Book Review: Strategic Alliances: Three Ways to Make Them Work

Written By Steve Steinhilber Published by Harvard Business Press

Steinhilber (Vice President of Strategic Alliances at Cisco Systems) explains that there are "five basic criteria to identify and characterize" relationships that will achieve significantly higher and more consistent shareholder returns, enabling a company to grow faster and more profitably by leveraging those relationships rather than going it alone. The criteria are identified on Pages 2-3. Steinhilber then identifies three reasons why alliances are a "must-do" investment for any company competing in the global marketplace. With regard to the three ways to make strategic alliances work, identified as "essential building blocks," they are (1) the right framework, (2) the right organization, and (3) the right relationships. A separate chapter is devoted to a remarkably thorough examination of each of the three.

It is worth noting, as Steinhilber does, that more than 2,000 strategic alliances are launched worldwide each year and this number increases about 15% annually. More than half fail and only about 9% of the companies "build alliances well." Of these, Cisco Systems probably has been among the most successful and Steinhilber heads those initiatives so he is well-qualified to explain what to do, what not to do, etc.

As I began to read this brief but content-rich book, I wondered why Cisco allowed Steinhilber to reveal so much about what the company does and how it does it; more specifically, to explain in detail the mindsets applied to prospective allies and then to business partners, respectively.

To me, some of the most valuable material in this book is provided in last chapter in which Steinhilber explains how Cisco manages complexity. He addresses specific issues concerning intellectual property such as those involving jointly developed technology, solutions, residuals, branding. With regard to refining business goals, he recommends that two questions be answered: "How do we achieve our desired global market?" Also, "Which pieces of the value chain are central to sustaining our long-term profitability in a market?" Then, once objectives and the specific market(s) have been analyzed, he suggests taking one of three different approaches: (1) Partner with market leaders, (2) Partner with market leaders/challengers, or (3) Partner with both. Steinhilber acknowledges that there may be times when it makes sense to "spread your bets with dealing with uncertainty." To evaluate the breadth of an alliance portfolio within a market space, he identifies five criteria: market share, market segmentation, competitive overlap, potential acquisition strategy, and ability to execute.


------

Phil Turtle is a serial Entrepreneur and Business Consultant. CEO of Turtle Consulting Group http://turtleconsulting.com and CEO of ManagementBooks.co.uk. Read more of Phil's advice at http://www.managementbooks.co.uk and select Blog.