Nathan did not see how rural America would survive after September 11th. Before that event, Nathan, as part of his sales job, visited two rural communities in North Louisiana: Minden and Gibsland. Both communities struggled with their lack of a tax base and job opportunities. Many of their bright, young people had left their communities for city life in larger cities in the state and beyond.
Yet, in 2019, Nathan was astounded at these communities now. There was Minden with a slightly larger population in 2011, still struggling with its economy. And then there was Gibsland with its thriving economy.
New companies were opening. There were influxes of new residents, especially from the Northern states, coming to live there. Nathan could not resist talking to Gibsland Mayor Becky Pullen about this turnaround.
Mayor Pullen suggests a simple strategy of a collaborative effort. She explains that their community decided to pull together and pool their resources on a shared vision. We identified the strengths of our community, as well as got businesses and non-profits to work together on our vision of being the best catfish spot in the country.
We worked with the local colleges and K-12 systems to build curriculums around tourism and the fishing industry. Citizens in the community were excited about this strategy. We slowly start seeing the results in 2015. We have never looked back. We had successfully created a strategic alliance for our community.
In today’s hyercompetitive environment, companies that want to compete in the future understand that the status quo will not do. Accenture Strategy surveyed 1,252 business leaders from diverse industries across the world to better understand the degree to which companies are capturing ecosystem opportunities.
We discovered that companies are pursuing new business models to navigate, or even lead, disruption. When asked what they would typically do to disrupt their industry, 60 percent of executives said, “build ecosystems.” Nearly half have already built or are currently building an ecosystem to respond to disruption.
According to Accenture, 76% of business leaders surveyed agree that current business models will be unrecognizable in the next 5 years. Businesses that attempt to move forward against the backdrop of uncertainty and unpredictability with little or no partnerships will find it difficult to be successful. In this discussion, we will focus on how to build strategic alliances in a disruptive world marked by uncertainty and unpredictability.
The coronavirus has had a tremendous impact on our lives as global citizens. Over 152 countries across the globe have been impacted by the coronavirus (COVID-19), and over 7,000 people have lost their lives to it according to the World Health Organization (WHO).
In the United States, there have been more than 5,600 cases of the respiratory virus and 94 deaths. New York has reported some 1,700 cases, while
Washington state has reported nearly 1,000 cases. Individuals have been acted to change their behavior, especially the use of social distancing. Many businesses and non-profit organizations have been shut down. The WHO director, Dr. Hans Henri P. Kluge, said: “The lives of millions of people in our region are undergoing radical change. There is quite simply a new reality.” Maintaining the status quo won’t work in a pandemic situation.
For example, Italy underwent some extreme measures once the coronavirus was there. Over 31,506 cases and 2,500 deaths of COVID-19 have been reported in Italy, the heart of the outbreak in Europe. The government locked down the country and mandated curfews for its citizens. Italy’s new cases are the slowest rate of increases in the country for several weeks. Only when organizations come together collaboratively can meaningful things get accomplished in a global crisis.
Strategic alliances can help an organization through disruptive changes. What is a strategic alliance? According to the business dictionary, a strategic alliance is an “agreement for cooperation among two or more independent firms to work together toward common objectives.
Unlike in a joint venture, firms in a strategic alliance do not form a new entity to further their aims, but collaborate while remaining apart and distinct.” The advantages of a strategic alliance include: (a) sharing resources and expertise, (b) new-market penetration, (c) expanded production, and (d) innovation.
Organizations are able to leverage limited resources and maximize their core competencies to spin-off innovative ideas into tangible actions. The disadvantages include loss of control and increased liabilities. Effective strategic alliances must be built on trust and transparency. In most cases, organizations must surrender their autonomous thinking to collaborative efforts. With strategic alliances, there is a large risk that the outcomes will not be desirable ones.
Having taken risks in strategic alliances can pay off. For example, one company that has continued to infuse itself with effective strategic alliances is Starbuck, the Seatlle-based business. In 1971, Starbucks started as a single coffee shop in the historic Pike Place Market. The company’s mission is “to inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time.”
Today, Starbuck is the world largest coffee retailer, with over 19,000 locations in more than 60 countries, selling over 2 billion cups of coffee every year. In 1993, Starbucks partnered with Barnes and Noble bookstores to provide in-house coffee shops; Starbuck built an alliance with United Airlines to serve Starbucks coffee on all its flights; Starbuck made a strategic partnership with Kraft foods, resulting in Starbucks coffee being marketed in grocery stores; and finally, in 2006, Starbucks partnered with Apple to collaborate on selling music as part of its “coffee house” experience.
Rosabeth Kanter, former Chief Editor of Harvard Business Review, and author of the new book Think Outside the Building: How Advanced Leaders Can Change the World One Smart Innovation at a Time, argues, “In rapidly changing environments, compatibility in values, philosophy, and goals are more important than specific features of an immediate business deal. The basis for collaboration must be more enduring, and there must be a foundation for mutual trust to help inevitable weather changes or problems.”
Jason Wakeam, Director, Operations, Global Alliances, Hewlett-Packard Company, further suggests five critical elements for strategic alliances, which are: (a) Critical to the success of a core business goal or objective; (b) Critical to the development or maintenance of a core competency or other source of competitive advantage; (c) Blocks a competitive threat; (d) Creates or maintains strategic choices for the firm; and (e) Mitigates a significant risk to the business.
Wakeam maintains, “The essential issue when developing a strategic alliance is to understand which of these criteria the other party views as strategic. If either partner misunderstands the other’s expectation of the alliance, it is likely to fall apart. For example, if one partner believes the other is looking for revenue generation to achieve a core business goal when, in reality, the objective is to keep a strategic option open, the alliance is not likely to survive.” The following strategic alliance steps are presented:
- Each organization should have a shared vision.
- Each organization should bring its strengths (core competencies), but be aware of its weaknesses.
- Develop short-term and long-term goals.
- Seek compatibility in values.
- Develop measurable outcomes and track results.
- Put it in writing as a collaborative work, but don’t leave it all to the attorneys.
- Build on mutual respect.
- Keep Communication flowing.
- Have a champion in each organization to serve as liaisons.
As we move forward, there will be an onslaught on crises across the globe. Most large firms with the financial willpower will opt to solo through tragedies alone. Some will succeed in the short-term, while many will fail as history shows.
In this article, I demonstrated how to build strategic alliances in a disruptive world marked by uncertainty and unpredictability. While the coronavirus poses a challenge for the world, dealing with crises alone is not wise. Organizations that can be collaborative on a shared vision create a culture that can spin off innovation and can ensure sustainable successes. Find the right organizations for effective strategic alliances. Pray that it is not too late.
© 2020 by Daryl D. Green
About Dr. Daryl Green:
Dr. Daryl Green provides consulting, guidance, and management training for today’s business leaders. He is the Dickinson Chair at Oklahoma Baptist University. In 2016, he retired as a Senior Engineer and Program Manager with the Department of Energy after a successful career. Dr. Green has over 25 years of management experience and has been noted and quoted by USA Today, Ebony Magazine, and Associated Press. For more information, please visit http://www.drdarylgreen.com.