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How to Manage Alliances
Better Than One at a Time
Companies are remarkably myopic when they go about forming
strategic partnerships. Systematizing the analysis process should
produce more gain and less pain.
BY ULRICH WASSMER, PIERRE DUSSAUGE AND MARCEL PLANELLAS
THE FRENCH FOOD GIANT Groupe Danone, long a leader in the Chinese market for beverages and food products,
has recently seen its position in this enormous
market deteriorate
drastically. The reason: Danone's strategic partnership with Hangzhou Wahaha Group Co. Ltd. is
breaking up. Wahaha became the dominant player in the Chinese bottled water and other nonalcoholic beverage market through its 1996 alliance with Danone. But by 2007, Wahaha was blaming
Danone for setting up competing joint ventures with other local companies, such as Robust, Aquarius, Mengniu Dairy and Bright Dairy & Food, while Danone was suing Wahaha for using the brand
outside the scope of their joint ventures. Wahaha retaliated by dragging several Danone officials to
court for conflict of interest because of their simultaneous membership on the boards of the Wahaha-Danone joint venture and other competing joint ventures Danone had in China. As a result,
the relationship further deteriorated, and over 30 lawsuits were eventually filed on three different
continents. By the end of 2009, a settlement was reached in which Danone pulled out of the alliance, which had accounted for a dominant share of the French company's sales in China of almost
US$3 billion
COURTESY
-
about 10% of its total worldwide sales.
THE lEADING
QUESTION
How can
companies
form strategic
alliances that
create value
on a standalone basis
and at the alliance portfolio
level?
FINDINGS
~Use an alliance
business case
framework
that
takes into account
the costs and benefits on both levels.
~Empower
an
individual
or a department
to oversee
alliance formation
decisions.
~Implement an integrated and codified
decision process.
OF AIRBUS
SPRING
2010 MIT SLOAN MANAGEMENT REVIEW 77
PARTNERING
Danone's bungled approach to the formation of
corporate alliances probably resulted in the destruction of several billion dollars' worth of market
capitalization. Our study of how companies make
decisions on the formation of alliances shows that
this sort of dysfunctional behavior is all too common. Most companies now maintain an alliance
portfolio comprising multiple simultaneous alliances with different partners.! In the global air
transportation industry, for example, most airlines
maintain broad portfolios of code-sharing alliances
with other carriers, which allow them to significantly extend their route networks by offering
services to their partners' destinations. In 1994, the
average number of alliances per airline company
was only four. By 2008, however, the picture had
changed dramatically: The average alliance portfolio size across the industry had increased to 12, with
some airlines engaging simultaneously in as many
as 30 or 40 alliances.2 Despite this proliferation of
corporate collaborations, research reveals a troublesome pattern. When a company adds a new alliance
to its portfolio, it tends to focus on how much value
the alliance will create as a stand-alone transaction
but ignore the fact that the composition of its entire
alliance portfolio is an important determinant of
the value that will come from a new alliance. In
other words, an alliance opportunity that promises
to create value from a stand-alone perspective may
not necessarily be value-creating from an alliance
portfolio perspective. The formation of the new alliance may even be an overall value-destroying move.
By studying the global air transportation industry, we found concrete evidence of this proposition.
(See "About the Research.") Formations of alliances
that create synergies with other alliances in an existing alliance portfolio have a more positive effect on
companies' stock prices than alliances with little or
no synergy-creating potential. We also found that
the stock market penalizes companies
that enter
into alliances that create conflict in the form of market overlap with existing alliance partners. Structural
incentives at many companies often encourage a
process that results in actions that may benefit one
business unit while hurting the corporate whole.
Observation of this phenomenon raises three
questions. Why do companies behave so thoughtlessly when forming alliances? What are the
78 MIT SLOAN MANAGEMENT REVIEW SPRING
impediments to a more strategic approach to configuring effective alliance portfolios? And, finally, what's
the way out
-
that is, what systems and processes
should organizations adopt that will enable them to
optimize the value of their alliance portfolios?
