Rwb October 27 Part Ii What Every Business Executive Needs To Know About Strategic Alliances
1.
2. Q1. When is alliance
strategic right?
Q2.How do you make a
strategic alliance fit?
Q3. What about the
management and the
finances?
Ronald W. Brown, Esq., MBA
3. In order for the strategic alliance to be successful and to fulfill
its stated purpose, it must be well managed by a manager.
Here is an excellent definition of management: “the effective,
efficient, correct, and timely use of another person’s property
and resources for the purpose for which they were delegated
with a view to producing the expected added value.” Given
that definition, managing well, may be easier said than done
depending on factors such as the geographic location of the
alliance, its intended purpose, scope, and duration.
The shortest and best definition of a manager that I ever
heard was given by Harold S. Geneen., when he said a
“manager turns in the performance.”
Ronald W. Brown, Esq., MBA
4. #1. Having clear purposes,
objectives, metrics, and
governing structure.
#2. Having a written entrance
strategy.
#3. Having a written exit
strategy.
#4. Building and managing
“relationship capital.”
Ronald W. Brown, Esq., MBA
5. #5. Knowing your
enterprise economics and
finance.
#6. Knowing ”the turf” .
#7. Never compromising
your ethics.
#8 Knowing what you
will consider success and
failure.
Ronald W. Brown, Esq., MBA
6. #9. Managing risk by
managing compliance.
#10. Staying actively
engaged in the operations
of the alliance.
#11. Using ADR to
resolve disputes
#12. Engaging legal
counsel
Ronald W. Brown, Esq., MBA
8. Personal values are important.
Your personal values and
business values should be
congruent, not in conflict.
Ronald W. Brown, Esq., MBA
For example, if honesty and integrity are
important personal values you should not
compromise those personal values in business.
To illustrate, if you are discussing a strategic
business alliance with someone abroad who tells
you that in order to do business together in that
country it is expected and required to pay bribes
because “everyone pays bribes here”, you should
terminate the discussion
9. Don’t try to solve
everything by yourself.
Ronald W. Brown, Esq., MBA
Even Superheroes have sidekicks.
10. Every morning in Africa, a gazelle wakes up. It knows it must run faster than
the fastest lion or it will be killed. Every morning a lion wakes up. It knows it
must outrun the slowest gazelle or it will starve to death. It doesn’t matter
whether you are a lion or a gazelle. When the sun comes up, whether in Africa,
or in a strategic alliance, you better be running.
“To everything there is a time. To everything there is a season. There is a time
to start, and a time to stop. But in between those times, keep moving.
Ronald W. Brown, Esq., MBA
11. Know what’s going
on where ever your
strategic alliance or
joint venture is
located.
Ronald W. Brown, Esq., MBA
“You are not in Kansas any more.
You are on Pandora.”
12. A strategic alliance entails
faith, planning, and
execution.
Notwithstanding, your
strategic alliance may fail.
Face the fear of failure,
but have the courage to
step out of your boat into
deeper waters, while never
forgetting what it takes to
be a water-walker.
Ronald W. Brown, Esq., MBA
Editor's Notes
When is it Right?
For a strategic alliance to “fit”, it must be right for you. Though that may seem circular, it isn’t. For the first place to determine if it is right, is with your attitude. You must be open to the idea of collaboration and it cannot be in conflict with your personality, your perception of yourself as an entrepreneur, and in practice, a strategic alliance must fit in with the way you operate and run your business.
How Do You Make a Strategic alliance “Fit”
In creating a strategic alliance , there are a number of practical steps that have to be considered. It is important to create a framework in which to operate. Joint planning between partners of the strategic alliance is crucial for both beginners and seasoned business veterans. You need to determine what you want to do (purpose of the venture) and how long you want to do it together (the duration). Thorough planning will provide expectations for each member of the alliance in order to release tension by ensuring that all members clearly know their responsibilities. Determining a plan and a business strategy will allow the goals of the strategic alliance to be clear and ensure that all members remain focused on their responsibilities. The thoughts that the strategic alliance joint participants have about their venture should also be expressed in writing and address traditional business points (finance; management, etc.).
Money
Strategic alliance participants should determine basic money issues early on, such as how strategic alliance participants will be compensated. If a strategic alliance arrangement requires some financing, how that financing will be provided and its terms, how funds earned from the activities of the strategic alliance will be handled, including expenses as well as terms of compensation to the strategic alliance participants should be addressed. One strategic alliance participant might be looking at cash while another strategic alliance participant might be looking at cash flow. These are not the same, and the difference can be a source of substantial friction when it comes to determining what is available to be paid out to the strategic alliance participant.
