As a veteran in the technology solutions industry who has spent most of his career thus far in the realm of "strategic alliances", I thought it would be helpful to provide a general overview and share a few of the reasons why I am so passionate about the value of partnerships and alliances.

Definition of Terms

For the sake of simplicity, I will use the terms "partnership" and "alliance" relatively interchangeably, even though a technical definition of each might suggest otherwise. There is, however, enough overlap between the two terms/concepts for a primer like this. 

Put simply, a strategic alliance is a formal arrangement between two or more parties to pursue a set of agreed-upon objectives while remaining independent organizations.

Some key characteristics:

• An alliance exhibits structured collaboration that aims for a synergy where each partner genuinely believes the benefits from the alliance will be greater than those from individual efforts
• These benefits may be cost, profit, and/or service benefits. Examples include breaking into a new market segment, expanding the base of customers and overall revenue, gaining a competitive advantage, improving a service/product offering, and more.
• An alliance involves mutual knowledge, expertise, and/or technology transfer (i.e., shared resources), as well as economic specialization (i.e. division of labor), shared expenses, and shared risk, all to accomplish shared goals
• Each party remains independent and keeps its autonomy while working toward shared objectives. 

In essence, a strategic alliance is about teaming in a formal manner whereby both parties have skin in the game, and there is a solid understanding and acknowledgment that the partnership is important to the success of each organization with a strong fit in terms of complementary business models.

Three Principles of Strategic Alliances

>  Create synergy    (  1 + 1 = 3  )

>  Out of many, one  (  1 + 1 = 1  )

>  Capture value       (  1 + 1 = 1.4 + 1.6  )

Creating synergy   --->   1 + 1 = 3

First and foremost, a true alliance will create a synergy where the total is greater than the sum of the parts. This is foundational. In other words, the alliance accomplishes more together than if the parties continue operating completely independently. 

Out of many, one   --->   1 + 1 = 1

To create synergy, the alliance partners have to work together well. Otherwise, each party will appear to one another (e.g., in the eyes of the customers who are mutually served by the alliance) as disjointed, in which case, the first principle (synergy) cannot be properly accomplished.

Capturing value   --->   1 + 1 = 1.4 + 1.6

This is the aim or purpose of the alliance... capturing value for the benefit of the parties to the alliance. 

How the value is divvied up, so to speak, is based upon how the parties go to market together and a clear understanding of the respective pieces of the combined solution or offering, as well as what the overall solution/offering looks like in terms of pricing, customer experience, etc.

But how is the value "split" between the parties to the alliance?  Is it always 50/50? Probably not, but each party to the alliance needs to be excited about what they’re getting out of it. 

This is where an alliance often breaks, thus the parties to the alliance need to get this right. The alliance partners must experience that they are sharing the value created, and, not just pleased, but excited about it. Moreover, the value should be recognized and appreciated by the marketplace (e.g., the mutual customers, other parties/observers, industry analysts, etc.). 

Examples of Strategic Alliances

• Vendor/Reseller
• One party (the Reseller) acquires and resells an offering/product/service produced or offered by the Vendor
• Example: IBM => IBM Reseller
• Typical contract structure: Reseller Agreement (usually provided by the Vendor)
  
  
• Vendor/Distributor/Reseller
• A variation on the above
• A Vendor distributes its offerings through a distribution network (one or more Distributors)
• A Distributor often brings certain unique value-added capabilities to the relationship. Examples: the ability to warehouse a Vendor's product, technical capabilities (e.g., assembly, software installation, integration, etc.) the Reseller does not have, the ability to facilitate multinational distribution, etc.
• Example: IBM => TD SYNNEX => IBM Reseller
• Typical contract structures: Distribution Agreement (Vendor-Distributor), Reseller Agreement (Vendor-Reseller)
  
  
• ISV/OEM
• The maker of a software/hardware product sells its product through another party for the purpose of bundling/integrating with an existing offering.

• The term "ISV" technically means a software maker (independent software vendor), while the term "IHV" refers to an independent hardware vendor, but "ISV" is generally used in a broader sense to denote either type.
  

• The term "OEM" (original equipment manufacturer) can have a couple of different meanings:
• An entity that makes components (parts, subsystems, or software) of another company’s products
• An entity that buys components and then incorporates or rebrands them into a new product under its own name
• Types: 
• A computer system comprised of an operating system and a microprocessor, both of which were manufactured by other parties, but combined in a complete system
• Example: A Dell laptop comprised of a microprocessor from Intel and a Windows operating system from Microsoft
• A software offering loaded onto a hardware platform to comprise a complete solution that provides a specific function
• Example: An IP telephony solution comprised of telecommunications software running on an industry-standard computing platform
• Note: The software offering could be an actual license or a SaaS offering
• A variation of this type of partnership/solution is an embedded system, which is a combination of computer hardware and software designed for a specific purpose and which functions as a complete device. Example: a mobile phone.
• Typical contract structures: Contracts governing ISV/OEM relationships take many forms and, hence, have varying titles. Examples: OEM Agreement, ISV Integration and Reseller Agreement, ISV/OEM Partner Agreement.
  
