Successful partnerships and strategic alliances

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This are the first chapters of an ebook that provides an introduction into partnerships and strategic alliances and how to create them successfully. The 80% rule is explained and you will understand …

This are the first chapters of an ebook that provides an introduction into partnerships and strategic alliances and how to create them successfully. The 80% rule is explained and you will understand why the 80% rule is important to your partnerships too.

For the full version of the ebook browse to http://petersimoons.com/ebook

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  • 1. ! Successful Partnerships & Strategic Alliances ! A journey into the how and why of partnerships & strategic alliances including a roadmap to navigate them to success ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Peter J. Simoons, CSAP
  • 2. Successful partnerships & strategic alliances ! ! ! Successful Partnerships & Strategic Alliances ! A journey into the how and why of partnerships & strategic alliances including a roadmap to navigate them to success ! ! Peter J. Simoons, CSAP peter@petersimoons.com www.petersimoons.com ! ! ! ! Version: Slideshare-­‐ ©2014 All Rights Reserved Simoons & Company – Voormeulenweg 73 – 1402 TH Bussum – The Netherlands +31 20 894 6214 -­‐ peter@simoons.com -­‐ www.simoons.com KvK 32146771 – BTW NL1213.86.454.B01 2
  • 3. Successful partnerships & strategic alliances Contents IntroducYon ....................................................................................................................4 Strategic Alliances ..........................................................................................................5 Why would you partner in strategic alliances? ...............................................................8 Table of contents ebook full version .............................................................................10 3
  • 4. Successful partnerships & strategic alliances Introduc<on Business partnerships and alliances are an increasing important strategic way to help organizaYons grow. In 1998 Yves Doz and Gary Hamel already wrote “No Company can go it alone” as the opening statement of their book “Alliance Advantage”. Today this is more applicable than ever. The challenge is to do alliances in a successful way. They bring a different dynamic than organic growth, with less control and more need for trust. This book takes you on an introducYon journey into the topic of strategic alliances. It explains why a structured approach enhances the chances for success and it gives an introducYon on how best to approach these partnerships and alliances. When talking strategic alliances I equally mean partnerships, collaboraYons and joint ventures between organizaYons. As we will see later on, the term is widely used for various forms of partnering between two or more organizaYons. It can also depend on the industry you are working in and the size of your company. I have noYced that solo entrepreneurs more ofen talk about establishing joint ventures whereas large organizaYons talk about strategic alliances. When these large organizaYons use the words joint venture, they ofen mean a separate organizaYon where they and their partner jointly hold the shares. We will address these differences when discussing the reasons for partnering and have a look at the alliance spectrum. These first chapters are merely an introducYon on the topic, it’s purpose is to inspire you and show you how a process can help increase the chances for success in your strategic alliances & partnerships. Purchase the full version of this ebook from petersimoons.com or in the Amazon Kindle store 4
  • 5. Successful partnerships & strategic alliances Strategic Alliances Since Doz and Hamel wrote “Alliance Advantage”, much has happened in the world. CommunicaYon technologies over the Internet have increased reachability and the world has become flajer than even Thomas Friedman anYcipated. China is virtually next-­‐door nowadays. These changes combined bring new compeYYon and new opportuniYes that you would probably not have even expected five years ago. Amazon is a good example of an organizaYon that knows how to leverage these new opportuniYes and has become an unexpected threat for local companies. For a long Yme local booksellers around the world did not see on-­‐line bookseller Amazon as a serious compeYtor. Times have changed. Today Amazon is no longer just a bookseller; it is a global on-­‐line retailer with a broad pormolio, and a compeYtor to many. Driven by the economy, companies are careful with investments and reluctant with acquisiYons. When asking the quesYon “make, buy, or ally?” regarding a growth strategy, the ally opYon might be more viable than ever. Are alliances an opYon for every growth quesYon? Before we can answer that quesYon we need to look at the definiYon of alliances. I already noYced that there are several terms used for alliances, where people might have the same intenYon. So for the sake of clarity let’s define what we mean with a strategic alliance in this book. The definiYon