Understanding the counterproductive incentives
that skew alliance formation allows us to propose a
new decision-making process that we believe will
encourage companies to shift from the currently
prevalent ad hoc approach to a smarter approach. In
particular, companies should manage their alliances
not as stand-alone arrangements but much more
strategically, paying far more attention to how their
various partnerships interact with one another.
Pitfalls of Alliance
Portfolio Expansion
Alliance portfolios often result from a "sedimentary"
accumulation process. That is, companies engage in
multiple alliances over time, and all these partnerships accumulate haphazardly. Most alliances
- even
far-reaching partnerships that profoundly affect
companies' overall performance
- are initiated on
an operational level as ad hoc responses to local business issues. In contrast, broad alliances promoted at
the corporate level rarely translate into any actual
business development.
t
t
~
F
£
n
As a result, one part of an organization, such asa
business unit, will enter into partnerships that serveits
own parochial interests, often without realizing or
without regard for the impact on other parts of the
organization or the company as a whole. It is not surprising that alliance formation decisions are often
\\
n
o
local matters and that coordination across units in the
organization tends to be limited. Because business
problems, and thus alliance formation opportunities,
often are located in different units within an organization, problem owners are rarely the same individual.
The issues associated with creating an alliance tend to
affect different managers, who may interact with one
another rarely, if ever. From an alliance portfolio perspective, such bottom-up alliance formation decision
making is especially problematic when decision makers focus exclusively on criteria relevant to their local
S
A
pJ
ar
te
m
VI
to
business problems and ignore how the new alliance
fits into the company's alliance portfolio. Companies
pe
implement patchwork solutions that address problems for parts of a company but may actually create
ke
ca
Inl
2010
SLOANREVIEW.MllEDU
SL
-
new troubles for other parts. The net result is often a
failure to create value for the company overall- or,
worse, a destruction of value overall.
Explanations for such silo thinking are manifold.
Business-unit managers tend to have clear performance targets that are intrinsically linked to the
success of their own units; this naturally leads to the
prioritization oflocal needs over broader corporate
needs. Academic research has also shown that managers frequently behave opportunistically
and use
alliance formations as ways to improve their own freedom of action. 3Indeed, because alliance management
is shared with a partner and because interpersonal re-
ABOUT THE RESEARCH
We conducted
two types of research. First, we conducted
and interviewed
executives
qualitative
research
involved in alliance decisions in globally operating
companies from industries in which alliance portfolios are an important strategic device and an essential part of business strategy. More specifically, we
interviewed
executives
from the global air transportation
lines, Air Canada, Air France, Delta Air Lines, Deutsche
sector (American AirLufthansa and others),
packaged goods (Danone), aerospace and defense (EADS, SAFRAN). financial
services (Banco Santander, Banco Bilbao Vizcaya Argentaria) and telecommunications (Telef6nica de Espana, Ningbo Bird).
Second, we conducted
transportation
quantitative
research on companies
industry to better understand
value the companies
derive from individual alliance formations.
24 publicly traded, internationally
We examined
operating airlines from 19 countries and their
alliance portfolios as well as 259 formations
companies
in the global air
how alliance portfolios affect the
of code-sharing
alliances of these
over a five-year period. We applied event study methodology
and
lationships are often crucial in this process, it is
difficult for corporate-level management to interfere.
As a result, business-unit managers find themselves
code-sharing alliances. To examine how the alliance portfolios of these 24 companies contribute to the explanation of the abnormal stock market return
with a great deal of autonomy in alliance affairs.
