What is a strategic alliance? A ‘strategic alliance’ is a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. This form of cooperation lies between acquisitions and organic growth.
One of the distinct advantages of an alliance growth strategy compared to M&A or organic growth is that it is almost always less capital intensive. Buying another firm and integrating it usually requires a substantial effort first in the back office (IT, HR, Financial systems and reporting…) and eventually in the front office as well (sales & marketing, product / service portfolio harmonization…). Growing your business organically means opening new offices, hiring more employees, etc. which can tie up working capital for years.
Creative collaborative solutions such as strategic alliance agreements offer faster and less expensive options to grow your business. This is especially true when considering international expansion. The respective partners do not need to create synergies and economies of scale to justify the capital investments, and most of the time can continue business as usual within their existing systems, management style and go-to-market approach.
What is a strategic alliance? Strategic alliances are key agreements – very formal and contractual or less formal and more opportunistic – designed and implemented to boost revenues and capabilities. Everyone has the desire to use additional channel partners to grow sales, but an often overlooked benefit of an alliance development strategy is to broaden and deepen organizational capabilities.
Capabilities can include many areas of a company’s growth strategy:
- key account reviews – ability to understand a client and to create a coordinated relationship map to expand touch points
- new service offerings – ability to develop and implement a broader and deeper portfolio of services for each client
- training & development – ability to share expertise and resources so that the ally team members get smarter with new input
- global reach – ability to follow any client into any market on any continent and provide consistent and effective services
Creative collaborative solutions involve more than just an additional revenue channel. A properly managed strategic alliance provides each partner with new and enhanced capabilities resulting in better business opportunities for clients and personnel. Strategic alliances involve mutual gains over the long term which neither firm could achieve alone, and can often be a more attractive strategy than buying or building your way to greater growth.