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While strategic alliances are acknowledged to be an increasingly important driver of revenue growth for many corporations, it’s ironic to observe just how non-strategic alliances management and partnering more generally is as a corporate discipline.
Why does this matter? It’s widely believed that 30% of enterprise revenue is tied to strategic alliances and that number has been growing steadily over the last few years. A recent study by IBM found that 82% of business leaders believe partnerships will be a prime vehicle for business growth.
Alliances are more important than ever because emerging technologies, new commercial, social, and business models elevate the role and importance of ecosystems and strategic partnerships in creating value. Start with the technology building blocks that are the foundation of digital transformation – cloud, IoT, machine learning, hyper connectivity, mobile computing, etc.- these all depend on business networks, and introduce new ways to align and create value, forever altering customer expectations for what is possible and at what speed.
These technologies, combined with the emergence of new commercial and monetization models, are driving inexorable change in the way companies package, compete, and go to market. From multi-sided platform business models (think YouTube, Airbnb, Ariba) to social networks and apps on platform, value is being created and combined in ways that no longer resemble traditional hierarchical command and control management models.
New business models and GTM strategies that leverage an ecosystem-centric landscape change the basis of competition and threaten almost every industry. They disrupt and destroy old industry structures which are often, by their very nature, blockers to innovation. These ecosystem models are free to define completely different customer experiences, new supply and value chains, and totally different economic structures.
Strategic partnering and alliances are at the heart of making any of these ecosystem-centric strategies work. Partners are no longer an add-on; partners are the network, and the network is the value. Partnering needs to be considered as integral to the product and solution development process from the start. Companies need to stop building value from the inside out, and instead build it from the outside in, leveraging the resources in their ecosystem.
Most CEOs and corporate board rooms have rotated to embrace Digital and have adopted the mantra of Transform or be left behind. IDC predicts that at least 50% of GDP will be digitized by 2021. What’s not yet understood is how to effectively build products and services against the backdrop of an ecosystem value model and GTM. Most product and service development still follow command control orientation in which leaders believe that they make products and services and ship them to the market.
As value drivers and digitally transformed markets push companies to innovate, it is becoming imperative that innovation be collaborative, and directly leverage strategic alliances. This means working with partners to jointly develop, jointly sell, and jointly market to customers. In this emerging landscape an outside-In model that looks at the potential for value creation beyond the four walls of the enterprise is imperative. Industry disruptors, start-ups, and incumbent leaders, are all increasingly finding new sources of value through the advent of cloud APIs, platforms, and digital initiatives which require the pairing of internal resources with partner capabilities.
This brings us back to our original question: “Why aren’t strategic alliances managed strategically in most enterprises?” They are certainly given attention – they drive many C suite objectives (growth, managing risk, innovation, new technologies, etc.) – but in many cases they fall short on effective execution. According a recent Association of Strategic Alliance Professionals, as much as 60-70% of strategic alliances fail. And those that fail, often do so because they aren’t resourced or managed to execute on the lofty promises and aspirations set for them. Fundamentally good intentions meet with bad process, yielding failure.
Fortunately, Alliance leaders no longer need to suffer the fate of a discipline that simply can’t deliver. They can now begin the process of Alliance Management Transformation and bring the required discipline and business processes to help more alliances succeed and elevate the partnering discipline to become truly strategic. New technology-enabled alliances management models are emerging built on the three pillars of engagement, automation, and accountability that will allow managers to design, manage, and measure alliance value. Alliance transformation won’t happen overnight, but finally we can put alliances on a trajectory to not only be strategic but be managed strategically as well.