of a strategic alliance is: “A strategic alliance is a strategic coopera8on between two or more organiza8ons, with the aim to achieve a result one of the par8es cannot (easily) achieve alone.” A strategic alliance has per definiYon a focus on the long term. Partners will contribute part of their resources to realize the success and will in exchange receive part of the control and benefits from the alliance. When establishing alliances it is important to look at contribuYons and returns of an alliance. Hence alliances will only be an answer to your growth quesYon when you are contribuYng too. A pure sales transacYon does not fit the definiYon of an alliance. You will be contribuYng as the seller and you will receive the benefit of the revenue, but it is a transacYonal relaYonship and not a long term focus. Also nothing is generated that you could not achieve alone. ! 5
  • 6. Successful partnerships & strategic alliances The definiYon menYoned is a basic definiYon that covers the essence of a strategic alliance. In the Alliance ConversaYon 1 I conducted a series of interviews with people working in the alliance domain and asked each of them the quesYon “What is for you a strategic alliance?”. The answers that I received contained several angles to the definiYon of a strategic alliance and emphasized that an alliance can mean different things to different people. To expand a bit on the previous definiYon of a strategic alliance here are some of the expert opinions in their own words: Tom Halle appeared in the very first episode of The Alliance ConversaYon. Tom is a strategic alliance professional based in San Diego, CA and answered to the quesYon: A strategic partnership is where you cri8cally need something that I have or something that I am capable of delivering and I cri8cally need that from you as well, sufficient to get the interests of our execu8ves on both sides and to get some real commitments to showing each other preference and inves8ng in the joint business. Being in strategic alliances for 15 years, Anoop Nathwani gave in our conversaYon the following definiYon of a strategic alliance: For me an alliance in a business environment is where two companies have a need to work together, for either from a technology leadership perspec8ve, or from a product leadership perspec8ve. Quite oIen it is driven by compe8tor ac8vity or a requirement for growth as one of their strategies. You can have a build strategy, a buy strategy and the third op8on is the partnering strategy. The drivers tend to be either accelera8ng growth, or compe8tor ac8vity. Now, from a strategic alliance, par8cularly in large organiza8ons, it's where two very large organiza8ons get together and fundamentally do something that is so game changing and it's very very strategic in the long term in its very nature. That's what I would then class as a strategic alliance as opposed to a normal alliance. Donna Peek is the Global Alliance Program Manager at SAS InsYtute and shared the definiYon she most ofen uses: The best defini8on that I’ve seen for what strategic alliance is, is one I came across in a book I read several years ago by Neil Rackham. The book is called “GeSng Partnering 6 1 The Alliance ConversaYon series can be downloaded from hjp://www.simoons.com/allianceconversaYon/ and the current podcast series with guest in the field of alliances and partnerships can be found at hjp://simoons.com/cbp
  • 7. Successful partnerships & strategic alliances Right”. I do a lot of reading about strategic alliances and in this book Neil Rackham defines a strategic alliance as a partnership between two companies where three elements are present: vision, impact and in8macy. By vision he means a compelling picture of the possibili8es. What can the partnership achieve and how is it going to get there? By impact he means the capacity to deliver real tangible results. So impact really is the ‘raison d’être’ of a strategic alliance. If you’re not crea8ng impact in the market, it’s not a strategic alliance. And then lastly in8macy, which is a level of trust and informa8on sharing between the two companies, that really makes the vision and impact possible. So to me when you’re talking about a strategic alliance, you’re talking about a partnership where those three elements are present. If they’re not present, you’re not talking about a strategic alliance. Jan Twombly is president of Rhythm of Business and a board member of the AssociaYon of Strategic Alliance Professionals (ASAP). Jan extended the definiYon with an example to include collaboraYve networks: When we look at an alliance, generally what we see is a contractual rela8onship in place. At the 8me that the contract is established, the alternate risk and reward can't really be determined, because there are events that are going to occur in the alliance that can impact the value and also the risk that exists in any alliance. If you broaden that out to a collabora8ve network, a collabora8ve network is any collec8on of individuals and businesses that are brought together in order to achieve a par8cular purpose. And it’s very dynamic; it can change over 8me depending upon how the needs of the customers are changing. In all cases we see the strategic element coming back as well as the resources that are required from the other party. Now we have created a clearer view on the definiYon of alliances, let’s have a look at why companies enter into strategic alliances. ! ! Tip: make sure you have a common understanding in your organizaYon what a partnership or strategic alliance is. CreaYng your own internal definiYon helps to align people and departments while going forward with alliances. 7
