Jonathan Hughes

Jeff Weiss

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">The Idea in Brief</h4>
 <div class="ideainbrief-contents">
 The number of corporate alliances soars 25% a year. And those partnerships account for nearly 33% of many companies’ revenue and value. Yet the failure rate for alliances hovers at 60%–70%. According to Hughes and Weiss, that’s because too many firms rely too much on conventional advice for managing alliances—such as “Focus on defining a business plan” or “Minimize conflict.”
 Alliances pose special challenges that make traditional management practices irrelevant. Consider: These partnerships require two companies to cooperate with one another while simultaneously competing in the same market. And the participants must navigate often-maddening differences in operating styles.
 To bolster their alliance success rates, companies need to apply five counterintuitive practices. These include focusing less on the business plan and more on the partnership’s working relationship and, rather than suppressing disagreements, exploring conflicts to find sources of value in partner companies’ differences.
 The Idea in Practice
 Hughes and Weiss recommend these practices for managing your alliances:
 Develop the right working relationship. Define exactly how you’ll work together. For example, clarify what “mutual trust and respect” mean to each of you. Articulate how you’ll make decisions, allocate resources, and share information. Example:&nbsp; 
 Pharmaceutical giant Schering-Plough initiated “alliance relationship launches.” At these meetings, the partners identified potential challenges of working together as well as mechanisms for handling day-to-day tasks and making key decisions. The resulting clarity accelerated decision making, eased frustration, and improved decision follow-up. 
 Peg metrics to progress. Alliances require time to pay off financially. So, augment “ends” metrics (financial performance indicators) with “means” metrics assessing factors that will affect the alliance’s ultimate performance (such as information sharing and new-idea development). Example:&nbsp; 
 In its alliances with other health insurers to develop new services for members, Blue Cross and Blue Shield of Florida tracked issues “escalated” to a joint alliance oversight committee for resolution. Tracking revealed an unspoken clash over strategic direction that had spawned disagreements on how to prioritize efforts. 
 Leverage differences. Companies ally to take advantage of partners’ different know-how, markets, customers, and suppliers. Yet other types of differences (such as contrasting cultures) can lead to uncomfortable conflict. Instead of driving conflict underground, surface it and find ways to use your differences to create value.
 Encourage collaboration. When a problem arises (such as a missed milestone), replace finger-pointing with dispassionate analysis of how both parties contributed to it and what each can do to improve it. Example:&nbsp; 
 When drug manufacturer Aventis and biotechnology company Millennium Pharmaceuticals formed an alliance, the companies jointly created a list of problem-solving protocols, including “When discussing challenges, we’ll present possible solutions, not just problems.” Adhering to the protocols helped the partners quickly achieve their objective. 
 Manage internal stakeholders. Most external alliances depend on cooperation from internal units in each partner company. Ensure that all internal players involved in supporting the alliance are committed to its success. Example:&nbsp; 
 Prior to any joint governance meetings with partners, Aventis meets with inside stakeholders to discuss and resolve internal disagreements, so that issues can be resolved without the awkwardness of doing so in front of partners. Since this practice began, partner companies have noticed that Aventis is more consistent and reliable in delivering resources and meeting deadlines—thus a more attractive ally.
 </div>
</article-ideainbrief>It’s a remarkable paradox: Studies show that the number of corporate alliances increases by some 25% a year and that those alliances account for nearly a third of many companies’ revenue and value—yet the failure rate for alliances hovers between 60% and 70%. And despite an abundance of advice on how to make alliances work, that dismal record hasn’t improved in the past decade.

sHEsz+sEMh5TKbwKWPpZVJQTwNQEADk8eoZS0vtrBdxV8UQiv9GasG7BNTX/crjAUgeEVZ4kRNZ3RGlB2Z87zpV8/EdpI1vWR9KbyOFe/VOOxuLYbzVIZA+QgZWaLPfTuLqI26E8djmMsGfFmoRpbw==

Reprint: R0711H
Corporate alliances are growing in number&#8212;by about 25% a year&#8212;and account for up to a third of revenues and value at many companies. Yet some 60% to 70% of them fail. What is going wrong?
Because alliances involve interdependence between companies that may be competitors and may also have vastly different operating styles and cultures, they demand more care and handling than other business arrangements, say Hughes and Weiss, management consultants at Vantage Partners. The authors have developed five principles&#8212;based on their two decades of work with alliances&#8212;to complement the conventional advice on alliance management: (1) Focus less on defining the business plan and more on how you and your partner will work together. (2) Develop metrics pegged not only to alliance goals but also to performance in working toward them. (3) Instead of trying to eliminate differences, leverage them to create value. (4) Go beyond formal systems and structures to enable and encourage collaborative behavior. (5) Be as diligent in managing your internal stakeholders as you are in managing the relationship with your partner.
Companies that have adopted these principles have radically improved their alliance success rate. Schering-Plough, for example, engages in a systematic &#8220;alliance relationship launch&#8221;: four to six weeks of meetings at which the partners explore potential challenges, examine key differences and develop shared protocols for managing them, and establish mechanisms for day-to-day decision making. Blue Cross and Blue Shield of Florida measures the quality of alliance progress through regular surveys of both its own staff and its partners&#8217;.
These companies have learned that the conventional advice is not so much wrong as incomplete. The five simple rules can help fill in the blanks.

Simple Rules for Making Alliances Work

Reprint: R0711H Corporate alliances are growing in number—by about 25% a year—and account for up to a third of revenues and value at many companies. Yet some 60% to 70% of them fail. What is going wrong? Because alliances involve interdependence between companies that may be competitors and may also have vastly different operating styles and cultures, they demand more care and handling than other business arrangements, say Hughes and Weiss, management consultants at Vantage Partners. The authors have developed five principles—based on their two decades of work with alliances—to complement the conventional advice on alliance management: (1) Focus less on defining the business plan and more on how you and your partner will work together. (2) Develop metrics pegged not only to alliance goals but also to performance in working toward them. (3) Instead of trying to eliminate differences, leverage them to create value. (4) Go beyond formal systems and structures to enable and encourage collaborative behavior. (5) Be as diligent in managing your internal stakeholders as you are in managing the relationship with your partner. Companies that have adopted these principles have radically improved their alliance success rate. Schering-Plough, for example, engages in a systematic “alliance relationship launch”: four to six weeks of meetings at which the partners explore potential challenges, examine key differences and develop shared protocols for managing them, and establish mechanisms for day-to-day decision making. Blue Cross and Blue Shield of Florida measures the quality of alliance progress through regular surveys of both its own staff and its partners’. These companies have learned that the conventional advice is not so much wrong as incomplete. The five simple rules can help fill in the blanks.

Simple Rules for Making Alliances Work

Summary.

Partner Center