Part 2—Making Strategic Alliances Work: Proper Strategy and Aligned Structure
May 19, 2022
By Thomas Pietras
Bauknight, Pietras, & Stormer, PA.
This is part two of our series where we explore the key components of successful strategic alliances. In this article, we’ll be discussing proper strategy and aligned structure.
[Part 1 – Making Strategic Alliances Work: What is a Strategic Alliance?]
Proper Strategy
Too often, strategic alliances are formed without sufficient thought given to the strategic purpose for the alliance. The thought process is often no more than: “We have a great product. They have a great distribution channel. We should partner-up.” Or, “Everyone else in our industry seems to be forming strategic alliances. We’d better find a partner of our own.” Or even, “Ol’ Bubba is a great guy. We should find a way to work with his company.” The formation of alliances becomes an end, rather than a means to achieve a strategic goal. When this happens, little thought is given to the underlying strategic foundation for an alliance.
As with all strategic planning, the decision to form a strategic alliance should be the result of a formal assessment process. You evaluate your external business environment, your internal capabilities and your desired goals. In other words: what does the market want, what can we deliver and how do we align the two? If the market wants something that you cannot currently deliver, you must decide on the best way to satisfy the market. And remember, you should only seek a strategic alliance if doing so will enable you to deliver to the market in a method that is cheaper or faster than you can achieve on a stand alone basis.
A final word on strategy — a strategic alliance may be the correct solution for your current strategy. However, strategies change. Companies should continually evaluate their strategic goals and the tools they employ to achieve those goals. A strategic alliance that makes sense today may not make sense five years from now.
Aligned Structure
Most articles focus on the structural elements of alliances and often include a top ten list of critical success factors, all related to the legal structure of an alliance or the terms of alliance operating agreements.
Before we get to our own list of suggestions in part three, we want to first make it very clear that every situation is unique. Companies must tailor their alliance structure to their business strategy. The goals of a technology-based joint venture are likely to be very different from those of a supply-chain alliance or a research partnership. Strategy should drive the choice of legal structure as well as the choice of alliance partners.
Thomas Pietras is a partner with Bauknight Pietras & Stormer, P.A. Since joining the Firm in 1992 (after leaving Ernst & Young), Tom has served as audit engagement partner or as technical review partner for clients in a broad range of industries, including telecommunications, manufacturing, dealerships and distribution, construction, and technology.
Tom was an adjunct professor at the University of South Carolina from 1996 through 2011, where he taught a graduate level accounting course. Tom also teaches accounting and auditing seminars to CPA’s around the country.
Tom is actively involved in Columbia’s entrepreneurial business community.
