How to Make Strategic Alliances Work

This is an MIT Sloan Management Review article. New research shows that among today's numerous strategic alliances, the most successful are in companies with a department specifically assigned to oversee alliances. Management professors Jeffrey H. Dyer, Prashant Kale, and Harbir Singh came to that conclusion after conducting an in-depth study of 200 corporations and their 1,572 alliances. They set out to discover why some companies manage alliances effectively when others fail. They found that organizations such as Hewlett-Packard, Oracle, Eli Lilly & Co., and Parke Davis, which excel at generating value from alliances, have a dedicated strategic alliance function. Companies with a dedicated function were better at solving problems related to the four key alliance management elements: knowledge management, external visibility, internal coordination, and accountability. A dedicated function, the authors show, acts as a focal point for learning and for leveraging feedback from prior and ongoing alliances. It systematically establishes processes to articulate, document, codify, and share alliance know-how. One benefit of creating an alliance function was that it compelled companies to create metrics for evaluating the performance of all their alliances. And regular evaluations alerted senior managers to intervene when a particular alliance was struggling. Many companies with dedicated alliance functions report codifying alliance management knowledge. They create guidelines to help with specific aspects of the alliance life cycle, such as partner selection or alliance negotiation. When done properly, dedicated alliance functions offer internal legitimacy to alliances, assist in setting strategic priorities, and draw on resources across the company.

• Operations strategy
• Corporate strategy
• Strategic alliances
• Operations research