How to form strategic alliances
To grow your company, sometimes two heads are better than one.
Teaming up with another company to pursue common goals is a smart way to grow your company. It just makes sense: two heads are better than one.
A strategic alliance is a cooperative agreement where companies come together for a specific duration and/or project and add value to each other through the alliance. Resources, skills and/or capital are pooled for mutual gain.
Whether your business is small or large, creating domestic or international partnerships can help gain an edge in today’s marketplace.
Strategic alliances let two (or three or four) companies share each other’s strengths. For example, a convenience store might form an alliance with a fuel company to create a one-stop gas station. Together, these companies can pull in a larger number of customers and benefit from complementary sales activities.
According to Industry Canada, international evidence suggests that strategic alliances have been on the rise for several decades, with an estimated annual growth rate of 25%. Consider the many benefits for your business:
Despite the many potential benefits, strategic alliance partnerships can fail without careful consideration by all parties.
Look for peers and who are like-minded and share your ethics. Viable sources include networking events, online groups or social networking, industry and trade publications, trade associations, government agencies, and even through your banker, lawyer, or accountant. Make sure the alliance is a win-win situation.
For example, if you plan on tackling the global market, your potential partner may be international, but may lack the product knowledge you have.
Identify the kind of alliance you want – marketing, licensing, distribution, technology, or research and development. Calculate the amount of time you can both realistically commit to the project. Determine how much you can afford to invest and lose, should your alliance fail. It’s important to negotiate a formal contractual arrangement for further peace of mind.
Many business relationships fail because of faulty assumptions and poor communication. What’s obvious to you may be unclear to your partner, especially if you are dealing across cultures or in different languages. To avoid failure, take notes, have minutes of meetings recorded, and document all agreements and actions to be taken.
Set trial timeframes to get an idea of your partner’s work ethic, management style, attention to detail, and true commitment. Be cautious about taking things to the next level before testing the waters. If your partner misses the first deadline, how will they meet future ones?
Decide upfront – before anything goes wrong – on an exit strategy that will suit you both should the alliance fail. It’s better to lose a partner in the early stages of a joint venture than to lose your good name in the marketplace. Brainstorm possible best and worst case scenarios.
If the partnership is working well, don’t forget to take a breather now and then and enjoy your mutual accomplishments.
To maintain motivation, it’s important to celebrate the milestones in your alliance, such as the acquisition of your first big corporate account or receiving an award for exceeding industry standards. A lot of work and a little bit of play go a long way in a maintaining a healthy and successful strategic partnership.
The possibilities for business owners to create strategic alliances are endless. Do your homework to make sure it’s the right strategy for your business, target a strategic and motivated alliance partner, and be prepared for benefits and potential risks that may come your way. It can be a delicate balancing act to maintain your autonomy and preserve your interests.
By sharing resources, costs and risks, your strategic alliance may catapult your growth in a way you might never achieve on your own.
*No purchase necessary. The Contest commences at 12:01 a.m. (ET) October 23, 2016, and ends at 11:59 p.m. (ET) October 22, 2017. To be an entrant, you must be the named recipient of this notification, a legal resident of Canada and the age of majority, but not an employee, agent or representative of Scotiabank, its affiliates or subsidiaries, or a member of the household or immediate family of above parties. Selected entrant must answer time-limited mathematical skill-testing question. One (1) Grand Prize: $10,000. Five (5) Secondary Prizes: $1,000. Chances of winning depend on the total number of eligible entries received during the contest period. Click here for full contest details.