E5.007 (rEIMAGINE YOUR BUSINESS) YOUR ALLIANCE STRATEGY - WILLIAM EASTMAN

We are beginning to wrap up the Executive track for Season 5. The topic of sticking to the knitting and outsourcing the rest has been addressed in the Finance, Operations, and Customer tracks. The conclusion belongs here.

INTRODUCTION
If you are going to 'idiot proof' your business from stupid bureaucrats, the one - two punch is building a network based business model and outsourcing to those alliances functions you shouldn't do.

OBJECTIVES

1. What criteria should I use to find outsourcing partners?
2. How do I build the right relationship?

​WHAT DO YOU NEED TO KNOW
Think about the concept of an Open Source Corporation as the context to Your Alliance Strategy. There are 4 main opportunities that make this element crucial to outsourcing non core functions. 

Business Model Development – one of the most neglected aspects of building a successful company is the conscious decision of the right business model. The core question is - “how do we make a profit” and that answer drives which model(s) fit our purpose, systems, and processes. We will not address the entire topic here, our focus is on creating profitable deals, finding compatible partners, or building alliances as part of how you do business. The quickest way to fail is to cobble an ill conceived, reactive approach to this critical element of market dominance.

• Supply Chain – can we obtain a more secure, higher quality source of materials with better pricing and payment terms?
• Products/Services – can we add their products and services to enhance our offer? Can they add our products and services to enhance their offer?
• Market Channels - can we use their client base to distribute our products and services; can we use their client base to test new products and services? 

Quick Capacity – how quickly will all parties see an increase in capacity – the ability to do more business? An increase in productivity? An decrease in costs? The smart move for company's under $10m in revenue is to look for other organizations where quick wins are possible. This doesn't mean quick judgments. Taking the time to pick the right deals, partners, alliances is essential. However, once you have  the opportunity, the results need to come forth quickly. Find a client, an opportunity and take action. You will only know if the choice was right once action is taken. Remember in all things “fail fast”!

• Open Source Mindset – can we achieve any economies of scale by integrating processes between the company's? Are their strengths our weaknesses – are our strengths their weaknesses? Is there a multiplier from the relationship for all organizations involved?
• Shared Vision, Mission, Values – are we compatible on purpose and operating principles? Do we are similar belief's about right and wrong? If you don't share these core issues, the relationship will sour quickly.
• Compatible Business Models and Customers – are we building a Frankenstein or something attractive to customers, employees, investors?

Generating Revenue - how quickly can we build something that will achieve results? Larger organizations have the luxury of time, small business do not. Patience is a fine quality and most relationships require time to nurture – BUT – this is business. Set an aggressive target for results and ensure your side of the deal is focused on tangible results. If it doesn't happen by the first deadline, evaluate why and make corrections. If you miss a second deadline – rethink the relationship. Here are the 2 strikes and your out approach.

• a product/service alliance to Gain a Foothold - boost the launch of a new product or service, measure it against prior launches to evaluate progress and success.
• Increase Mind Share – use the brand association to can greater exposure for your products and services, ensure you have a mechanism in place to evaluate the impact, do not rely solely on feelings or comments.
• Stable of Marquee Customers – use this approach to put the company on the map, nothing works better than having corporate brands with high visibility in your portfolio.

Rules of the Road – quick rules to apply to your search for deals, partnerships, and alliances:

• Choose the Right Agreement – all the company's involved have compatible brands. Strengths in one company match the weaknesses in others – avoid duplication. Good contracts make good alliances – discuss all aspects of the relationship: account ownership, costs, profit, accounts payable, accounts receivable, legal liability, etc. Discuss and agree in the beginning, and PUT IT ALL IN WRITING.
• Avoid Exclusivity - but always push for it. Only accept exclusive relationships if the other party is willing to guarantee performance. You cannot put the future of your business at the mercy of another company. If the relationship doesn't work you must be free to pursue similar deals without help from lawyers.
• use Equity to Level the Playing Field - using the Japanese model of keiretsu, members of successful long term alliances have small positions in the other companies. Nothing supports your success like having your partners invested in it.

• Develop Executive Champions – these deals must be supported without hesitation by the owner/executive level if you expect seamless relationships at the front. The operational side of the relationship will generate conflict that can only be solved at the top.
• Know Thy Exit Strategy – you need a methodology for untangling processes, customers, costs, revenue streams, personnel, etc.. All of this is easy to decide at the beginning, impossible if the relationship is failing. Clarity and agreement early will prevent problems in the end.

WHAT DO YOU NEED TO DO

1. Focus on the working relationship - be selective and make them feel special for being selection.
2. Create metrics that measures the mutual benefit of the relationship as well as end results.
3. Leverage differences to create new competitive advantage(s).
4. Management balance between inside the firm and the alliance.
5. Create shared problem solving and decision models.

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