Where should alliances report in the organization?

Posted: 9/19/2007 by Norma Watenpaugh

This is a question I am frequently asked and one for continual debate. As far as I know there is very little published work on this topic, only fleeting references on the challenge. My opinion: there is no perfect answer but the best answer relates to what are you trying optimize?

Functional silos tend to optimize for their respective functions. If an alliance is formed for a single functional role, for example, co-development, the development capacity of an alliance is best managed by developers. If the alliance is formed to streamline supply chain operations, then the supply side of the business is best equipped to understand the dynamics and 'gains' of forming this type of alliance. But do these functional managers have the necessary partner management skills? Are they versed in the best practices of partner management? Do they understand how to foster a collaborative culture within their virtual teams?

To complicate matters, what happens when an alliance bridges functional silos across the value chain as the 'strategic' ones so often do?

This leads to the very leading question once posed to me about why alliances should NOT report to sales? Sales being what it is, is not functionally oriented to managing cross functionally and truly 'strategic' alliances are rarely successful when managed in a sales organization. The strategic nature gets sacrificed in the 'make the quarter' mentality. This becomes problematic in go-to-market or market facing alliances where the end goal is more sales for both partners. One might imagine that this kind of alliance could be optimized in a sales organization but in truth, this is rare, although one should not underestimate the role sales must play in driving this end goal. The exception to this rule, at least where Ive seen, is with large account sales. These folks tend to build long term relationships with their customers and manage very complex cross-functional buying decisions, rather than short-cycle transactional sales. These skills are very transferable to partner management.

Channel alliances, however, should report to sales. Sales is the best organization to optimize for sales. There is one caveat here, however. Many sales organizations, setting on the partnering path, try to manage channels like customers. They are not. This practice results in selling to the channel rather than the channel. This happens so many times, it is painful. The fundamental premise behind channels is to build an external sales engine. A sales organization that is culturally tuned for direct sales will not 'get' this. This can be likened to the old adage that your best sales person is not necessisarily your best sales manager; different skills are involved. As companies try to evolve from direct to indirect, they often assign direct sales reps to manage channel accounts with abysmal results. Skilled channel managers understand they are building selling capacity.

With channels, companies depend on the reseller to add value, to add services or enhancements that differentiate the joint offer to address a particular customer set. In strategic alliances, this differentiation is also derived from partner value. The classic partner equation 1 + 1 > 3 applies. Differentiation is added upstream through technical integration or development, co-marketing or co-branding. Again, a cross-functional play and again, not easily managed in a silo. Marketing tends to a better job, since they are naturally the bridge between development and sales and are comfortable in that role, Well, maybe not comfortable, but at least accustomed. They are also accustomed to sales enablement, the function of preparing and equipping sales organizations to sell, which is key.

Here is some evidence that cross functional, strategic alliances are best managed from a Corporate Development function. This is particularly true of large organizations with multiple business units. Corporate development organizations often have responsibility for M&A and may have some responsibility for charting the course for R&D. This approach enables a balanced view of Build, Buy, or Partner decisions in implementing corporate strategies. HP employs this model for their four largest and most strategic alliances notably, Cisco, Intel, Microsoft, and AMD.

Additionally, HP has other other alliance organizations that are more aligned with business unit needs and with sales. The largest of these is in the computer technology group which shares alliance management between marketing and sales. Marketing provides alliance management from a strategic perspective and provides the systems infrastructure needed to manage a large partner ecosystem. Sales assigns alliance managers regionally to manage the co-selling effort. In effect a hybrid model that tries to address the strategic intent of each aspect of their alliance ecosystem. This kind of resource commitment is a major statement about the importance of alliances in driving the HP business model.

Another approach shared by many companies is the Alliance Center of Excellence. This model is one that Phillips employs.

Alliance management is distributed to each of the business units, but the center of excellence is responsible for proliferating best practice and guidance to the alliance managers within each business unit.

There is great benefit in knowledge sharing across the various alliance management groups which is for the most part lacking in many firms with multiple alliance functions.

Where are partnerships managed in your organization? How is that working for you?

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