Statability | Company

				Founders
				Press

Two-Headed Advantage

Practical techniques on how to form solid alliance partnerships

By Michael Wohl

You did it-you developed a successful company. You're growing. Your clients trust and need you. So much, in fact, that now they're asking you to do more for them. Unfortunately, what they're asking isn't what you do best, or even what you do at all. How do you meet their needs without taking your company on an inappropriate and costly strategic detour?

The answer could be an alliance partnership, a relationship that allows companies to complement and mutually benefit each other by filling in the gaps in each other's core competencies. If they are well-conceived and well-managed, these partnerships can allow both companies to achieve greater long-term success together than they would individually.

The concept of people or groups banding together for their mutual benefit is not new. Smart interdependence is a proven business tool that complements other time-tested, commonsense advice, such as don't focus on investors more than customers and fall in love with what your customers want instead of the products and services you want to develop. Unfortunately, much of this advice seems to have been forgotten in recent years.

And although the idea of mutually beneficial relationships are not new, the modern alliance partnership is. It is the result of new technologies that allow companies to interact more easily than before, and new ways of thinking about how to manage growth and capitalize on opportunities.

Building an Alliance Partnership

An alliance partnership is, at its heart, a relationship between people. Like other relationships-those with a spouse, a friend, or a customer-each one will be unique. But all good relationships have certain features in common, such as trust, commitment, clear expectations, and strong communication. Alliance partnerships aren't any different.

Here are some other ideas to keep in mind as you develop an alliance partnership strategy:

Know thyself. Every company does some things better than its competitors and other things not as well. Know where you are vulnerable and decide if you want to, or can, develop these skills internally, outsource them to a vendor, or create an alliance partnership to address them.

This decision hinges on your comfort level with control and cost. If you try to improve all your weaknesses internally, perhaps by creating new departments or hiring additional staff, you have the greatest amount of the control but also incur the highest costs. Outsourcing or creating an alliance partnership reduces your overall cost, but forces you to give up some control.
Have a strategy. Before seeking out partners, decide ahead of time that an alliance partnership is truly what you want to pursue. Stumbling into a partnership by accident might work, but it must line up with your overall strategic objectives.
Expose yourself-flaws and all. In most business relationships, you take pains to show the best part of your company. In alliances, you should be prepared to show your partner the parts that aren't as attractive. A good partner might be able to help you improve areas of your business that aren't working as well as you'd like. Your partner can also keep an ear open for what your competition is doing or trends that might affect you.
Seek out appropriate partners. Partners should balance what each other doesn't do well and make both companies stronger. Look at each other's product lines, expertise, industry focus, geography-any areas where one's strength can fill the other's void.

Prospective partners may be your current vendors. They may also be your competitors. Events hosted by your industry, such as conventions and trade shows, are fertile ground for seeking partners, as are industry publications and other companies' Web sites.
Take your time. You don't marry someone after one date, and you shouldn't become alliance partners after one meeting. Take time to get to know your prospective partner's business. Check references from their customers. Ask questions about their successes, failures, and other alliance partnerships they've created. Decide how branding would be addressed-would one of your companies be more prominent or would both be equal? Financial questions should be tackled last, after you've hammered out all the other details; don't let them distract you in the beginning from deciding if the partnership is a good fit. Most important, follow your instincts on whether you can trust your potential partner.
Think long-term. The key to a good alliance partnership is striking a deal where both parties win, even if another deal could help one partner more at the other's expense. If you feel you are being taken advantage of, you are probably not talking to the kind of people you want as partners.

And you both have to be committed to long-term results, not just next quarter or next year. Short-term thinking is often "me first" thinking. For both partners to prosper, you have to invest time in nurturing a relationship.

Finally, get a signed contract. Not only will it make the terms of your partnership enforceable, being legally "married" to your partner may encourage you both to stick it out during any tough times.

Avoiding Common Mistakes

When you embark on alliance partnerships, keep in mind that some will work out and some will fizzle. You can increase your success rate by being aware of these pitfalls:

Forgetting to set ground rules. Have clear ground rules in case either of you ever decides to terminate the partnership-for example, how to handle shared customers, or if either of you can hire the other's employees. Setting ground rules can help you avoid 90 percent of the problems you could encounter in an alliance partnership.
Not clearly communicating expectations. Determine at the outset what is expected of each partner, and set up a process to review these expectations periodically if needed.
Failing to decide who pays for what. Will there be joint promotional materials? Is travel necessary? If so, agree up front on who pays for what so neither partner feels taken advantage of.

You've already done the hard part-making your company successful. To keep it that way, whether the economy shudders or surges, consider teaming up with an alliance partner so you can grow even stronger.

Michael Wohl (mwohl@statability.com) is the co-founder of Statability (www.statability.com), which provides Web-based reporting packages for multi-unit hospitality companies.