. Post alliance or merger management is essential; yet it seems to be the most difficult part. Make sure there are regular review periods between partners to assure one another that objectives are being met and process issues resolved. To continually benefit the final customer, alliances need care and feeding.
  • 34. Jerry R Mitchell 34 Lower exposure to riskLower exposure to risk
  • 35. Jerry R Mitchell 35 Involving many partners in a risky venture reduces the exposure that each has toInvolving many partners in a risky venture reduces the exposure that each has to the possibility of failure.the possibility of failure.
  • 36. Jerry R Mitchell 36 This technique is as old as capitalism; the English East India Company used it inThis technique is as old as capitalism; the English East India Company used it in the 17th century to finance risky voyages. In the 20th century oil explorationthe 17th century to finance risky voyages. In the 20th century oil exploration companies often teamed up.companies often teamed up.
  • 37. Jerry R Mitchell 37 In today's high-tech economy the explorers are not sailing to distant continents orIn today's high-tech economy the explorers are not sailing to distant continents or drilling the earth they are colonizing the sky or probing the depths of DNA anddrilling the earth they are colonizing the sky or probing the depths of DNA and atomic structures.atomic structures.
  • 38. Jerry R Mitchell 38 A prime example is Iridium the consortium of electronics, aerospace andA prime example is Iridium the consortium of electronics, aerospace and telecommunications companies that launched 66 satellites into space andtelecommunications companies that launched 66 satellites into space and initiated the first round-the-world telephone service in late 1998initiated the first round-the-world telephone service in late 1998
  • 39. Jerry R Mitchell 39 The enterprise cost more than $5 billion and filed for voluntary bankruptcy withinThe enterprise cost more than $5 billion and filed for voluntary bankruptcy within a year.a year.
  • 40. Jerry R Mitchell 40 Why? Many answers have been offered. Prime among them is that theWhy? Many answers have been offered. Prime among them is that the project was overtaken by technological and market trends that were notproject was overtaken by technological and market trends that were not foreseen when the initiative was launched.foreseen when the initiative was launched.
  • 41. Jerry R Mitchell 41 Being at the leading edge of technology and aiming to serve a marketBeing at the leading edge of technology and aiming to serve a market that did not yet exist brought huge risks for Iridium.that did not yet exist brought huge risks for Iridium.
  • 42. Jerry R Mitchell 42 This case shows why alliances can be valuable in lowering a company's riskThis case shows why alliances can be valuable in lowering a company's risk exposure.exposure.
  • 43. Jerry R Mitchell 43 Hedge your bets!Hedge your bets!
  • 44. Jerry R Mitchell 44 Another useful feature of alliances in bioengineering and semiconductors is thatAnother useful feature of alliances in bioengineering and semiconductors is that they allow companies to hedge their bets among two or more competingthey allow companies to hedge their bets among two or more competing technologies.technologies.
  • 45. Jerry R Mitchell 45 Bill Gates uses this strategy too. Microsoft has been investing in a slew ofBill Gates uses this strategy too. Microsoft has been investing in a slew of companies offering competing solutions to address the coming convergencecompanies offering competing solutions to address the coming convergence between the TV and the PC. No one knows exactly how this will occur.between the TV and the PC. No one knows exactly how this will occur.
  • 46. Jerry R Mitchell 46 So, Microsoft has invested in AT&T to spur the rollout of high-speedSo, Microsoft has invested in AT&T to spur the rollout of high-speed internet access over telephone lines, in Nextel Communications to developinternet access over telephone lines, in Nextel Communications to develop wireless internet access and in Comcast to promote access over cable-wireless internet access and in Comcast to promote access over cable- systems.systems.
  • 47. Jerry R Mitchell 47 It is likely that one or more of these options will pan out and that others willIt is likely that one or more of these options will pan out and that others will not.not. Either way Microsoft is likely to have at least one winning bet. It may then useEither way Microsoft is likely to have at least one winning bet. It may then use this to raise the ante on competitors.this to raise the ante on competitors.
  • 48. Jerry R Mitchell 48 Alliances are most useful in hedging your bets when there is uncertaintyAlliances are most useful in hedging your bets when there is uncertainty among competing future outcomes.among competing future outcomes.