We all know that if everybody is responsible for all aspects of a project then nobody is responsible. In setting up a strategic alliance, the participants will have to determine what roles each will play to produce the result or purpose that has been agreed upon. Some parties may have to play a subordinate role in the alliance. Although not every member may be used to playing a subordinate role, it is necessary for the participants to remain focused on the goal and trust in the competence of their leader. Apart from ego, the parties should determine who is best suited to manage. Determining who will lead the strategic alliance, who will manage the day to day operations of the strategic alliance will be critical. Leadership must be competent, clear, and credible for a strategic alliance to be sustainable and successful.
#1. Commit to having clear purposes, objectives and metrics for the alliance, with Key Result Areas (“KRAs”) by functional department.
#2 and #3. Commit to having a clear, written, entrance strategy and strategic plan One form of entrance strategy that borrows a phrase from matrimonial law, entails having strategic alliance business “pre-nup.” See “The Perfect ‘Pre-Nup’ To Strategic Alliances: A Guide to Contracts” by Professor Africa Arino, Professor Jeffrey J. Reuer, and Antoni Valverde, www.criticaleye.net. (Hereinafter “Guide to Contracts”). Commit to having a clear, written exit strategy; for everything there is a time and a season and nothing lasts forever. See Guide to Contacts. Exit strategies could range from a ‘Texas shoot-out (“when both parties wish to buy and a sealed bid procedure takes place to determine who the higher bid is” to ‘Russian roulette’ (“that allows one party to offer to buy the shares of the other party at a certain price—but with the other party having the right to decide either to accept and sell its shares or instead to buy the first party’s shares at the same price.”).
#4. Commit to building and managing the alliance’s “relationship capital” through continuous communication and pro-active exchange of information before, during, and after the alliance. See Cullen, Johnson, and Tomoaki, “Success Through Commitment and Trust: The Soft Side of Strategic Alliance Management”, Journal of World Business, September 22, 2000. (“Relationship capital involves having alliance partners attend to and invest in time and effort toward building positive feelings and interaction patterns in the reliance relationship. Two important areas of relationship capital are mutual trust and commitment. Other types of relationship capital include norms of reciprocity, information exchange, and cultural sensitivity.”)See also Building Trust. (“Companies often under-invest in their alliances. They not only do they not invest in the incremental people and program resources required to go beyond traditional product and services in order to start obtaining the strategic value possible between companies in the alliance. Most importantly the under-invest in the human relation aspects of alliances…”)
See Building Trust. (“The root cause for alliance failure is a lack of respect, confidence and trust in the other partner or the alliance itself. Trust is affected by the degree of openness in communication; and a lack of trust is also a root cause for communication. Therefore trust is a fundamental issue, being both cause and effect.”)
See Hutt, Stafford, Walker, and Relingen, “Defining the Social Network of a Strategic Alliance”, MIT Sloan Management Review, January 15, 2000. (“Communication and the proactive exchange of information can strengthen cooperative relationships in several ways. First, effective collaboration requires connection at three levels across partnering organizations, represented by continuous contact among (1) top management to develop broad goals and monitor progress, (2) middle managers to develop plans for joint activities, and (3) operational personnel, who carry out the day-to-day work of the alliance. Second, trust plays an important (often dominant) role in successful alliances and communication and information processing are instrumental in building trust between partners. Third, communication among boundary-spanning personnel produces a shared interpretation of goals and common agreement on norms, work roles, and the nature of social relationships. In turn as a strategic alliance evolves, (1) personal relationships increasingly supplement formal role relationships and (2) informal psychological contracts increasingly substitute for formal legal contracts.”)
#5. Commit to clearly understanding how the alliance will be financed, how losses and profits will be determined and allocated, and how future financial contributions will be addressed.
#6. Commit to becoming conversant with at least the basic language, history, culture, customs, and holidays in the country where the strategic alliance is located.
#7. Commit to considering a code of conduct that is enforced so that everyone understands and is held accountable to the business values of the alliance.
#8. Commit to articulating what you will consider success or failure (so you know when to hold and when to fold) and within stated time frames.
#9. Commit to managing risk by monitoring compliance with applicable regulatory, legal, and other requirements.
#10. Commit to being actively engaged in the operations of the alliance, to having regularly scheduled, face to face, on site operational reviews, and to having excellent internal controls including segregation of duties.
#11. Commit to using alternative dispute resolution when the inevitable disagreements arise.
See “What Every Business Executive Needs To Know About Dispute Resolution” by Ronald W. Brown and Ronald W. Brown.
See “Building Trust in Strategic Alliances: Enabling Greater Value” by Joe Kittel, and Gerlach, Porst & Steiner. GmbH (GP&S), an alliance-oriented business development consultancy headquartered in Bad Homburg, Germany. ( “When people or organizations attempt to work together there are always differences—differences of opinion, differences of perspective, different strategies, cultural differences or decision-making differences…As individuals collaborate in alliances, as relationships deepen over an extended period of time, significant differences will inevitably surface. The question is: ‘How do we choose to look at and leverage off of those differences.” ) (Hereinafter “Building Trust”). See also Sean Silverthorne “Using the Law to Strategic Advantage, December 12, 2005. (“Every legal dispute is a business problem requiring a dispute resolution. Instead of handing over disputes to the lawyers with a ‘you take care of it attitude, managers need to take responsibility for their disputes.”)
