Before an Alliance Sours, Seek Assistance

Two companies interested in forming an alliance might think that they share mutual goals. Unfortunately, that's not always true, according to Larraine Segils, an international consultant specializing in strategic alliances. She found that 55 percent of all alliances failed within three years, while Anderson Consulting (AC) found that 61 percent of all alliances are either failing or under-performing.

Why are so many alliances doomed to failure? Segils found incompatible corporate personalities were the problem 75 percent of the time, while 58 percent fail because of incompatible project priorities or personalities. Additionally, AC, in Dispelling the Myths of Alliances, blames alliance failures on five widely held myths:

Myth 1: Alliances Are Like Marriage
Instead, AC suggests that good alliances are driven by "enlightened self-interest", rather than emotional consideration, likening it to diplomacy.
Myth 2: The Integration Task for an Alliance Is the Same as for a Merger
Integration is usually a one-time task that needs to be accomplished speedily. Alliances, on the other hand, are usually "continuous integration" models that require contribution through the duration.
Myth 3: One Governance Model Fits All Alliances
Just as one size doesn't fit all, neither does one governance model match all situations. Instead, a governance model needs to be tailored to each situation, based upon at least two variables - the potential value of the alliance and the complexity of the alliance's needs.
Myth 4: It is Adequate for Alliance Expertise to Reside Within an Elite Corps of Deal Makers
Don't just leave it up to the specialists. The people who are most affected by an alliance need to be aware of the nitty-gritty details, too.
Myth 5: Alliance Performance Is Impossible to Measure
While intangibles are a large part of any alliance's success, leading many executives to believe that success cannot be measured. AC, however, recommends some criteria to help measure the success of an alliance.
These criteria include determining both financial and non-financial values; assuring financial security for the alliance; and recognizing the hidden values.

Both sides should do their homework first. Before signing an alliance, Segils recommends the two companies should use an alliance professional to hammer out a few details--a pre-alliance agreement.

Before meeting, executives need to prepare themselves with a checklist of issues to be discussed, from intellectual property rights to time expectations, ownership decisions, and much more. These efforts provide a better understanding of each companies business culture, goals and needs, Segil explained.

Such meetings usually last about a half-day, and are based upon conversations she has had with both companies previously, as well as the checklist of questions she provides both parties before the meeting.

Companies that don't take the time to develop a pre-alliance agreement might find their alliance isn't what they hoped for. For example, the deal could become one-sided, she said, or it could completely fall apart.

If an alliance begins to breakdown, it's still not too late to seek alliance counseling. At that point, however, the relationship has been burdened with hard feelings and suspicion, making it harder to get things back on track. Usually, such problems can be avoided by working with a pre-alliance counselor, Segil said.

For further information on alliances and pre-alliance counseling, readers can check out information available from the Association of Strategic Alliance Professionals (www.strategic-alliances.org), Anderson Consulting (www.ac.com), Larraine Segil's site (www.larrainesegil.com) or the International Center for Alliances, Networks and Strategic Innovation (www.icansi.com), for a start.