following
Consider, for example, the decision of Construcciones Aeronauticas SA or CASA, a Spanish aerospace
and defense company, to partner with McDonnell
portfolio level measures and applied multivariate
Douglas Corp. in the 1980s. This move originated at
the plant level: CASA had idle manufacturing capacity
that needed to be utilized. By becoming a partner in
McDonnell Douglas's MD-80 commercial airliner
project, CASA was able to create activity for one of its
factories in Seville, Spain. The alliance with McDonnell Douglas thus solved a local business problem
(unused manufacturing capacity). From an alliance
portfolio perspective, however, the move was problematic. Since 1971, CASA had been collaborating
with Airbus - a McDonnell Douglas rival and the
man ufacturer of the A319 aircraft, a direct competitor
of the MD-80. As a result of its partnership
with
McDonnell Douglas, CASA's standing with Airbus
suffered and it was not able to increase its share in new
Airbus projects as it had hoped. Because the Seville
plant was not involved in the Airbus collaboration, its
managers lacked the perspective to fully understand
and evaluate the consequences that would follow from
teaming up with McDonnell Douglas.
Nor is that the only instance of a new alliance formation that appeared to be value-creating when
viewed as a stand-alone transaction but turned out
to be value-destroying from an alliance portfolio
perspective. In the 1990s, the Spanish telecommunications company Telef6nica de Espana maintained a
key alliance with Unisource NV, a consortium that
included telecommunications
providers Koninklijke
tracked the abnormal stock market returns following
individual alliance formations,
the announcements
we operationalized
of the
various alliance
statistical techniques
to ana-
lyze the impact on company value.
KPN N.V. of the Netherlands; Stockholm, Swedenbased Telia; Swiss Telecom; and AT&T World
Partners. In the late 1990s, one of Telef6nica's business units, Telef6nica Internacional or TISA, engaged
in an alliance with Concert, a venture between British Telecom and MCI, in order to promote business
in Latin America. While TISA managers focused on'
the value that Concert could add to Telef6nica, they
ignored the alliance's value-destroying effect from
the portfolio-level perspective. Shortly after the
TISA-Concert alliance was formed, Unisource partners raised concerns that Concert was becoming
AT&T World Partners' main competitor and asked
Telef6nica to leave the Unisource alliance. As part of
its exit, Telef6nica paid more than 14 billion pesetas
to Unisource (about US$94 million).
Making Alliances Fit
How can companies create alliances that not only
are valuable at the local business-unit level but also
work together to comprise a coherent alliance
portfolio - a portfolio that is worth more than the
sum of its parts? One part of the answer lies in having a corporate-level department that coordinates all
alliance-related activity across a company's multiple
units.4 Such a department
- what we call an alliance
function - is crucial in ensuring the overall effectiveness of the alliance portfolio. Even though ideas
for alliances have to come from low down in the
SLOANREVIEWMIT.EDU
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2010 MIT SLOAN MANAGEMENT REVIEW 79
PARTNERING
organization, there must be an overall alliance portfolio compatibility check in order to ensure that value
is created not only on the local, and thus individual,
alliance level but also on the alliance portfolio level.
A dedicated alliance function should keep track of
the alliance portfolio as it evolves over time and manage the balance between local problem solving and
overall alliance portfolio effectiveness. The reality,
however, is that such functions are often performed
by one of many internal corporate consulting units.
therefore, companies need to identify and quantify a
broad range of benefits and costs both at the level of
the individual alliance and at the portfolio level.
one
the
poa
bus
hea
leac
ofi
mal
larg
]
makers. Conflict between such a central function and
Costs and Benefits: Individual Alliance Viewed
on a stand-alone basis, alliances can help companies do four things:
. Achieve economies of scale by pooling similar
the business unit that initiates particular alliances is
often unavoidable due to diverging performance
assets, knowledge or skills. For example, Volkswagen AG and Renault S.A. teamed up to jointly
measures and interests. Although a dedicated alliance
function is measured against overall alliance portfolio effectiveness and how well it enforces the
develop and produce automatic gearboxes because
Cm
the market for automatic cars in Europe is small
and neither company had large enough volume to
efit:
par
ne\\
Such units are run as cost centers, and their managers
typically have little power over operational decision
company's overall alliance policy, individual alliances
often tie into business-unit performance metrics for
which the alliance initiator is responsible. The buck
essentially stops at the business unit, not at the corporate stafflevel where the portfolio is coordinated.
