As the world gets increasingly complex, alliances become more and more necessary to effectively compete. But, alliance management can be pretty tricky business. In a 2014 Forbes article, Kimberly Whitler reports on a study conducted by the Chief Marketing Officer (CMO) Council. It is not surprising, the study indicated 85% of respondents viewed partnerships and alliances as essential to their business. What is surprising is the estimated failure rate for alliances was 60% or higher.
If They Are So Important To Success, Why Do So Many Alliances Fail?
If you are considering entering into an alliance, wouldn’t it be nice to know how you might improve your odds of success? Vantage Partners conducted a three-year cross industry study of over 150 alliance managers to try and find insights into what differentiates successful alliances from the failures. The big conclusion is relationship issues matter and managing them well is integral to the productivity and long-term success of an alliance.
8 Key Capabilities For Success
The study identified 10 capabilities your organization needs to help ensure a successful alliance. If your organization is missing one or more of these capabilities, the probability is your alliance will likely become part of the 60% or higher failure statistic.
- You must constantly work at building and maintaining internal alignment. The best way to accomplish this is through a formal process. The purpose of the process isn’t to create consensus. It is to ensure all stakeholders are consulted or informed at appropriate levels and the decision makers are clearly identified. One decision-making model I recommend for difficult decisions is RACI. It is important to ensure clarity on which type of decisions can be made in the collaboration and which need to be delegated upward to the leadership of the economic development organizations participating in the collaboration. Establishing this level of clarity upfront is liberating to the team and ensures decisions are made efficiently.
- You must consider cultural fit when assessing potential alliance partners. It is unbelievable how culture clash can be an insurmountable barrier to a productive alliance. If the reward systems are misaligned or the organizational missions are at odds, the operation of the alliance will be compromised. At P&G, I lived through an alliance with a partner that had a strong sales driven culture. This frequently clashed with the equally strong P&G marketing driven culture. The result was frequent (and often unproductive) conflict on the most important business decisions. I can also honestly say it was the worst personal experience of my career.
- You need to build a strong working relationship while negotiating the alliance deal. You can’t view the deal negotiation and subsequent alliance management as separate events. The trust built or destroyed in the deal design phase directly impacts the operational side. If one of the partners feels taken advantage of, then they will try to compensate for it in the deal execution. This creates a one-sided sub-agenda that can manifest in very unproductive behaviors (e.g. delaying investment). Negotiate in good faith and the alliance will execute in good faith. My personal belief is the NPV of alliances should be equal for all parties involved. This is how the people on both sides assigned to the alliance will want to work. I think it is the only way to ensure 100% commitment from them.
- You must have common ground rules for working together in place. Typically this relates to processes for execution and reporting. Rarely are the systems of partners the same. This can create confusion and operational friction in getting things done within the alliance. Burdening the alliance with having to meet the requirements of both companies for securing funding or reporting results requires additional overhead. It is much smarter to think through the processes up front and decide on a single process to use.
- Have a dedicated alliance manager. You need to have somebody for each partner that will be held accountable for the alliance relationship and outcome. This person should be at an appropriate level in the organization to advocate for resources the alliance needs. It doesn’t have to be their sole job, but the individual assigned should know that the health of the alliance is part of her/his performance evaluation. Nothing kills alliances faster than miscommunication and finger pointing.
- Invest in building the alliance manager’s collaboration skills. Working in an alliance is not natural. Successfully getting things done in your organization is what your alliance manager likely knows well. There are unique collaboration skills that will help improve the odds of alliance success. These skills include (but are not limited to) trust building, conflict management, decision making, communication, providing recognition, working in teams, and change management. All skills your employee can reapply within your organization for improved performance, so they are definitely worth the cost of development.
- Think collaboratively at the highest levels of management. It does no good to have a highly collaborative alliance team if senior management does not value the health of the alliance relationship. Establishing mandates and expecting the alliance to abide by them is poor practice. It also puts your alliance manager in an untenable position where trust is sacrificed to meet your directive. This capability is all about thinking through the implications of your choices and then helping your alliance manager in their deployment.
- Audit the relationship frequently. You get what you measure. If you audit the alliance relationship, you make it clear that its health is a priority. You also are able to identify problems before they become a crisis. Personnel turn over is often a source of problems. Whenever an alliance team member or key contact changes, it adds a level of complexity. Trust needs to be rebuilt and productivity takes a body blow. Often, fast track managers are assigned to alliances and then moved to other assignments within the organization on rapid timing. This is a poor practice and should be avoided. Let the manager learn in the assignment so she/he can master the skills that will help with future success. Don’t make alliances a revolving door for your best and brightest if you want to accomplish anything.
I have authored other posts on alliances and collaboration that you may find helpful.
I hope you take the time to read them and share with others.