STRATEGIC ALLIANCES CAN GIVE YOUR BUSINESS A BOOST
By: Constance Lee Menefee
More and more small businesses are finding that strategic alliances can help increase growth, yield higher revenues and increase productivity.
Most of us learned about strategic alliances first on the playground: if you play well with others, things generally go better. If you are small or shy, you befriend a bigger, more outgoing kid so the bullies think twice about stealing your lunch. That's what business relationships are about, too.
Arm's length interactions involve preferred supplier arrangements and special licensing or vendor agreements held together by contracts and little or no mixing of personnel or corporate cultures. Paperwork and lawyers define the boundaries and everyone stays in his or her own space.
The most intimate business relationships involve mergers, acquisitions or creation of subsidiaries. Successful entrepreneurs that manage fast growing companies may have to face the possibility of merging or selling their business in order to keep momentum going.
That isn't an issue for the majority of small business, however. Most owners can retain control and derive the benefits of simply working with a larger or better capitalized business partner.
Somewhere between vendors and mergers in terms of collaboration and added value are franchises, joint ventures, strategic alliances and equity partnerships. In these relationships, personnel communicate regularly between companies and may spend extended periods working at another company's site.
Companies form alliances most often to improve marketing, distribution or production capability. Sharing expertise - research and development - and sharing personnel - outsourcing - are two of other common reasons to build an alliance.
For alliances to work well:
- Each company must be able to answer, What's in it for me? Believing that benefits outweigh aggravations will motivate participants to overcome the inevitable problems arising from a partnership.
- Companies need to handle misunderstanding arising from different decision-making styles, as well as to face and accept that some things are hard to control. Do not try to micro-manage the arrangement to death.
- Once the alliance is structured at the top, employees at all levels need to spend time together training, talking and, most important, sharing the credit and rewards that come from a healthy alliance.
Article originally appeared in the Cincinnati Post, April 14,1998