Thursday, November 08, 2007

Authors recommend improving alliances using the soft stuff

Aren't detailed plans, firm contracts and hard metrics the best way to ensure that your alliance performs to expectations?

Maybe not. Jonathan Hughes and Jeff Weiss of Vantage Partners write in the November Harvard Business Review ("Simple Rules For Making Alliances Work" - link $$) that specific goals and contractual commitments are necessary but not sufficient for alliance success. Why? Because alliances are too complicated to manage with contracts and metrics. Write Hughes and Weiss:

Alliances, however, are not just any business arrangement. They demand a high degree of interdependence between companies that may continue to compete against each other in the marketplace. They require the ability to navigate—and often to actively leverage—significant differences between partners’ strengths and operating styles.

Hughes and Weiss go on to set out five principles for better management of alliances:
  1. Focus less on the business plan and more on how you'll work together
  2. Develop metrics pegged to alliance progress as well as alliance goals
  3. Instead of trying to eliminate differences, leverage them to create value
  4. Go beyond formal governance structures to encourage collaborative behavior
  5. Spend as much time managing internal stakeholders as on managing the relationship with your partner
These sound right to me. When I've seen alliances go south, it's when the human interactions don't live up to the strategies, or when cultural differences promote alliance-damaging behaviors, or when the rest of the business tires of the difficulties of working with an alliance partner.

It also seems that narrative techniques would be very helpful in surfacing and exploring the differences between firms. Collecting and making sense of brief anecdotes that are meaningful to one company can help the other understand the deeper strengths and culture of its partner.

The other benefit I see working with the Hughes & Weiss prescription is the ability to create new value and innovation through the leveraging of differences. Going into an alliance, the joint value proposition is only a paper document--and each party's limited understanding of the other constrains what it can be. Once true collaboration is allowed to happen, the possibilities expand dramatically.

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