Between 1994 and 2008, the
average number of alliances
in the airline industry jumped
from four to 12.
misleading. An alliance viewed on a stand-alone
basis may appear to create value - but when the
benefits and costs on the alliance portfolio level of
analysis are taken into account, the picture can be
quite different. To construct a robust business case,
achieve efficient production volumes.
access to a partner's complementary
assets, knowledge and skills. For example, Volkswagen teamed up with Shanghai Automotive
. Obtain
and
alii,
its i
par
oth,
.s
Industry Corp. to create Shanghai VW, which leveraged VW's products and technology into China,
knc
by a
allia
interests both on the local and the alliance portfolio
where SAIC had local knowledge and access to
manufacturing and distribution assets.
. Obtain access to new skills. Similarly, General
anC
dev,
levels. The following three elements can help managers address this challenge: (1) an alliance business
Motors Co. and Toyota Motor Corp. formed the
NUMMI alliance so that GM could learn about
tho:
case framework that takes into account costs and
benefits on the individual level as well as the alliance portfolio level of analysis, (2) an integrated
and codified decision process involving managers
Toyota's lean manufacturing process and Toyota
could take a cue from GM on how to deal with U.S.
labor unions.
. Reduce competition in the market and increase
bast
on the business as well as the corporate levels, and
(3) clearly defined roles and responsibilities for all
van
market power. Rather than competing individually,
slve
DaimlerChrysler Aerospace AG (DASA), British
Aerospace, CASA and Aerospatiale Matra formed
the Airbus alliance, offering a jointly developed and
up'
Sale
app
By engaging in strategic alliances, companies incur
manufactured product. The companies thus benefited from a less crowded playing field within the
both costs and benefits.s Rationally behaving companies will enter into an alliance only when it creates
timl
European market for commercial aircraft.
mar
Still working from this stand-alone perspective,
we can see that alliances also create costs for their
partners. Most apparent are start-up costs, along
with ongoing coordination costs. More subtle are
licv
Based on our research, we put forward a framework that will help managers to systematically
make alliance formation decisions by considering
actors involved in decision making.
Holistic Cost-Benefit Analysis
value - that is, when its expected benefits exceed its
costs.6 The construction of a business case for each
alliance formation is therefore essentiaJ.7
Typically, alliance business cases tend to take into
account only those benefits and costs that occur for a
particular alliance, in isolation from existing ones.
the costs that stem from unexpected leakage, where
one partner in the alliance acts opportunistically
and appropriates skills or knowledge from the other.
But such a myopic cost-benefit
There are numerous examples of alliances in which
evaluation can be
ne\\
me.
pan
COlI
corn
lian
whi
cess
Sale
offe:
its C
80 MIT SLOAN MANAGEMENT REVIEW SPRING 2010
COURTESY
OF SKYTEAM
SLOt
r
I
one partner appropriates skills and knowledge from
the other partner in an opportunistic fashion. Such
poaching has afflicted even the seemingly genteel
business of flower breeding. Meilland International,
headquartered
in France and one of the world's
leading developers of rose hybrids, found that one
of its former Chinese licensees was growing and
marketing several of its patented varieties on a very
large scale without paying any royalties.8
But it is not sufficient to focus only on the costs
and benefits at the level of individual alliances: The
alliance business case needs to be pushed further, to
its impact at the level of a company's entire alliance
portfolio.
Costs and Benefits: Alliance Portfolio The benefits that a new alliance can create on the alliance
portfolio level mainly stem from ways in which the
· Reinforcing existing coalitions. The airline industry provides a good example of this type of
synergy. As a consequence of merging with Air
France, KLM joined the Skyteam alliance that had
previously been formed by Air France and Delta Air
Lines Ine., while retaining its own long-standing
relationship with Northwest Airlines Corp. Northwest eventually decided to follow its long-time
partner KLM into Sky team, rather than partner
with other airlines, which strengthened the existing
coalition. (Some years after this move, Northwest
merged with Delta.)
