Strategic alliances and tactical partnerships are both good frameworks for collaboration. But what do we mean by the terms ‘strategic alliances’ and ‘tactical partnerships’? How are they similar and how are they different?
Semantics aside, usage really depends on the specific markets, what part of the world you are in and which organizations are doing the defining.
‘Strategic alliances’ is an often overused term to describe any and all forms of partnerships. A strategy at its origin is a military term from the Greek language meaning generalship. Today the common understanding of the term ‘strategy’ is a high level plan to achieve one or more goals under conditions of uncertainty, over a period of time.
An alliance is a pact, coalition or friendship between two or more parties, made in order to advance common goals and to secure common interests. When an alliance is strategic it means the parties in question consider that their common interest and goals supersede those of the individual organizations, at least for the area covered by the agreement.
Tactical partnerships on the other hand are generally considered more of a case by case commercial relationship. The relationship is based more on the particular business deal, often negotiated in advance, and involves distribution channels designed to push products into markets.
Independent Software Venders (ISV), Value-Added Resellers (VAR), Systems Integrators (SI) and generally speaking any form of partnership or dealership designed to resell products or services “as is” can be considered as tactical channel partners. There are degrees of product/service transformation which blur the lines between new value creation (strategic development) and traditional value addition (tactical sales revenue).
Channel management drives top line revenue through resellers. Any strategic consideration is dealt with upstream in deciding which channels and which markets and which retail partners, not during the sales or service process itself, at the point of execution of the agreement.
Tactical partnerships and channel management tend to belong to the Sales leadership division and the main concern is short term revenue goals.
Strategic alliances tend to belong to the Strategy and/or Business Development departments and have a few characteristics which go beyond the singular focus on hitting the quarterly numbers. Strategic alliances involve additional activities, such as:
- Bundling products and services in new forms to create a new value proposition to the end client
- Designating joint teams to work together at all levels of the organization (executive sponsors, operations, alliance managers…)
- Carrying out joint advanced planning sessions to link strategies and planning cycles between the alliance partners
- Sharing knowledge and training and methods and some “trade secrets” to help each other perform at a higher level
- Agreeing to some form of exclusivity and privileged relationships so that competition is minimized
- Planning for a longer term relationship where return on collaboration is more important than return on investment
Tactical channel partners are sometimes called “box pushers”. This term is a little demeaning but it does encompass the essential characteristic of a non-strategic alliance partner: a purely distribution channel for an existing product. The value the sales partner provides to the product firm often resides more in the excellence of the logistics than in the quality of the partnership.
There is an exciting development underway with some of the most forward thinking companies to “alliancize” their channel partners. A few firms are breaking new ground in the attempt to create new value in their traditional distribution channels by leveraging state-of-the-art alliance management methodologies.
This trend brings together some of the latest management theories about return on relationships, loyalty values, return on collaborations, convergence of profitable business with social responsibilities, etc. The principal benefit to alliancizing the partner channels is that higher value can be created with improved business relationships.
Increasingly, in the new knowledge economy, the advantages of strategical alliances and the limitations of traditional tactical partnerships are becoming more evident. Instead of a focus on physical assets and economies of scale, the drivers of success reside in connectivity and long term partnerships. Businesses increasingly need to develop and manage complex ecosystems, i.e. sophisticated forms of creative strategic alliances.
This is especially true for many firms moving from a product-oriented strategy to a service-driven growth model.
Creative collaborative solutions which enable resources to be marshaled to create a powerful portfolio of external relationships that meet your company’s particular needs is one of the key success factors in future growth and staying relevant.