  
• Referral Relationship
• One party "refers" an opportunity or sale to another party who fulfills the transaction
• Typically, the referring partner receives a referral fee as compensation for referring business to the provider/fulfiller
• Example: A solution provider wants to add a capability, such as an information security assessment or other service, that it does not have organically, and refers business to an information security provider. If/when a customer purchases an information security assessment/service, the solution provider pays a referral fee to the information security provider.
• Typical contract structure: Referral Agreement
  
  
• Agent Relationship
• An agent is an independent technology expert who helps a customer with some or all aspects of a technology solution, such as telephony, video, and data communication services. An agent can represent one or more technology providers. A commission is paid to the agent if the customer acquires or uses the agent's recommended product/service. It can be a one-time fee (for a product sale) or an ongoing remuneration (e.g., a monthly residual) for a service for as long as the service is active.
• Example: A telecom services agent with expertise in and formal relationships with multiple telecom vendors advises customers and can recommend a specific solution based on a customer's needs, budget, etc.
• Typical contract structure: Agent Agreement, Sales Agency Agreement
  
  
• Joint Venture
• Two or more organizations agree to share resources and combine expertise for a specified period of time to execute a specific task, such as a new business initiative or project
  
• Example: SAS and Microsoft formed a joint venture in 2020 to create a response system for natural disasters, including flooding from hurricanes. Microsoft's Azure IoT solution enabled detection and automation of tasks while SAS’s analytic capabilities added real-time and historical data insights to equip and enable disaster response teams and public services.
• Typical contract structure: Joint Venture Agreement
  
  
• Ecosystem
• An interconnected and interdependent consortium of diverse technology providers that partner together to spur and sustain product/service innovation. These providers coevolve their capabilities to deliver solutions and create value for their customers and all partners involved.
• Example: Salesforce has enabled many interconnected products from various providers to extend and enhance customer relationship management in the digital sphere
• Typical contract structure: A collection of independent contracts with an underlying/unifying theme pertaining to a specific goal or objective (e.g., customer relationship management in the Salesforce context example above)

A Typical Alliance Lifecycle

Below is a depiction of one, simple Alliance Lifecycle process that can apply to just about any type of alliance.

It starts with the Identify/Evaluate phase where the opportunity to partner is identified, the type of relationship (co-sell, resell, referral, etc.) is determined, and the parties consider what is required in terms of investments of time, resources, training, etc. This is also when the parties envision the potential outcomes to confirm that they have line-of-sight to an attractive ROI. It’s also at this stage that the parties determine if it will be a strategic relationship or more of a tactical or opportunistic one.

The Formalize phase is when the parties officiate the relationship, often with a formal agreement. The parties also identify the key contacts (sales, marketing, development/services, etc.) who will primarily be involved in the interactions between the parties, how often and under what circumstances they will interact (i.e., ongoing engagement), and other relevant details based on the nature of the relationship. This is also when the parties ensure that they have mapped out the skills and resources they need to monetize and sustain the partnership.

The Execute/Transact phase is hopefully more than a phase because, ideally, it is a new way of life for the alliance partners as they are now "going to market" together, whether for the long haul or for a desired/projected period of time during which the relationship is relevant to the parties. Throughout the time that the parties are transacting together, the best partnerships will generate marketable success stories and case studies.

Once the alliance is well established with repeat engagements in the marketplace, it is a best practice to perform period pulse checks or health checks to make sure the alliance partners are getting what they expected out of the relationship. Hopefully, this includes achieving a first win together fairly early and then building momentum from there. And for more strategic relationships, it’s helpful to have a mechanism for routinely measuring the health and success of the alliance through scorecards in some cases but certainly regular checkpoints throughout the life of the alliance.

All of this hopefully enables the parties to Sustain the partnership and grow it to ever-increasing levels of success.

However, things don’t always work out, despite the best-laid plans, so there should be a simple and non-disruptive offboarding process for when situations change whereby the value from the alliance is no longer being realized consistently. In such cases, it is okay to part ways. Perhaps an opportunity to re-engage will arise in the future.

Challenges with Alliances

Challenges will inevitably arise in any relationship, and that is true for alliances. Some examples:

• Each participating organization in a strategic alliance is unique with its own culture. When such organizations come together, a "culture clash" may surface with arguments about a preferred approach, policy, practice, etc.
• An alliance runs the risk of falling prey to unequal (inequitable) participation of the organizations involved in the alliance. For example, one party may find itself contributing more time/resources to the alliance venture without realizing greater (or even sufficient) benefits.
• A lack of trust and/or good communication between alliance partners can lead to conflict.

Keys for Strong Alliances

To mitigate potential issues, alliance partners should follow several "tried and true" best practices which are indicators of healthy, long-lasting relationships. For example... 

1. Establish clear objectives and conflict resolution processes up front (it's best to document them in the governing agreement). This helps build trust which enables the parties to have confidence in one another's ability and willingness to fulfill their commitments and responsibilities.
2. Communicate regularly and build "beneficial dependencies" which help the parties get the most out of their investments in the alliance. Clear, effective communication fosters solid alignment, builds trust and transparency, and minimizes conflict and potential issues.
3. Related to communication, it's important to conduct regular "pulse checks" to more formally gauge partnership health and address any missed objectives or unmet expectations
4. Always be flexible. Partners must adapt as the market and business climate evolve to be best suited to address new opportunities, which helps ensure the long-term success of the alliance. Plus, it's good to routinely be looking for ways to inject new life into the partnership in both natural and creative (but not gimmicky) ways.

The Lifecycle Reality

As alluded to in the Alliance Lifecycle section above, most alliances have a finite lifespan, and that should not be viewed negatively. Oftentimes, alliance partners go to unnatural lengths to "save" a partnership when reality (i.e., the marketplace) is indicating that the useful lifecycle of the relationship is tapering off. Trying to force added life into a dissolving partnership only serves to make both parties less effective in their business pursuits and often results in missed opportunities elsewhere. 

There are always new partnerships and alliances to forge!

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References:

https://www.strategic-alliances.org/

• https://harappa.education/harappa-diaries/strategic-alliance-meaning-examples-and-types/
• https://alliancestrategy.com/making-business-combinations-work/

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