Gain Competitive Advantages Through Alliance Competence

To say that alliances are pervasive throughout the corporate landscape almost seems to trivialize their true impact on the conduct of global business. There is not a sector of the economy that does not rely on alliances to gain a competitive advantage. Firms rely on alliances to enhance their power in the marketplace, access new markets and/or new technologies, and to improve profitability as well as shareholder performance. Yet, despite the exponential growth in alliance formation, my research shows that alliances fail at the rate of 60-70 percent and that the rate of failure has not decreased significantly in 20 years.

Alliances require soft skills that many managers with command-and-control backgrounds need to acquire in order to create successful partnerships.

What Is Alliance Competence?

Competence is a multidimensional concept about the attitudes and behaviors that lead to success. So, alliance competence suggests that a firm understands the process of developing, nurturing and managing an alliance. Firms that are widely recognized as being competent are sought out as partners, are selective in their choice of partners, and have a well-honed approach to alliance management. They embrace the tenets of collaborative behavior and are better equipped to leverage the full potential of their partners for the benefit of the alliance.

A competitive advantage is a function of the partners’ collective resources and their alliance competence. Three elements must be understood if a firm is to be alliance competent. The first element is, an alliance is about relationships and relationships are about people. The second is that knowledge and information are assets to be shared and their free and open flow benefit all parties. The third is that certain processes, systems and structural factors guide and enable alliance-like behavior, the objective being to improve collaboration and integration across units and across boundaries, and thus create value in the marketplace.

Elements of Alliance Competence

Alliance management requires particular skills, and different skill sets affect the alliance in different ways. On a basic level, alliance management facilitates three main activities associated with managing a given alliance:

• Coordination
• Communication
• Bonding

In our work, we have documented five elements that enable a firm to support alliance-like behavior. Each of these elements been shown to affect alliance performance:

• Alliance know-how entails knowledge and experience in alliance management. It is the ability to articulate, codify, share and internalize alliance management know-how that is critical.  Here, the notion of competence as a tool to leverage and create new capabilities is bound to lead to better alliance performance.
• Alliance mindset relates to those relational variables (e.g., trust, commitment, communications) that enhance a firm’s ability to partner. It captures the underlying social contract that guides the interactions between partners and addresses the question of what it means to partner.
• Alliance bench depth is simply the depth of talent that a firm has in people who are alliance facile and can easily assume the role of alliance manager. Alliance managers cross many boundaries and may be considered “boundary-less.” They must balance the needs and desires of the parent companies, the needs and desires of their home companies, and the day-to-day management of the alliance. On an interpersonal level, alliance managers maintain relationships with superiors, peers and subordinates both in the alliance and the parent organizations.
• Alliance learning addresses the institutional mechanisms by which alliance skills are recognized, taught and institutionalized. Learning is the codification of the processes that foster alliance competence and can be accomplished a number of ways. One way is through the use of templates and forms that force others to ask questions and collect data that they might not otherwise do.
• Supportive processes and structures are the mechanisms that facilitate the sharing of alliance knowledge among partners as well as within the firm. Organizational structure and processes can impact both the firm’s ability to leverage its extant alliances and its ability to develop new skills in the future. In alliances, bureaucracy can stifle the firm’s ability to innovate due to the rigid rules that standardization and centralization manifest. On the other hand, in an adhocracy, its structure encourages the expression of communication, discussion, and information sharing that, in turn, promotes a culture in which alliances are more likely to succeed.

Necessary Process and Structural Elements

Through an examination of structure and process alone we are able to determine the degree to which a firm is alliance facile or not. Processes that enable the free flows of information, encourage risk taking and establish reward systems that facilitate teamwork among different parts of the firm are more likely to result in high-performing alliances. In a similar vein, structural elements that discourage silo-like thinking and encourage higher levels of participation in decision-making are more likely to be higher performing alliance partners. The items of the survey converge on the following four factors:

1. Not silo-bound: the absence of internal barriers that prohibit an enterprise view
2. Information sharing: the firm’s encouragement of information transfer and communication among units
3. Decentralization: the decision-making ability of the firm’s people and their ability to take action
4. Monitoring systems: the existence of systems that self-correct and monitor performance

We believe that these five elements of competencies explain much of the variance between high- and low-performing alliances. Successful alliances do not just happen by accident. They take effort and hard work. Trust is an essential ingredient in any attempt to transfer knowledge, because it acts as a counterpoint to opportunistic behavior. Said simply, trust is the currency that determines knowledge accessibility. It is fragile, easily damaged and should be repaired quickly. Open communication and the use of technology to enable the flow of information between partners are key to alliance performance. Building an alliance competence among one’s management team is important. Whether there is a dedicated alliance function or whether these requisite skills are inculcated as part of the firm’s genetic code is not the point.

We have attempted to delineate the elements that define alliance competence. In our work, we have measured these elements and find that while each element is key to appreciating alliance competence, supportive structures and processes are more critical since they enable the type of behaviors upon which successful alliances are built. To be a good alliance partner means that a firm must demonstrate internally the type of behavior that it wishes to see in its external relationships.

This article was adapted from “Alliance Competence: From Conceptualization to Implementation,” by Robert E. Spekman,  T.K.Das (ed.) Interpartner Dynamics in Strategic Alliances, 2013, 1-25.