The costs on the alliance portfolio level that a
new alliance can create mainly stem from conflict
resolution in existing alliances. These costs are related to re-establishing trust and good will with an
existing alliance partner and can arise when a new
new alliance and the existing ones can enhance each
alliance interferes with the relationship between a
company and its existing partners. Such a distur-
other. Two types of synergy are:
· Sharing or recombining know-how. Assets,
knowledge and skills contributed or developed
by a new alliance may be used in another, ongoing
bance may occur when the new alliance represents
a competitive threat toward the existing partnerperhaps through imitating the other partner's
alliance. A new alliance may help a company develop
a technology that may be of use in an existing alliance. Similarly, assets and knowledge contributed or
developed by a new alliance may be combined with
those associated with an existing alliance to create a
new service or product. For example, Californiabased on-demand service provider Sales force. com
ine. has a portfolio of alliances that allows the company to combine physical and intellectual assets from
various alliance partners to offer a more comprehensive service to its customers. Salesforce.com teamed
up with Google Ine. to offer a joint product called
Salesforce for Google Apps, a business productivity
application
that allows "business professionals
to
communicate, collaborate and work together in real
time over the Web."9 In order to offer its customers
more computing power and allow them to host public Web sites and company intranets over its Force.
com platform, Salesforce.com also engaged in an alliance with Amazon.com Inc. The online retailer,
which maintains a vast network of servers, makes excess server capacity available to Saleforce.com. Thus,
Salesforce.com is able to leverage both alliances and
offer a broader and more comprehensive service to
its customers.
technology or offering similar products or services.
When a newly formed alliance overlaps in product or market scope with an existing partner's
business operations, the focal company may not only
incur increased conflict resolution costs but in the
worst case may also have to bear the consequences associated with dissolving the pre-existing alliance. An
existing partner may decide to terminate an alliance
altogether as a reaction to the formation of a new alliance and the resulting conflict. Such termination can
result in the loss of valuable resources and particular
revenue streams and therefore create a cost, as in the
unhappy story of Danone and Wahaha.
Other examples can be found in the airline industry. British Airways PIc's decision to engage in
an alliance with American Airlines Inc. directly led
to the termination
by US Airways Group Ine. of its
existing code-share and frequent flyer partnership
with British Airways. USAir likely felt threatened by
the new links that BA was forging with American.
Although BA called USAir's move "disappointing
and puzzling,"l0 USAir may have suspected that BA
-
would systematically favor its relationship with
American, a larger and more powerful airline. BA
might, for example, direct most of its flights toward
American's hub cities or optimize its connections
SLOANREVIEW.MITEDU
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2010 MITSlOANMANAGEMENTREVIEW
81
PARTNERING
with American at USAir's expense. Another example
is Singapore Airlines Limited, which entered into a
will incur redundancy costs because they will have to
staff more people on the alliances than they would if
they only had one alliance.
multipartner alliance with Delta and Swissair involving equity swaps. Later, however, Singapore
Airlines entered into a code-sharing and joint marketing agreement with Deutsche Lufthansa AG,
leading to the termination of its alliance with Delta
Toward Smarter Alliance Formation
Sound alliance formation decisions require an integrated decision process that involves actors on the
and Swissair.
business level as well as the corporate level in order to
ensure a systematic assessment of the proposed alliance as well as the alliance portfolio level benefits and
costs. The first phase of such a decision process should
take an individual alliance perspective and the second
phase an alliance portfolio perspective. Companies
The second source of tension between new partnerships and existing ones becomes salient when the
focal company incurs costs associated with redundancy and value cannibalization as a result of a new
alliance. Overlap in scope between a new alliance and
an existing one can diminish either's benefits. It's
should assess alliance opportunities according to a
rigorous set of criteria. (See "Alliance Assessment Decision Process.") By systematizing what is at present
true that redundancy is sometimes created deliberately to pursue various simultaneous options and
thus spread risks, especially in research and develop-
done on a mostly ad hoc basis, companies should be
better able to ascertain that the partnership they are
ment alliances to develop competing technologies.