#12. Commit to having business legal counsel with experience in the area of the alliance to prepare the alliance document that helps you achieve your business objectives and which reflects your business decisions.If the strategic alliance has intellectual property as one of its principal assets, be sure to retain the services of counsel who has experience handling that type of intellectual property in the area where the strategic alliance will operate. See for example, ”Top Ten Legal Mistakes Made by Entrepreneurs”, Harvard Business School, Working Knowledge March 3, 2003. (“Patents are granted on a country-by-country basis (with a single application available for the European Union.). In the United States, if an invention is sold or made public, there’s a year’s grace period to filing the patent application. Everywhere else, if the invention is sold or publicized prior to filing the patent application, the invention is unpatentable in that country. For example, if the invention is publicly disclosed to a Japanese national visiting a tradeshow in the United States, then under Japanese patent law, if no patent application has been filed, that disclosure makes the invention unpatentable in Japan. The same is true with trademarks.”)
In his excellent book, Failure Is Written in Pencil: How To Turn Your Failures Into Success, David Ireland shares practical wisdom and pithy sound advice about success and failure which every business executive should heed, for example, “Don’t quit before your start” and “A successful person is one who can lay a firm foundation with the bricks that others throw at him”. In describing how failures became the back door to his success, Dr. Ireland draws on numerous examples such as Abraham Lincoln in American history, Michael Jordon in basketball, world history as well as the bible to illustrate how failure can be a bridge to success.
Here are two of those examples, “In 1831 this man failed in business. He was defeated in his bid for the legislature in 1832. He failed in business again in 1833. He was defeated for speaker of the house in 1838. He was defeated for elector in 1840. He was defeated for Congress in 1843. He was defeated for Congress again in 1848. He was defeated for the Senate in 1855. He was defeated for vice president in 1856. He was defeated for the Senate in 1858. In 1860, this man, Abraham Lincoln, was elected president.”
Even the great Michael Jordan said: “I’ve missed over 9,000 shots in my career. I’ve lost over 300 games. Twenty-six times I have been trusted to take the game-winning shot and missed. I’ve failed in my life over and over; that’s why I succeed.”
Failure has a value if you can learn a lesson from it and if it reinforces an unshakeable determination to succeed the next time.
When failure is not an option, make it a transforming opportunity.
But if you must fail, then, as Maximus (Russell Crow) in the movie “Gladiator” might advise, do so with “strength and honor”, meaning with dignity and character meeting the highest ethical standards.
Remember Tom Peter’s observation: “No failures.... No successes. No fast failures…no fast successes. No big failures…no big successes. No big, fast failures…no big, fast successes.”
If you compromise your personal values of honesty and integrity and pay the business bribe because “everyone pays bribes” there, not only should your conscience bother you, but you could be charged with violating the Foreign Corrupt Practices Act.
As Michael Jordan observed, “There is no ‘I’ in team but there is in ‘win’. So “we’ should find the best practical solution to “our” challenges in a strategic alliance.
The Boston Consulting Group stated this proposition this way: “There is power in numbers. The members of a broader team will provide complementary skills and multiply the manpower and brainpower available to tackle critical issues.”
Failure has a value if you can learn a lesson from it and if it reinforces an unshakeable determination to succeed the next time. When failure is not an option, make it a transforming opportunity. But if you must fail, then, as Maximus (Russell Crow) in the movie “Gladiator” might advise, do so with “strength and honor”, meaning with dignity and character meeting the highest ethical standards.
Remember this: “No failures.... No successes. No fast failures…no fast successes. No big failures…no big successes. No big, fast failures…no big, fast successes.” Remember that in order to pursue a strategic alliance, you may need to learn to face fear of failure.
Walking on water means facing your fears and choosing not to let fear have the last word.
If you want to walk on water, you have to step out of the boat. Water-walkers must master fear management. That means facing fear but not letting fear have the last word. When Winston Churchill was asked if he had failed a year in grade school, Churchill replied, “I have never failed anything in my life. I was given a second opportunity to get it right “Water-walkers must master ever failed anything in my life. In order to pursue a strategic alliance, you may need to learn to face fear of failure and have the courage to step out of your business boat onto the fear management. Walking on water means facing your fears and choosing not to let fear have the last word”.
“Peter Swims With The Fishes”, www.cc.ww.org/sermons/Matthew14.htm
If you want to walk on strategic alliance waters, you have to step out of your own business boat. Water-walkers must master fear management. That means facing fear but not letting fear have the last word. When Winston Churchill was asked if he had failed a year in grade school, Churchill replied, “I have never failed anything in my life. I was given a second opportunity to get it right“. I hope this presentation will help you launch your strategic alliances and get it right the first time