  • 49. Jerry R Mitchell 49 One common use of alliances is to change the capabilities and strategicOne common use of alliances is to change the capabilities and strategic position of a company.position of a company.
  • 50. Jerry R Mitchell 50 Xerox, the US printer and copier manufacturer, and Corning, a leading USXerox, the US printer and copier manufacturer, and Corning, a leading US glass and systems manufacturer are among enterprises that are well known forglass and systems manufacturer are among enterprises that are well known for having used joint ventures to enter new markets abroad and gain access to newhaving used joint ventures to enter new markets abroad and gain access to new technologies.technologies.
  • 51. Jerry R Mitchell 51 Other companies have used mergers and acquisitions for the same purposeOther companies have used mergers and acquisitions for the same purpose Daimler-Benz did so in acquiring Chrysler, becoming a German-US automotiveDaimler-Benz did so in acquiring Chrysler, becoming a German-US automotive group.group.
  • 52. Jerry R Mitchell 52 An alliance also helps transfer knowledge and skills gradually while a partnerAn alliance also helps transfer knowledge and skills gradually while a partner maintains an interest in the business; an acquisition can well kill the spirit thatmaintains an interest in the business; an acquisition can well kill the spirit that promised to renew the acquiring company.promised to renew the acquiring company.
  • 53. Jerry R Mitchell 53 A case in point involves AT&T, the US telecoms carrier. For decades,A case in point involves AT&T, the US telecoms carrier. For decades, computer and telecommunications companies had thought that somedaycomputer and telecommunications companies had thought that someday their technologies would merge.their technologies would merge.
  • 54. Jerry R Mitchell 54 However, in a scenario akin to the TV-PC convergence described before, noHowever, in a scenario akin to the TV-PC convergence described before, no one knew when or precisely how this would happen. Even faced by this bigone knew when or precisely how this would happen. Even faced by this big uncertainty, AT&T charged ahead to acquire computer company NCR foruncertainty, AT&T charged ahead to acquire computer company NCR for $7.5billion in 1991.$7.5billion in 1991.
  • 55. Jerry R Mitchell 55 As it turned out, there was little synergy between the two and AT&T spun off itsAs it turned out, there was little synergy between the two and AT&T spun off its acquisition in 1996, after the latter racked up more than $3 billion in losses.acquisition in 1996, after the latter racked up more than $3 billion in losses.
  • 56. Jerry R Mitchell 56 An initial alliance to test the idea might have saved money, time and effort.An initial alliance to test the idea might have saved money, time and effort. Taking smaller steps can help managers gauge the terrain better and assistTaking smaller steps can help managers gauge the terrain better and assist them in avoiding premature fatigue.them in avoiding premature fatigue.
  • 57. Jerry R Mitchell 57 Buy options on the futureBuy options on the future
  • 58. Jerry R Mitchell 58 An alliance at an early stage of industry transformation can also be seen asAn alliance at an early stage of industry transformation can also be seen as a way of "buying" an option on future developments.a way of "buying" an option on future developments.
  • 59. Jerry R Mitchell 59 The company first invests in an alliance and then has the option either to exitThe company first invests in an alliance and then has the option either to exit or get more deeply involved after it sees how the business develops. The costor get more deeply involved after it sees how the business develops. The cost of entering a relationship is relatively small in this case, as is the cost of exit;of entering a relationship is relatively small in this case, as is the cost of exit; but the value of the option to grow the relationship may be high.but the value of the option to grow the relationship may be high.
  • 60. Jerry R Mitchell 60 Let us take a brief detour into financial options. An option, in the financialLet us take a brief detour into financial options. An option, in the financial world, is the right to buy or sell a security within a given period at aworld, is the right to buy or sell a security within a given period at a pre-arranged price.pre-arranged price.
  • 61. Jerry R Mitchell 61 It is not a definite commitment to do anything. If the option is not exercisedIt is not a definite commitment to do anything. If the option is not exercised within the period, it expires. The chief value of the option comes from thewithin the period, it expires. The chief value of the option comes from the flexibility it offers to act in the future as new events unfold.flexibility it offers to act in the future as new events unfold.
  • 62. Jerry R Mitchell 62 Corning Glass used alliances as options to explore and ultimately takeCorning Glass used alliances as options to explore and ultimately take leadership in optical fibers.leadership in optical fibers.