Nevertheless, companies that pursue such a strategy
ALLIANCE DECISIONS: WHO'S RESPONSIBLE
Wise alliance formation
FOR WHAT?
deci-
sions benefit from an integrated
decision process. Many
companies
use a graphical
representation
modeling
.
of decision
that identifies
each
.,' ,.
,.
.I..
.,
'
actor according to the following
rubric, known by the initials
Identify
alliance
of the key terms as RAG
benefits
costs
AR
C
. Who is Responsible?
Conduct alliance level
cost-benefit
evaluation
AR
C
C
AR
Which
individuals have to perform
the task?
.1..1..
.
.' '.
..
:'.
,
level
Identify alliance portfolio
level benefits and costs
. Who is Accountable? Which
individuals have the ultimate
ownership of the task, and
whose heads will roll if the
task is not performed?
Conduct alliance
level cost-benefit
evaluation
. Who needs to be Consulted
for input during this process
step?
Compare alliance level
and alliance portfolio
level costs and benefits
.Who should be kept Informed
and up to date during this process step?
Raise awareness
of
benefits and conflict
between
alliances
.
contemplating will do more good than harm.
C
C
portfolio
AR
R
AR
AR
Take final decision
AR
Note especially the strong
role played by the Manager
of Alliance Function. This is
Alliance Sponsor: Owns the business problem that requires the alliance
Manager of the Central Alliance Function: Is responsible for the overall effectiveness
of the company's alliance portfolio
an individual or department
high in the central corporate
Managers of Other Alliances: Are responsible for the other ongoing alliances in either the same business or a different business
hierarchy that is charged with
Managers of Other Business Units: Have no vested interest in the alliance to be formed
the coordination
Executive Committee: Is the ultimate "decision maker" that decides on the go-ahead of the alliance
of a company's
alliance portfolio
82 MIT SLOAN MANAGEMENT REVIEW SPRING 2010
SLOANREVIEWMllEDU
-The other critical step that companies should
take to make sense of their alliance formation is to
clarify exactly who in the organization plays what
role in the process. Alliance formation decision
ALLIANCE ASSESSMENT
making in companies with alliance portfolios is a
complex undertaking that requires the involvement
ance should
be rejected
If the single
alliance
of a broad range of actors on both the business-unit
and corporate levels.
To ensure effective alliance formation decision
making, the exact roles and responsibilities of each
the impact
individual player or committee in the process needs
ance might
to be formalized, codified and communicated
throughout the organization. One commonly used
created
Any new alliance
regard
opportunity
to the alliance's
the alliance,
portfolio.
benefits
needs
impact
and then with
If costs
on the individual
regard
exceed
in two phases:
business
on the company's
at the single
alliance
there
are other
exceed
from
an alliance
portfolio
exceed
the costs,
the formation
involved
overall
reasons
in
alliance
level, the proposed
strategic
the costs,
first with
unit directly
to its impact
benefits
unless
benefits
DECISION PROCESS
to be examined
alli-
for pursuing
it.
then the next step is to assess
perspective
If the alliance
for the alliance
portfolio
decision
should
level
be a
"go." If, however,
costs exceed benefits at the alliance portfolio
level, then the
company
needs to do one further piece of analysis: comparing
the value that the
alliance
method of business process analysis, RACI analysis,
tags the various actors in an organization as having
is able to create
destrayon
exceeds
on the single
the alliance
expected
alliance
portfolio
level with the value
value destroyed
should
the new alliance
. Economiesofscale
.
.Access to new skills
Access to complementary
knowledge and skills
Individual
alliance
analysis
one or more critical roles. Based on our research, we
have developed a RACI diagram that precisely defines
.
that the alli-
level. Only if the expected
Reduced
competition
value
get the nod.
assets,
and increased
marketing power
. Start-up
.
the various actors in the alliance formation process
and coordination
costs
Unexpected leakage
and assigns to each actor one or more RACI tags. (See
"Alliance Decisions: Who's Responsible for What?")
