What makes a successful strategic alliance?

Apple and Beats; Atlassian and Slack; Spotify and Uber. All three of these strategic alliances have had enormous impacts on their respective industries. What do they have in common? First, each alliance comprises two companies with overlapping values and client bases coming together for mutual benefit. Each partnership also propelled both businesses to new growth and greater success. 

As a startup founder or small business owner, striking up a partnership with another business can be a great way to reach a broader market and improve your offering or service.

This article provides a framework to: 

1. guide you through the process of choosing partners that align with your business; and 
2. set up your partnerships for mutual success 

What Is a Strategic Alliance?

Put simply, a strategic alliance is a mutually beneficial arrangement between two businesses. 

Think of a strategic alliance as being similar to an alliance between friendly nation-states with different strengths. One might be rich in resources but lacking in talent, for example, and the other might have the opposite problem. 

With your partners, you might share:

• resources;
• industry knowledge, 
• marketing collateral, 
• events; and 
• customers. 

Each party will have their own agenda and goals, and the purpose of the alliance is to help each side reach these goals. Many strategic alliances allow the cross flow of value from various areas. 

For example, one partner may be interested in accessing clients from a previously untapped market and the other partner may be seeking to leverage technological developments to enhance their efficiency. 

Let’s look at the three key elements of a successful partnership.

1. Build on Strengths

First, you should consider your strengths. As a startup founder or business owner, you are a specialist at what you do. This expertise is your ‘currency’ when looking for a partner. Your partners should have strengths of their own that are different from yours.

Especially when you are in the early phases of expansion, you likely have a narrow business focus. For example, you might be excellent at serving a small target market. A great partnership opens up a new target market who would also benefit from your offering but has previously been inaccessible. By combining your efforts, you can expand the reach of both you and your partner.

Similarly, you should look for partners who can benefit from what you do well. Beyond opening up a market for your partners, you might provide knowledge or insights about your industry that they can use to enhance their offering. 

For example, General Motors (GM) and Toyota jointly operated an automobile manufacturing company between 1984 and 2010. Toyota benefitted by avoiding import restrictions and testing the American labour market. At the same time, GM learned the Japanese method of lean manufacturing – minimizing waste without sacrificing productivity- and was able to apply this to its products. Both parties built on each others’ strengths to maximise their own.  

2. Shared Values

Second, you should look for a partner with similar values to yours. Businesses with shared values will generally be more successful in their ventures. Your business’ values include your:

• strategy and vision; 
• operational style; and 
• culture. 

The more your values overlap, the more likely it is that you and your partner will build a thriving alliance.

For example, if both businesses are aiming to disrupt their industries, they will probably have a cohesive vision for partnership initiatives. On the other hand, tensions may arise in a partnership where one business values being agile and responsive and the other has a more traditional business model. 

On the other hand, divergent business values within a partnership can sometimes present the opportunity to share knowledge and learn new ways of working.  

For example, a young startup may have a lot to learn about operations and management from a mid-market corporation. Similarly, that same mid-market corporation could benefit from adopting the cultural practices of the startup.

In most cases, however, shared business values will be beneficial. Generally, shared values will:

• allow for more efficient delivery; and 
• mitigate the risk of divergent goals. 

3. Integrate

Finally, you should try to integrate your businesses as much as possible. The more that you and your partner can integrate your businesses, the more likely you are to have a successful strategic alliance. This is because greater integration means more: 

• points of contact between organisations;
• opportunities to collaborate; and 
• joint activities. 

Ultimately, this can lead to better access to markets and more joint offerings.

Most partnerships begin with one or two direct connections between top leaders or relationship managers in each company. Involving more people at different levels in each organisation will increase the connection between partners. This is because it becomes easier to implement initiatives as people begin to feel more included.

Formal structures, such as a partnership board or joint project team, can also help with establishing a strong connection between businesses. These kinds of ‘bridges’ between companies are especially useful when the alliance is developing and delivering a joint offering. 

Enhancing the public image of the partnership and projecting the strength of the alliance can also be a great way to foster integration. Good ways to show the importance of the partnership to the market include:

• co-branded marketing; and 
• co-hosted events.  

By publicising the partnerships, each business’ customers will be made aware of the relationship. Often, this means that they will be more likely to embrace joint offerings.

Similarly, enhancing the public image of the partnership will also impact how internal stakeholders view the relationship. If it is clear that both companies are working together to build the connection, employees and decision-makers will appreciate how important the partnership is. 

Uber x Spotify

The strategic alliance between Uber and Spotify in 2014 is an excellent example of the three elements outlined above. The joint offering was simple: premium Spotify users were able to listen to their music in cars booked through Uber. 

Firstly, both companies built on their strengths. Spotify was uniquely positioned in its market to allow customers to effortlessly and cheaply access a massive range of music. With millions of users worldwide, Spotify was able to influence its users to make Uber their preferred form of transportation. Similarly, Uber was able to add value to Spotify customers by providing a personalised experience. As an agile and technology-based business, Uber could do this much more effectively than its competitors. 

Second, both companies shared similar values. Both Spotify and Uber are disruptive companies leveraging the connectivity of technology to transform their industries. Both were rapidly growing and appealed to a broad audience. These shared values allowed for an effective partnership between the two businesses.

Lastly, both companies could integrate easily. The alliance between Uber and Spotify was well publicised in a range of ways, including:

• announcements to the press; and
• co-branding on each others’ website. 

By creating this public awareness, each company demonstrated their commitment and increased the alliance’s chances of success.

Key Takeaways

Strategic alliances between companies can take many different forms and have various purposes. As a startup founder or small business owner, you can propel your business into new growth by accessing untapped markets and developing new products with a partner. To ensure that your partnership is successful, look for these three critical elements:

• a commitment to integration; 
• shared values; and 
• individual strengths. 

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