  • 63. Jerry R Mitchell 63 Corning used a series of early alliances with telecommunications companies andCorning used a series of early alliances with telecommunications companies and research outfits to reduce technical uncertainties and develop a commercialresearch outfits to reduce technical uncertainties and develop a commercial solution.solution.
  • 64. Jerry R Mitchell 64 After it gathered new information Corning launched a second wave ofAfter it gathered new information Corning launched a second wave of alliances, this time with early users and manufacturers.alliances, this time with early users and manufacturers.
  • 65. Jerry R Mitchell 65 Its most important manufacturing ally was Siemens, which became a 50Its most important manufacturing ally was Siemens, which became a 50 per cent partner in Siecor, the optical cable company that soon rose to aper cent partner in Siecor, the optical cable company that soon rose to a dominant position in the industry.dominant position in the industry.
  • 66. Jerry R Mitchell 66 By 1999, Corning's interest in optical fibers had grown such that it preferred toBy 1999, Corning's interest in optical fibers had grown such that it preferred to "exercise" its option fully to own and manage the business and it bought out"exercise" its option fully to own and manage the business and it bought out Siemens's share.Siemens's share.
  • 67. Jerry R Mitchell 67 Manage business risk directly.Manage business risk directly.
  • 68. Jerry R Mitchell 68 Alliances can actually reduce business risks directly by improving a project'sAlliances can actually reduce business risks directly by improving a project's chances of success. This strategy is often complementary to the others; achances of success. This strategy is often complementary to the others; a company may do what it can to make a project succeed, while also hedgingcompany may do what it can to make a project succeed, while also hedging its bets in case of failure.its bets in case of failure.
  • 69. Jerry R Mitchell 69 The pharmaceutical industry has many examples of this type. SometimesThe pharmaceutical industry has many examples of this type. Sometimes major pharmaceutical companies make multiple investments in bio-technologymajor pharmaceutical companies make multiple investments in bio-technology start-ups and in university laboratories primarily to share risks and hedgestart-ups and in university laboratories primarily to share risks and hedge their bets.their bets.
  • 70. Jerry R Mitchell 70 At other times, however, they get deeply involved in shaping the agendaAt other times, however, they get deeply involved in shaping the agenda of a start-up or coaching it in marketing, the regulatory process and otherof a start-up or coaching it in marketing, the regulatory process and other matters that can make or break a new drug.matters that can make or break a new drug.
  • 71. Jerry R Mitchell 71 Often, this direct management of risk is reflected in complex sequences ofOften, this direct management of risk is reflected in complex sequences of decisions and milestone payments, designed to guide the start-up while alsodecisions and milestone payments, designed to guide the start-up while also creating an option-like flexibility for the larger partner.creating an option-like flexibility for the larger partner.
  • 72. Jerry R Mitchell 72 The deal between Abbott Laboratories, the US drug and medical productsThe deal between Abbott Laboratories, the US drug and medical products maker, and Japan's Takeda Chemical Industries is a good example.maker, and Japan's Takeda Chemical Industries is a good example.
  • 73. Jerry R Mitchell 73 In 1977 they formed TAP Pharmaceuticals, a US-based joint venture thatIn 1977 they formed TAP Pharmaceuticals, a US-based joint venture that initially would have access to all of Takeda's R&D for use in the US market.initially would have access to all of Takeda's R&D for use in the US market.
  • 74. Jerry R Mitchell 74 This was a classic use of the options approach to alliances, as it was uncertainThis was a classic use of the options approach to alliances, as it was uncertain which compounds would turn out to be commercially viable in the US.which compounds would turn out to be commercially viable in the US.
  • 75. Jerry R Mitchell 75 Abbott did not just sit by and watch the uncertainties resolve themselves. Instead,Abbott did not just sit by and watch the uncertainties resolve themselves. Instead, it helped TAP develop a marketing strategy and sales force and manage the longit helped TAP develop a marketing strategy and sales force and manage the long and complex drug approval process at the Federal Drug Administration.and complex drug approval process at the Federal Drug Administration.
