Why Partnerships Fail
Like any other business relationship, successful strategic alliances are subject to misunderstandings, poor planning, and sheer caprice. According to Gene Slowinski, director of strategic-alliance studies at the Rutgers Graduate School of Management, before you even approach a potential strategic partner, you need to make sure you have something of genuine value to offer.
"Unilateral deals fail," says Slowinski. "Probably 80% of the deals that we see include company A providing some unique product or technology and company B providing access to markets and distribution."
Slowinski also warns that although personal relationships are useful in forging partner relationships, it would be wise to look beyond social acquaintances. "Be careful not to create alliances based solely on personal relationships," he says. "Many people merely approach the company that they're comfortable approaching, not necessarily the one that will make the best partner."
Also beware of the "drive-by" alliance--the kind in which two CEOs meet on a golf course, get to talking, and cut the deal before any of the actual implementers even know about it. Through his research, Slowinski has found the most common reasons strategic alliances fail:
- A strategy change. With companies of all sizes reevaluating and shifting their strategic focus in much tighter time frames than ever before, it's no surprise that many alliances bite the dust when one partner abruptly takes a new strategic tack. Just as small boats tack faster, small companies are more likely to change their strategy than large firms are because they can respond more quickly to the marketplace. You need to ask, "Who is this company, and will they be the same six months from now?"
- The loss of a key person. Mutable as strategies can be, personal careers often morph with even more startling speed. "Alliances are relationships between individuals, not institutions," says Slowinski. To protect your precious partnership, try to establish relationships with more than one decision maker.
- A priority mismatch. Slowinski sees many examples of partnerships that are foiled when the deal-makers-to-be have unequal levels of technical and management competence. "The small company could have the best technical people in the world," he says, "but if you're dealing with lower-level people at the larger company or people from the wrong department, it can end in disaster."
- An intellectual-property gaffe. How much do you share with your partner? How much will the other company feel comfortable telling you? Partnerships often involve sharing proprietary information, including patents, trade secrets, business practices, and customer lists. "When I form an alliance with you, I become polluted with your intellectual property," says Slowinski. "I learn what you do, and I can't forget it." The key issue to address: What are your rights to use your partner's intellectual property both inside and outside the deal?