Alliances are made in the boardroom but tested in the field!
Alliances are an important part of war and corporate strategy. CXOs view it as a lever to enhance market share and dominance across the globe and industries. After almost a decade-long hiatus, alliances are back in vogue in the IT industry. Thanks to the uncertainty in the wake of digital disruption and resulting business flux, alliances (and M&As) have become central to the growth strategies, again.
40% of business is conducted through alliances (EIU Global Survey, 2010).
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Alliances are characterized by shared risk and returns. They also facilitate access to (unexplored) markets, augment expertise and foster competitive advantage. To reiterate then, they are particularly useful in uncertain times as alliances significantly lower the investments required in an ambiguous environment.
About 30% of IBM’s revenues come from a wide variety of alliances.
What is a strategic alliance?
A strategic alliance is an agreement for cooperation among two or more independent firms to work together towards common objectives (Strategic Marketing, David Cravens, Nigel Piercy).
The term strategic is used rather loosely when it comes to alliances. Jason Wakeam in his article, The Five Factors of a Strategic Alliance, lists the following criteria to qualify as one: critical to the success of a core business goal or objective, critical to the development or maintenance of a core competency or other source of competitive advantage, blocks a competitive threat, creates or maintains strategic choices for the firm and mitigates a significant risk to the business.
Alliances in IT are typically expertise based partnerships. Partners tend have complementary core competencies. Moreover, these are not exclusive arrangements. As a result, the same player will foster multiple alliances with many similar players. Given this scenario, it is best to have a tiered approach allowing for alliances to work their way to strategic status through interim stages. This allows for managing the alliances as a portfolio, weeding out the non-performing while adding promising and relevant ones.
Alliances – A reality check!
Despite all this theory on how alliances can be enabling, the reality seems to be that a majority of these arrangements don’t seem to provide the kind of impetus that is expected of them. In his article, Why Strategic Alliances Don’t Work, Bill Robinson argued, alliances fail because the top ingredients– respect, honesty and trust between companies – are missing. And, in what appears to be a rejoinder, Larraine Segil in her article, 5 Keys To Creating Successful Strategic Alliances, reasoned that trust has little to do with creating a profitable alliance. Companies have proven that they can forge successful partnerships with those they don’t trust and with which they compete.
It is true that the respect, honesty, and trust are a little over hyped but they should be the foundation for any lasting relationship. It comes from fundamental understanding that the partner is complementary and makes you appear bigger than you are. The rule of the thumb is to honor the boundaries and adopt a win-win strategy.
Seven steps of strategic alliances
Alliances are notoriously difficult to manage. While there may not be a perfect recipe for success, in my experience, a charter with clear vision and mission should act as a north star. The following seven steps (ala seven vows of a Hindu wedding) go a long way in ensuring success: Governance, Enablement, Joint IP creation, Demand Management, Marketing, PreSales and Sales Collaboration. Without which, it is very likely that the alliance may instead turn out to be seven steps of kung fu!
Winning together with alliances
At Wipro, strategic partnerships are one of the core pillars (of business objectives) that help our customers do business better.
We have a 360-degree relationship with our alliance partners – as a vendor, partner and a customer. The Wipro Winning Together approach is aimed at delivering unparalleled value to clients. Our partner ecosystem includes the likes of Amazon, Google, IBM, Microsoft, Oracle, SAP, etc., just to name a few. Let me illustrate the discussion and recommendations thus far with one of the partnerships.
Wipro and HPE partnership is a case in point. To say the relationship is strategic would be an understatement. There are many best practices that can be learned from it. The relationship synergizes the core competencies of both the entities. There is a clear and demonstrated executive buy-in and commitment from both sides. As an HPE Alliance Executive said in a conversation with Patrick Moorhead at HP Discover 2015 in London, the reality is that HPE cannot provide every product and service themselves to their enterprise customers without partnering or adopting strong alliance programs. This understanding that you need a partner ecosystem to complement forms foundation of any alliance program. HPE recently centralized their alliance function to remove certain ambiguities and even leverage the might of the entire enterprise for the function. Wipro has a focused and strategic alliance program with a federated functional model. It empowers individual units with the central team acting as a friend, philosopher, and guide. Both Wipro and HPE systematically built their partner ecosystem based on vast experience and understanding of the market.
No vendor can be all things to all customers, Meg Whitman.
A recent large deal where Wipro displaced the incumbent at a manufacturing giant based out of Europe is a fine example of this working model. In the ultimate analysis, what helped us win the deal is a superior solution enabled by Wipro AssureNXT platform integrated with HPE tools, right pricing and exchange of strategic information.
Yes, alliances are made in the boardroom but tested in the field. But with right approach and strategy, alliances made in the boardroom are celebrated in the field!
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Read other Blog by Sridhar : How to enhance value through innovative commercial models?