  • 76. Jerry R Mitchell 76 With Takeda's compound and Abbott's contributions to management, TAPWith Takeda's compound and Abbott's contributions to management, TAP Pharmaceuticals eventually developed Prevacid ®, a blockbuster drug thatPharmaceuticals eventually developed Prevacid ®, a blockbuster drug that accounted for approximately $2bn in sales in 1999.Here too alliances wereaccounted for approximately $2bn in sales in 1999.Here too alliances were useful in dealing with risks that are inherent in the project.useful in dealing with risks that are inherent in the project.
  • 77. Jerry R Mitchell 77 Alliance strategyAlliance strategy
  • 78. Jerry R Mitchell 78 These guidelines for alliance success have one thing in common: they treat theThese guidelines for alliance success have one thing in common: they treat the alliance as an evolving organization embedded in a dynamic strategy.alliance as an evolving organization embedded in a dynamic strategy.
  • 79. Jerry R Mitchell 79 An alliance, in my view, is much more than "the deal" that is typicallyAn alliance, in my view, is much more than "the deal" that is typically announced with much fanfare in the business press. A simple play on wordsannounced with much fanfare in the business press. A simple play on words summarizes this point:summarizes this point:
  • 80. Jerry R Mitchell 80 Companies should build "alliance strategies" not "strategic alliances".Companies should build "alliance strategies" not "strategic alliances".
  • 81. Jerry R Mitchell 81 The difference is not semantic. Every manager has seen how excessive focusThe difference is not semantic. Every manager has seen how excessive focus on the deal can lead to neglect of the strategy behind the deal. Why are weon the deal can lead to neglect of the strategy behind the deal. Why are we participating in an alliance?participating in an alliance?
  • 82. Jerry R Mitchell 82 How will we manage it?How will we manage it? How does this alliance fit our overall "constellation"How does this alliance fit our overall "constellation" of allies?of allies? How will we support it internally?How will we support it internally? These key questions go well beyond the closing of a deal.These key questions go well beyond the closing of a deal. Effective use of alliances to manage risk requires such a dynamicEffective use of alliances to manage risk requires such a dynamic perspective.perspective.
  • 83. Jerry R Mitchell 83 Whatever their structure, one goal prevails: strategic alliances are opportunitiesWhatever their structure, one goal prevails: strategic alliances are opportunities for small businesses to accomplish things that would otherwise take much morefor small businesses to accomplish things that would otherwise take much more money or staff time.money or staff time.
  • 84. Jerry R Mitchell 84 Small business owners, with their limited resources and marketing reach,Small business owners, with their limited resources and marketing reach, could benefit from cooperative arrangements with other organization andcould benefit from cooperative arrangements with other organization and business entities.business entities.
  • 85. Jerry R Mitchell 85 Joining forces with another organization can allow your business toJoining forces with another organization can allow your business to finance certain services or production functions by sharing expertise, assets,finance certain services or production functions by sharing expertise, assets, expenses and risk without necessarily incurring cash debt or trading equity.expenses and risk without necessarily incurring cash debt or trading equity. For small businesses, strategic alliances often consist of simple "bartering"For small businesses, strategic alliances often consist of simple "bartering" with customers, suppliers, and even competitors.with customers, suppliers, and even competitors.
  • 86. Jerry R Mitchell 86 Here are several ways that you can collaborate with another person orHere are several ways that you can collaborate with another person or company to bring added value, revenue, traffic and/or expertise into yourcompany to bring added value, revenue, traffic and/or expertise into your business.business.
  • 87. Jerry R Mitchell 87 Partner with a key customer.Partner with a key customer. If you are selling a substantial amount of your product to one company, itIf you are selling a substantial amount of your product to one company, it is best to explore opportunities for strategic alliances between youris best to explore opportunities for strategic alliances between your organizations.organizations. Cementing the relationship into a long-term formal alliance will helpCementing the relationship into a long-term formal alliance will help mitigate the risk of losing your biggest customer and market.mitigate the risk of losing your biggest customer and market.
  • 88. Jerry R Mitchell 88 Partner with a brand leader.Partner with a brand leader. When considering strategic partners, most small businesses will benefit fromWhen considering strategic partners, most small businesses will benefit from alliances that add value and prestige, not just money, through sheer associationalliances that add value and prestige, not just money, through sheer association alone.alone. If a brand leader wishes to join forces with you a “small fry” grab the offerIf a brand leader wishes to join forces with you a “small fry” grab the offer immediately!immediately!
