A strategic alliance is a cooperative arrangement between two or more organizations that aim to share strategic goals. Whether it is to directly increase profits or just for exposure, the ultimate desire result is the growth of both parties. There are two types of alliances: shared equity alliances and non-equity alliances. A good example is my alliance with an insurance company that specializes in serving high-net-worth customers.
The foundation of the alliance is to hold joint events, where we hold many lunch seminars. We are not competitors, but the same customers, and each of us has our own marketing materials. Our goal is that 40 to 50 participants will usually be held in a five-star hotel or restaurant to translate our premium brand. There will be follow-up activities after the event, with the goal of turning the event into a new business.
A study done by my Wharton business school professors Harbir Singh and Preshant Kale shows that the global top 500 companies have an average of 60 major alliances. There were risks, and almost half of them failed, but when the alliance was announced, their long-term success rate increased by 25% and market wealth increased by four times.
The reality of the alliance is that the two companies must build trust between each other. Even if there are cultural differences, they must find a way to operate. The first two years of the alliance have the highest risk. The administration must have support and commitment. Neither company can have a hidden agenda.
Both companies must schedule meetings and continue to work on the alliance, and they must maintain communication at all times. Strategic alliances are very suitable for small and medium-sized enterprises to accelerate their growth, and there is no marketing budget to compete with large companies.
Other advantages that small companies have are that they do not have the company’s politics and management, sometimes slowing down the process, and sometimes undermining alliance cooperation. Small and medium-sized companies need innovation and creation to increase revenue and create growth.
If you are considering a strategic alliance with a target company, I suggest you hold a meeting and use the following overview to explore some guidelines for cooperation for common goals. Every company has its own strengths and weaknesses.
The alliance company you are considering can be one where you use each other’s strengths to create growth. It can be used to create a marketing team and business developers to share resources and keep costs low. Another idea is that you may want to use technology that can help one company that can help you, and you have the strength to help another company.
Strategic alliances have great competitive value in today’s complex business environment. I recommend that you use the following overview when forming an alliance and make sure you understand the problems that caused the alliance to fail in the past.
The outline of strategic alliances to create growth
- Confidentiality agreement
- Executive summary of the content that the alliance will promise and be implemented by all parties contract
- Cultural fit or conflict?
- Strategic budget and cost transparency
- Share information
- What is proprietary and what is not
- Equity distribution
- Value proposition to customers
- What is the goal of the personal company
- Clear performance indicators, benchmarks and metrics
- League time
- Communicate with the public
- The contract does not hire employees of the other party
- Meeting-How often do you meet? My suggestion is monthly
- Every meeting we should have a clear understanding of task ownership and estimated completion time
- Each partner should write a press release about our work and compare it
- Create value for each company’s customers
- Cross-share customers