The formation of strategic business alliances locally can enable the Hunter region’s professional service firms and SME’s to win higher value business than as individual firms. Alliances can overcome the ‘David and Goliath’ problem of SME’s as being perceived as ‘small businesses’ by large corporations and government departments who, in turn, appear to SME’s to be clad in impenetrable armour.
Potential strategic alliance arrangements span from collaborative product and service design, development, alliance brand marketing and bid alliances through to joint ventures.
Here are a few reasons to consider strategic alliances for your business:
- Successful alliances can leverage the integrated capacity of member firms to create competitive advantage to win higher value business, especially where the alliance focuses on a targeted market, such as for:
- Aerospace and defence;
- Building and construction;
- Agriculture and food processing;
- Engineering and manufacturing;
- Mining, rail and port operations;
- Financial institutions and insurance;
- Local, State and Federal Government.
- Alliances can secure larger contracts through collaboration, rather than organic growth. Most importantly, each member firm becomes a channel to market for other members of the alliance. And thus, network marketing can establish ‘brand recognition’ to successfully position the alliance in the target market.
- Alliances also offer an effective business risk management solution in turbulent market environments. In the resources investment boom, many engineering and construction firms aggressively pursued organic growth. In the subsequent investment downturn, the firms had to lay off staff and close facilities to survive.
Alliances had their genesis in the partnership sourcing approaches developed within the Japanese company families – the keiretsu – in the 1960’s and 1970’s, which tried and tested many of the management tools now used by all the major industries of the world. In fact, many commentators place their partnership approaches as the single greatest factor which gave the Japanese automotive industry their unprecedented success in the 1980’s and early 1990’s.
The Japanese success was to eradicate non-value adding activities which result in the destruction of value in the adversarial interface between firms.
My experience in business alliances and joint ventures suggests that to be successful the alliance must be driven by business owners and leaders from each organisation who share common business goals. Successful business alliances begin with a clear business need for all parties. A clear business need answers the fundamental question “why am I doing this?” For example:
- Need to boost profitability;
- Need to win higher value business;
- Need for diversification into targeted markets;
- Need to structurally reduce business cost base;
- Need to effectively manage market volatility risk;
- Need to access scarce skilled resources; and/or
- Need to access specialist technical expertise.
The other question to ask is “am I ready, and are they?” This is answered by examining essential prerequisites for business alliances to succeed.
- Similar values – honesty, integrity and trust.
- Common maturity – leadership commitment, levels of delegation, skills and competencies.
- Mutuality – willingness to share in risk and rewards.
- Style compatibility – agility and team work.
If these prerequisites are met you can say with conviction “yes I understand why I am doing this, and yes, I know what I am taking on.”
The substantial benefits of alliances can be found in their ability to deliver superior value for all participants.