  • 89. Jerry R Mitchell 89 Your networking ability plays a major role in locating and investigatingYour networking ability plays a major role in locating and investigating strategic partnering opportunities.strategic partnering opportunities.
  • 90. Jerry R Mitchell 90 Even if the partnership does not offer direct financial remuneration, you canEven if the partnership does not offer direct financial remuneration, you can leverage your formal association with the brand leader in the advertising andleverage your formal association with the brand leader in the advertising and marketing for your company.marketing for your company.
  • 91. Jerry R Mitchell 91 Cross-sector Partnerships.Cross-sector Partnerships. While strategic alliances are often formed with businesses, consider theWhile strategic alliances are often formed with businesses, consider the possibility of joining forces with the non-profit organizations such as tradepossibility of joining forces with the non-profit organizations such as trade associations, nonprofit groups, local community organizations, etc.associations, nonprofit groups, local community organizations, etc.
  • 92. Jerry R Mitchell 92 Partner with former employer.Partner with former employer. Many entrepreneurs start their own companies after seeing potentialMany entrepreneurs start their own companies after seeing potential partnership opportunities with their employers.partnership opportunities with their employers.
  • 93. Jerry R Mitchell 93 For example, you may develop a product or service that provides yourFor example, you may develop a product or service that provides your employer with a solution to a major problem. You make arrangements toemployer with a solution to a major problem. You make arrangements to go into your own business selling this product or service, and your formergo into your own business selling this product or service, and your former employer offers you a long-term contract with his or her company.employer offers you a long-term contract with his or her company.
  • 94. Jerry R Mitchell 94 The bonus: you end up with great cash flow, and the long-term contractThe bonus: you end up with great cash flow, and the long-term contract with a creditworthy company means you can go to other lenders andwith a creditworthy company means you can go to other lenders and possibly get other financing you need.possibly get other financing you need.
  • 95. Jerry R Mitchell 95 Partner with a competitor.Partner with a competitor. Your competitors, if handled properly, can be a very good alliance partners.Your competitors, if handled properly, can be a very good alliance partners. By understanding the capacity and capabilities of your competitor, you mayBy understanding the capacity and capabilities of your competitor, you may be able to tap into their unique strengths for your own advantages.be able to tap into their unique strengths for your own advantages.
  • 96. Jerry R Mitchell 96 You may work hand-in-hand with a competitor over contracts thatYou may work hand-in-hand with a competitor over contracts that maybe too large for you to handle by yourself.maybe too large for you to handle by yourself. You may also refer customers and projects to your competitors ifYou may also refer customers and projects to your competitors if your manpower resources are tightly squeezed.your manpower resources are tightly squeezed.
  • 97. Jerry R Mitchell 97 If you cultivate a good harmonious relationship with your competitor, they mayIf you cultivate a good harmonious relationship with your competitor, they may also reciprocate and pass on to you projects and contracts that they feel you canalso reciprocate and pass on to you projects and contracts that they feel you can do much better!do much better! As the saying goes, “if you can’t beat them, join them!”As the saying goes, “if you can’t beat them, join them!”
  • 98. Jerry R Mitchell 98 Partner for cross marketing.Partner for cross marketing. Cross marketing calls for two distinct businesses to pool their resources andCross marketing calls for two distinct businesses to pool their resources and collectively market to a target customer base.collectively market to a target customer base.
  • 99. Jerry R Mitchell 99 The strategic alliance will provide additional leverage for their productThe strategic alliance will provide additional leverage for their product offerings and generate greater marketing impact. The potential to save moneyofferings and generate greater marketing impact. The potential to save money for both companies is the greatest benefit to both companies.for both companies is the greatest benefit to both companies.
  • 100. Jerry R Mitchell 100 An online newsletter targeting small business entrepreneurs, for example, canAn online newsletter targeting small business entrepreneurs, for example, can partner with a site that offers assistance to entrepreneurs in securing governmentpartner with a site that offers assistance to entrepreneurs in securing government loans. The online newsletter will be able to increase its business tools offering toloans. The online newsletter will be able to increase its business tools offering to its readers, while the government loans site can widen its reach.its readers, while the government loans site can widen its reach.
  • 101. Jerry R Mitchell 101 Your company may have started out as a solo enterprise, and you still wantYour company may have started out as a solo enterprise, and you still want it to remain that way but you see the value in making connections.it to remain that way but you see the value in making connections.