A clearly defined decision process and explicitly
codified roles and responsibilities
could have
helped companies such as Telef6nica to see the bigger picture and avoid falling into the trap of forming
Value 1:
benefits>
costs
?
Yes
.
.
. and skill.s.
Sharing
alliances that appear to be value-creating deals from
the business-unit
of assets,
skills across
perspective but create negative
Alliance
portfolio
analysis
intra-alliance portfolio dynamics that destroy value
overall. More specifically, it would have forced
.
in the decision. Through clear roles and responsibilities, the corporate alliance function could have
put the potential outcomes in the context of the
and
Recombination
of assets,
Reinforcement
of existing coalitions
. Conflict
Telef6nica's TISA unit to flush out the benefits as
well as downsides of the new partnership
and
forced it to involve other parts of the organization
knowledge
alliances
resolution
knowledge
costs
Costs of value cannibalization and
redundancy
Value 2:
benefits>
costs
Value 1> Value 2
?
?
company's overall strategy.
Yes
Yes
Conclusion
There is no doubt that alliance portfolios have become a popular and important strategic device for
companies seeking both to exploit opportunities
and to neutralize threats. But surprisingly, many
decisions pertaining to the formation of alliances
are made on an operational level, without much regard for the impact on the company's overall
alliance portfolio. By following a rigorous process
that includes an integrated alliance business case
and clear roles and responsibilities in decision making, companies can ensure that their alliance
SLOANREVIEW.MITEDU
portfolios
do not grow
that their
alliances
as the sum of their
As noted
Levinthal,
are worth
more
individual
parts.
by corporate
"in complex
covery
of the optimum
Such
span
company
decisions
multiple
or if outside
fashion
and
as a whole
than
scholar
D.A.
management
decision
task."ll
they
in a haphazard
problems,
is an extremely
are even
organizational
more
units
the disdifficult
difficult
within
if
a
parties are involved. Alliance
SPRING
2010 MIT SLOAN MANAGEMENT REVIEW 83
PARTNERING
formation - which by definition entails bringing
together multiple business units and inevitably requires interaction
with independent
partner
companies - thus presents numerous possibilities
for mismanagement.
In fact, viewed in that light, al-
liance formation emerges as one of the most fraught
and perilous moves an organization can make.
The tools described above are essentially a set of
mechanisms that help companies address three common issues with alliance formation decisions from an
alliance portfolio perspective: breaking down silo
thinking, overcoming information asymmetries and
balancing local and global needs across the organization. Bysitting down around one table, decision makers
from different units can better understand each others'
perspectives, realize how a new alliance they are considering might be detrimental elsewhere in the
organization and bargain with one another to arrive at
a mutually acceptable solution. Also, by putting the responsibility for alliances in a central position, this
approach will increase the status, influence and power
that function has. As a result, companies will find it
easier to arrive at decisions in which overall corporate
objectives prevail over local, business-unit interests. Finally, working out the business case for an alliance will
force all parties involved in the process to quantify, or at
least estimate, the benefits and the downsides of the
partnership being considered and allow for a somewhat more objective evaluation of the various
implications of forming that particular alliance, both
on the level of each individually affected business unit
and on the overall corporate level.
Ulrich Wassmer is a professor of management at
Concordia University's John Molson School of
Business in Montreal, Canada. Pierre Dussauge is
a professor of strategic management at the HEC
School of Management in Jouy-en-Josas, France.
Marcel Planellas is a professor of business policy
at the ESADE Business School in Barcelona, Spain.
ACKNOWLEDGMENTS
The authors thank Silviya Svejenova for her helpful comments on earlier versions of this article. Pierre Dussauge
acknowledges
support from the H EC Accor-Air FranceSNCF Chair on Service Management.
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Reprint 51305. For ordering information,
Copyright
@
Massachusetts
Institute
seepage 9.
of Technology, 2010.
All rights reserved.
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