“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it. Because nothing else is sustainable, everything else you create, somebody else will replicate.1 –Jeff Bezos, Amazon CEO

That’s tough love from Jeff Bezos, a man who definitely knows his way around business growth and innovation. Executives in the High-Tech industry are living volatility. Ask any of my clients about change and you’re likely to hear about the blurring of industry lines, 5G and IoT, evolving AI, XaaS, and more. And let’s not forget the yet-to-be-determined impact of COVID. It’s no wonder 75% of executives believe that the stakes for innovation have never been higher.

But that innovation is key to the sustainable growth that keeps businesses not just alive, but thriving, in today’s environment.

In the uncertain times we’re living in, inorganic growth becomes more important than ever because organic growth can feel like an increasing gamble, subject to so many unpredictable factors. Instead of turning to the usual remedies as part of an overall inorganic growth strategy--specifically M&A and joint ventures (JVs)—I see more companies using strategic alliances to generate new growth.

And realistically, the usual remedies aren’t consistently working like they used to. M&A deals and JVs can easily fall short in an environment like the one High-Tech companies are in now. M&A can be risky, expensive, resource intensive, and subject to regulatory scrutiny. JVs have complicated legal arrangements, require standing up a separate entity, and tend to be inflexible and slow-moving. As a result, innovation slows, time to value lengthens, and growth objectives aren’t met. Recent Accenture research shows just 27% of M&A transactions result in both revenue and operating margin growth.

On the flipside, nearly 2,000 new business alliances form every year2. These alliances, if forged properly, can create new value faster and in new ways, giving High-Tech companies the ever elusive sustainable growth CEOs want for their companies.

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Innovation is key to the sustainable growth that keeps businesses not just alive, but thriving, in today’s environment.

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Strategic alliances as part of your growth playbook

Let’s talk about what partnership traction looks like when done successfully.

In 2018, Roche and GE, traditional competitors, forged an alliance to develop an integrated digital diagnostics platform for oncology and critical care treatment. The companies agreed to develop jointly-branded clinical decision support software for faster, more accurate, earlier diagnosis and individualized treatment. The complex explanation is the companies apply advanced analytics to in-vivo data from GE’s medical imaging and monitoring equipment, along with in-vitro data from Roche.

The strategic alliance means oncology care teams with multiple specialists can access a comprehensive data dashboard to better collaborate and align on treatment decisions for cancer patients. In the critical care setting, data from a patient’s hospital monitoring equipment is integrated with their biomarker, genomic and sequencing data, helping physicians to identify, or predict severe complications before they strike.

Not only does this alliance make great strides toward precision healthcare for cancer patients, it also allows each of the healthcare giants to capitalize on the other’s strength—taking innovation and potential 2 growth to an entirely new level.

Competitive advantages of strategic alliances

Let’s look more generally at some of the competitive advantages of strategic alliances that I see, regardless of industry:

  • A laser focus on outcomes and returns. Joint ventures are designed to minimize risk, but strategic alliances are designed to maximize gain. It’s less about legal structure and protections, and more about delivering outcomes.
  • More speed, less “red tape” on the way to value. Partners can quickly get to work and deliver value to customers.
  • Lower upfront capital commitment. Initial capital investment is limited to enabling the alliance and ongoing investments for new offerings, which means less funds at risk.
  • Flexibility. Strategic alliances are bound more by the strength of the relationship than what the ink on a legal document says. This means financial and other contributions can be constantly reevaluated.
  • Agile innovation for market disruption. Pooling complementary strengths and leveraging outside perspectives enables faster development of innovative products and services.

Risks to watch

Strategic alliances are not a panacea. They can deliver rapid value, but you need to avoid some common pitfalls:

  • Resource drain. If not careful and deliberate about time and resource commitments, you may find yourself passing on other lucrative opportunities because of your commitment to the alliance.
  • Inequity. Decision power, investment of capital and resources, and partner commitment should remain fairly equitable. When they’re not, it can drive mistrust or dysfunction.
  • Creating future rivals. Strengthening your alliance partner’s capabilities may allow them to eventually separate and compete in the same market segment as you.

A set-up for success

Realizing value in a High-Tech partnership takes work. So how do you manage through these challenges and set your alliance up for success?

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Establish strong governance 

Take time to set up a foundation for how the alliance will operate, and the commitments on all sides.

Gain strategic alignment 

Align early and often on strategic objectives to ensure shared goals and a vision that fully represents combined interests.

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Build deliberate, exhaustive incentive structure

Be intentional and lay out all scenarios.

Nurture a culture of flexibility

You only get so much right in the beginning. Treat your alliance as an ongoing project and work to establish a culture of change and improvement.

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Innovation and growth are no longer solo sports, especially in High Tech. But “group swim” is turning out really well for a lot of companies.

1 BrandGarage
2 INSEAD Strategic Alliances Blog

Sam Panda

Managing Director – Accenture Strategy

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