  • 102. Jerry R Mitchell 102 Or, your business has now grown to include one or more employeesOr, your business has now grown to include one or more employees and you’re looking for ways to expand your reach without generatingand you’re looking for ways to expand your reach without generating a lot of debt or overhead.a lot of debt or overhead.
  • 103. Jerry R Mitchell 103 For these situations, and many more, strategic alliances and partnerships are aFor these situations, and many more, strategic alliances and partnerships are a smart solution. Design them any way you want keeping in mind a win/winsmart solution. Design them any way you want keeping in mind a win/win philosophy and you’ll discover ways to grow your business without the directphilosophy and you’ll discover ways to grow your business without the direct use of money.use of money.
  • 104. Jerry R Mitchell 104 JERRYS RULESJERRYS RULES DECIDE YOUR STRATEGIC AGENDA BEFORE YOU BEGIN THEDECIDE YOUR STRATEGIC AGENDA BEFORE YOU BEGIN THE PROCESSPROCESS
  • 105. Jerry R Mitchell 105 JERRYS RULESJERRYS RULES FINANCING IS ONLY ONE PART OF THE DECISIONFINANCING IS ONLY ONE PART OF THE DECISION TO DO A STRATEGIC ALLIANCETO DO A STRATEGIC ALLIANCE
  • 106. Jerry R Mitchell 106 JERRYS RULESJERRYS RULES WHERE YOU START NEGOTIATIONS IN COMPANIES HAS A LOT TOWHERE YOU START NEGOTIATIONS IN COMPANIES HAS A LOT TO DO WITH SUCCESS…(E.G. CEO,MARKETING,MANUFACTURING,DO WITH SUCCESS…(E.G. CEO,MARKETING,MANUFACTURING, FINANCE, R&D TYPES ALL HAVE DIFFERENT OBJECTIVES)FINANCE, R&D TYPES ALL HAVE DIFFERENT OBJECTIVES)
  • 107. Jerry R Mitchell 107 JERRYS RULES PLANNING CAN’T BE DONE ENOUGH
  • 108. Jerry R Mitchell 108 JERRYS RULESJERRYS RULES NEGOTIATE WITH MORE THAN ONE COMPANY SIMULTANEOUSLYNEGOTIATE WITH MORE THAN ONE COMPANY SIMULTANEOUSLY
  • 109. Jerry R Mitchell 109 JERRYS RULESJERRYS RULES ALWAYS NEGOTITATE AS EQUALSALWAYS NEGOTITATE AS EQUALS
  • 110. Jerry R Mitchell 110 JERRYS RULESJERRYS RULES GIVE SOMETHING/ GET SOMETHINGGIVE SOMETHING/ GET SOMETHING
  • 111. Jerry R Mitchell 111 JERRYS RULES GIVE SOMETHING/ GET SOMETHING
  • 112. Jerry R Mitchell 112 JERRYS RULESJERRYS RULES FOR INTERNATIONAL ALLIANCES,HIRE SOMEONEFOR INTERNATIONAL ALLIANCES,HIRE SOMEONE (ON YOUR SIDE) WHO SPEAKS THE LANGUAGE(ON YOUR SIDE) WHO SPEAKS THE LANGUAGE
  • 113. Jerry R Mitchell 113 JERRYS RULES SUCCESS RESULTS FROM SUCCESSFUL “MIDDLE” MANAGEMENT
  • 114. Jerry R Mitchell 114 JERRYS RULES KEEP TECHNOLOGY-ONLY LICENSE AWAY FROM THE USE IN MARKETS/GEOGRAPHIC/TECHNOLOGY AREAS
  • 115. Jerry R Mitchell 115 JERRYS RULES IT ONLY WORKS IF BOTH SIDES WIN
  • 116. Jerry R Mitchell 116 JERRYS RULES TECHNICAL CONSIDERATIONS ( FINANCIAL STATEMENTS AND TAX TREATMENTS) SHOULD NOT BE “DEAL KILLERS”
  • 117. Jerry R Mitchell 117 JERRYS RULES KNOW HOW THE EXIT WILL HAPPEN
  • 118. Jerry R Mitchell 118 JERRYS RULES ALWAYS HAVE A COMPEDENT LAWYER