Outlook Special Edition, October 1999
To succeed in an alliance-filled world, companies need to capture and transfer skills and expertise from one alliance to the next. What capabilities are needed to do this effectively?
During the last decade, this task at many companies fell to a small corps of functional super-specialists—deal makers working inside the corporate business development, legal and tax departments who understood the intricacies of alliance negotiations, contracts and valuations. This approach, developed in a different era of alliance strategy and usage, is showing signs of wear.
One software manufacturer found that as its business model began to include large numbers of alliances, it was increasingly striking inconsistent deals with partners. In one near-fatal blow, the company agreed to turn over one-third of all sales of its leading product to one dominant ally—even sales made by other partners.
Another high-technology firm's audit team found that as the company allied itself with growing numbers of computer hardware and software companies, three different business units had paid millions of dollars to license the same technology.
Such problems are not unique to high-technology industries. Consider the experience of one oil company: "Our decision to sue a partner in an exploration joint venture resulted in us being blocked from an extremely lucrative alliance with that same partner," laments a senior company executive. "We gained $14 million in court and lost a $100 million opportunity because we did not manage the totality of the alliance."
Managing a portfolio of 30 or more alliances is fundamentally different from managing a few scattered joint ventures in two important ways. First, conflicts among alliances should be minimized. In a world where alliances are everywhere, conflicts concerning partners and projects are common. Second, and more important, leverage across alliances should be maximized. Best practitioners have the capability to increase speed and consistency, reduce costs and avoid duplicating past mistakes. Both demands tend to supersede the skills and purview of most elite deal-negotiation teams.
Skills Transfer
Today alliance capabilities must be transferred from the elite deal makers to the army of line managers. To do this, companies need several things:
1. Tools. All sorts of devices allow managers to better handle alliances—instructions, processes, checklists and shortcuts (See "Empowering the Organization"). The most basic alliance tool is a standardized methodology that details the various steps of a successful alliance. Other tools include sample alliance contracts, standard alliance proposal forms, partner-selection criteria and a database of alliances. One especially useful tool is a set of corporate alliance policies—a code that guides employees in their alliance-related activities. Tools are an important means for documenting past lessons and building a common platform for future learning.
2. Systems. Communication systems are needed to distribute the tools and experience across the organization. These come in a number of forms. One is a dedicated corporate intranet site that contains all the alliance tools, histories of company partners and other alliance information.
Another type of communication system is a corporate alliance council. One company brings together 15 to 20 executives quarterly to discuss and coordinate alliance activity.
3. Staff. Organizations may need dedicated staff to create and maintain these tools and systems. A growing number of companies, including Continental Airlines, have a vice president-level executive responsible for corporate alliances. Another new position is the corporate alliance director, an individual who assists in alliance capability development and often coordinates one or two large corporate relationships. The purpose of these staff positions is not to create a corporate alliance bureaucracy but rather to invest some individuals with the power to push alliance skills into the whole organization.
Alliance capabilities must be consistent with the character of the alliance portfolio. It makes little sense for companies that have formed few complex alliances to build an elaborate structure to capture and transfer alliance knowledge across the organization. On the other hand, for companies that are fast forming a diverse array of complex alliances, an ongoing internal capability has considerable merit.
When a formal capability is warranted, organizations should house it in a location that matches their own corporate structures and beliefs. One company has chosen to centralize important portions of its alliance infrastructure; a corporate alliance group oversees the alliance buildup and reports to the corporate strategy office.
Oracle has taken a more decentralized approach. Much of its alliance infrastructure is embedded within its sales and marketing function, the area containing its most intense alliance activity. This group has developed alliance best practices and training programs, and it devotes more than $1 million per year and a staff of 15 to run a 20,000-page Web site to attract partners. Over time, as other parts of the company begin to form alliances more frequently, it seems likely that pieces of this infrastructure will sprout new shoots elsewhere within the company.
With companies turning to alliances in ever increasing numbers to execute a strategic vision, it is time to rethink the internal capabilities–tools, systems and staff–needed to spread alliance-management expertise throughout an organization. In turn, the higher the level of alliance activity, the more likely the need to restructure the organization.
Empowering the Organization
To better capture and transfer skills from one alliance to the next, companies will need new tools, staff and systems.
Tools
- Alliance process methodology
- Checklists of best practices
- Corporate alliance policies, 20 to 40
- Sample contracts
- Standard proposal form, three to five pages
- Regular benchmarking
- Post-mortems (post-negotiation, turning points) Alliance mapping system (including scope, contract, names, brief history)
- Detailed case studies of a few successes and failures
- Hierarchy of partners
- Electronic library of external alliance information
- List of external advisors
Staff
- Vice president, alliances (to oversee alliance strategy and infrastructure)
- Corporate alliance directors (to coordinate cross-organizational alliances)
- Alliance facilitators (to support senior executives)
- Audit team (to assess alliance status)
- Alliance database manager
Systems
- Electronic storehouse of alliance best practices and profile information
- Intranet site for dissemination
- Alliance training for top 100–1000 managers
- Tailored training, internal consulting
- Corporate alliance council (10–20 senior executives)
SOURCE: Accenture ANALYSIS
Continued
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