Alliance Optimisation

I have conversations virtually every day with Alliance Vice Presidents struggling with the question 'How do I optimise my alliance relationships?'
The first and most obvious reason that they struggle is that there is no clear definition of 'optimisation' in the context of business to business alliance relationships.
Optimise for whom? One side or the other? Or is it somehow joint optimisation that we are concentrating on?
Alliance Best Practice Ltd (ABP) has spent the last 14 years researching this question. Indeed, our fascination (some would call it obsession) with the topic has led us to develop a comprehensive database of alliance results from which to discern different levels of optimisation (benchmarking).
ABP would define 'optimisation' in two ways:

  1. Doing the right things (Effectiveness), and
  2. Doing the right things right (Efficiency)

It is the combination of the two that creates the degree of optimisation possible.
But then we have to consider the question 'What are the right things?' Is there a definitive list? Surely the right things change over time or in the context of the alliance?
In our experience the right things don't change, they remain the right things to do, or to focus ones attention on. Although it is true that companies may place more emphasis on certain things at certain times during the lifecycle of the alliance.
So without further ado let me share with you a list of the right things:

Commercial Technical Strategic Cultural Operational
  • Co1 Business Value Proposition (BVP)
  • Co2 Due Diligence
  • Co3 Optimum Legal / Business Structure
  • Co4 Alliance Audit
  • Co5 Key metrics
  • Co6 Alliance reward system
  • Co7 Commercial cost
  • Co8 Commercial benefit
  • Co9 Process for negotiation
  • Co10 Expected cost value ratio
  •  T11 Valuation of assets
  • T12 Partner company market position
  • T13 Host company market position
  • T14 Market fit of proposed solution
  • T15 Product fit with partners offerings
  • T16 Identified mutual needs in the relationship
  • T17 Process for joint problem solving
  • T18 Shared Control
  • T19 Partner accountability
  •  S20 Shared objectives
  • S21 Relationship Scope
  • S22 Tactical and strategic risk
  • S23 Risk sharing
  • S24 Exit strategies
  • S25 Senior executive support
  • S26 B2B Strategic alignment
  • S27 Fit with strategic business path
  • S28 Other relationships with same / other partner/s
  • S29 Common strategic ground rules
  • S30 Common vision
  •  Cu31 Business to business trust
  • Cu32 Collaborative corporate mindset
  • Cu33 Collaboration skills
  • Cu34 Dedicated alliance manager
  • Cu35 Alliance Centre of excellence
  • Cu36 Decision making process
  • Cu37 Other cultural issues
  • Cu38 Business to Business cultural alignment
  •  O39 Alliance process
  • O40 Speed of progress so far
  • O41 Distance from revenue
  • O42 Joint business plan
  • O43 Communication
  • O44 Health check / quality review
  • O45 MOUP or Alliance Charter
  • O46 Change management
  • O47 Operational metrics
  • O48 Business to business operational alignment
  • O49 Exponential breakthroughs
  • O50 Internal alignment
  • O51 Project plan
  • O52 Issue escalation

We call these right things Success Factors and our ongoing research has revealed that a subset of these Success Factors repeat in a statistically meaningful way. This simply means that they show up more often than you would have imagined or than can be explained by fluke or luck. We call these special factors Common Success Factors or CSFs for short.
Having discovered these factors we then worked with clients (as far back as 2002) to discover whether the existence of these factors could lead to commercial success in alliances. The answer was that it did!
Our research was not particularly sophisticated or complex we simply asked organisations about the existence or absence of our list of CSFs. This gave us a measure of the effectiveness of the alliance in question. Next we asked of those CSFs that were in existence 'How well are they performing currently?' That in turn gave us an assessment of the efficiency of the alliance and a combination of the two gave us our Optimisation Rating. Simple really.
Of course the next step was to prove that increasing optimisation increases commercial revenue. This we proceeded to do over a period of a number of years (indeed we still do it for companies today).
What we discovered was that as companies increased the optimisation score the commercial value of the alliance increased exponentially (usually in the range of 250% - 650% over a 12 - 18 month period).
So now we can go back to our original discussion of alliance optimisation and answer the fundamental question that we started this article with, which is: How do I optimise my alliance relationships?
The process is simple:

  1. Decide which of the CSFs are relevant for the alliance in question
  2. Compile a benchmark set of the chosen CSFs
  3. Benchmark the alliance in question in two stages: a) Existence (or otherwise) of the chosen CSFs (Effectiveness Rating) and b) Performance of the CSFs in existence (Efficiency Rating)
  4. Identify those underperforming CSFs and develop an action plan to remediate
  5. Track progress and commercial return quarterly
  6. Annually re run the benchmark to identify new CSFs for underperformance and repeat steps 2-5 above (Continuous Improvement)

However, do remember that alliance optimisation is a journey not a destination.
What do I mean? Well some people think that once they have gone through the exercise above once then that is the end of the matter and their alliance is optimised. Not true.
If you have gone through the series of steps above then you will discover in improving the chosen CSFs that the improvement leaves a new set of CSFs exposed as underperforming to the new level. Hence, you need to go through the exercise again to further improve the alliance. This is why the repetition is called continuous improvement above.
What about global strategic alliances I hear you cry? In our experience these types of alliances are structured country by country so an optimisation exercise focuses on a defined number of countries at a time. In each case the benchmark set might be different and the scores might be different but the logic is unshakeable - if you continuously and consistently optimise the alliance country by country then the overall value of the global alliance will increase year on year.
How do we know? Because we have proved it! With companies like: IBM, Oracle, Capgemini, Accenture, Tieto, Microsoft and EMC.
If you'd like further information on alliance optimisation feel free to contact us at info@alliancebestpractice.com

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