  • 8. Successful partnerships & strategic alliances Why would you partner in strategic alliances? Reasons companies enter into strategic alliances can basically be categorized into three main groups: • Knowledge transfer: companies enter into alliances, because there is knowledge or IP required to create something new. An example here is the Senseo alliance between Philips and Sara Lee (Douwe Egberts). Each of the parYes was lacking the knowledge the other had. Philips is good in creaYng household appliances and Sara Lee knows all about coffee. Together they were able to bring a balanced coffeemaker to the market with dedicated Senseo coffee supplies. • Market development: here companies enter into alliances to be able to develop new markets, whether it be geographic extensions or new market segments. In 1994 Pepsi and Starbucks entered into an alliance to bring bojled cold coffee drinks to the market. For both of them a complete new market was created that was difficult for either of them to enter without the knowledge and capabiliYes of the other. • Efficiency: alliances that focus on cost reducYon and increasing efficiencies. Take for example the Rolls Royce jet engine division. In 2003 they established an alliance with several logisYcs partners to increase the overall value to Rolls Royce’s customers. Coming from a tradiYonal purchase relaYonship, this partnership was transformaYve. No longer was the focus on selecYng the supplier with the lowest price, but on the customer experience. Partners were also encouraged to collaborate amongst each other, thus opYmizing the enYre system rather than opYmizing in silos as previously was done. This partnership led to an increase to 99% on-­‐Yme delivery and a 20% overall cost reducYon without reducing partner profitability. Alliances ofen start in one of the groups and expand into the other areas during existence. Knowledge transfer may be the obvious reason to start an alliance. But when you reach the point the product needs to be brought to the market, why not develop that market together too? And if you are working closely together, then fine-­‐tuning for efficiency might make sense as well. 8
  • 9. Successful partnerships & strategic alliances An example is the NovarYs Malaria iniYaYve. In 2001 NovarYs established an alliance with the World Health OrganizaYon (WHO) to provide their Coartem medicine for Malaria without profit for use by public health systems in developing countries. By 2011 over 400 million Coartem treatments had been delivered in more than 60 malaria-­‐endemic countries, helping to save an esYmated 1 million lives, mostly infants and children. On one hand, this alliance might be seen as a market development alliance as it gives NovarYs access to developing countries and helps build their brand there. But on the other hand, it can be seen as a knowledge transfer alliance as it gives NovarYs access to a huge learning ground allowing improving the medicine based on the feedback received. From a third angle, it can be seen as an efficiency alliance, as providing without profit is certainly not a philanthropic effort. The huge amount of treatments delivered, provides NovarYs economies of scale that would not have been easily reached otherwise. These economies of scale will amongst others have their impact on NovarYs buying power from their suppliers and may result in lower purchase prices for supplies that might benefit other products too. The examples used here may be examples from large corporaYons, they illustrate many answers to growth quesYons and they are equally applicable to smaller organizaYons. As long as you keep a focus on your core capabiliYes and ensure you contribute and benefit, then alliances can be an excellent way to grow any organizaYon. ! A Tip: know your iniYal reason for entering into a partnership and focus on that iniYal reason during the formaYon of the partnership. Once formed and operaYonal growing a partnership into other areas is generally easier than iniYally creaYng a big partnership. 9
  • 10. Successful partnerships & strategic alliances ! Table of contents ebook full version The full version of the ebook contains more chapters with theory and Yps that can directly be applied to your alliances and partnerships. The table of contents for the full version is: Purchase the full version of this ebook from petersimoons.com or in the Amazon Kindle store ! 10
  • 11. Successful partnerships & strategic alliances ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Simoons & Company ! Voormeulenweg 73 ! 1402 TH Bussum ! The Netherlands! ! Phone:! NL:! +31 20 894 6214 ! US:! +1 617 418 3450! Skype:! psimoons! !p eter@petersimoons.com! www.petersimoons.com! 11