Strategic alliances: a real alternative to M&A?

Strategic alliances: a real alternative to M&A?

As critical drivers of growth, strategic alliances should be up there with M&A as a top priority for CEOs. But success is dependent upon rigorous planning, execution and nurturing.

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Numerous businesses across multiple sectors have demonstrated the power of strategic alliances, to bring together complementary capabilities to mutual commercial benefit. Despite a growing body of evidence that strategic alliances can help to transform business and operating models and deliver attractive financial outcomes, they continue to suffer from fundamental misperceptions that reduce their effectiveness. These include:

  • A lack of agreement over what constitutes a ‘strategic alliance’, meaning that some alliances are considered as minor partnerships or, worse still, buyer-supplier relationships.
  • An underestimation of how the hidden agendas of different partners can significantly block collaboration and joint value creation, if they are not uncovered.
  • A widespread belief that, once you have found the appropriate partner fit, strategic alliances are easy to implement and will largely take care of themselves – when in fact they are extremely difficult to get right.
  • A lack of appreciation by CEOs of the huge significance of strategic alliances; these are major, once-in-a-lifetime transformations that can impact the entire company’s future, but they are rarely treated with the same importance as large M&As. 

Our own experience from forming strategic alliances, and our conversations with clients, have taught us that they should be led by a dedicated team that can manage the interdependencies between the three core elements for success: 

  1. A clear, mutually understood strategic and commercial ambition
  2. A detailed alliance business model 
  3. A flexible operating model that underpins the business model

In this article we look at the evolving strategic alliance landscape, consider why some strategic alliances succeed and some fail, and highlight the key steps to an effective partnership that meets both parties’ interests.

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