The Strategy of Alliances

Alliances in the technology sector are overwhelmingly evaluated based on revenue and for good reason. They deliver incremental revenue over above business as usual. However, revenue is a lagging indicator and does not provide insight into whether the alliance is achieving the strategic objectives for which it was formed. Revenue at the end of the day is an outcome and measures the impact of strategic decisions made in the past.

Among the many concerns we hear from alliance managers is that senior executives do not understand the full value that alliances create for  the company. Nor do they understand the practices, processes, and commitment it takes to be successful.Phoenix Consulting Group has conducted research into how alliances created corporate value through the lens of the best practices of high performing alliances. One of the purposes of the research was to go beyond that ‘top line’ assessment of revenue to understand how alliances are creating strategic value for their organizations – the capability to grow the business and create sources of incremental revenue. We asked alliance managers how their alliance created corporate value in the following dimensions:

Market Impact embraces those strategies that grow the business such as market share increase, new customers wins, access to new markets.

Innovative Capacity is an indicator of the alliance to create new value and streams of revenue through new products and services, accelerating technology adoption, even creating new business models.

Competitive Advantage is gained by creating unique business value for customers or by countering a competitve trend in the market.

Operational Effectiveness is gained through sharing knowledge, resources, costs, and risks. Operational Effectiveness can also be gained in reduced time to market.

Financial Performance is measure through incremental revenue, of course, but also in margin preservation, more effective use of assets, and return on investment.

What we found is that top performers do manage and measure strategic value more than their counterparts and were achieving higher levels of financial performance as well. In our next series of discussions, we delve into each of these five strategies to better understand how high performing alliances were creating value in these dimensions and how they were measuring value.