The Hidden Work Behind Successful Business Alliances

Based on research Prashant Kale (Rice Business), Melanie Schreiner (University of Konstanz), and Daniel Corstein (IE Business School)

Key findings:

• Companies forging a partnership must prioritize trust.
• One-on-one informal chats in the hall or impromptu coffee breaks can provide crucial information or ideas.
• Separate companies, by definition, don’t share the same cultures, skills or goals. If the firms are too much the same, adding a partner doesn’t add much spark. If they are too different, harmony can be elusive.

It’s one thing to know your firm might benefit from a partner. It’s quite another to make that relationship work. 

As experienced managers know, corporate alliances can look a lot like a marriage: a partnership that requires hard work and specific skills. And even when everyone stands to profit from the union, there are no guarantees a relationship will have what it takes to survive.

Because business alliances can be so vital, much research has gone into puzzling out exactly how the successful ones work. Among the most important steps, studies suggest, are selecting the right partner from the start and clearly defining the terms of engagement.

Emerging evidence now shows that a healthy alliance also requires a firm to focus on the relationship once the union is sealed. According to a recent study co-authored by Prashant Kale, an associate professor at Rice Business, strong alliances demand coordination, communication and bonding.  

In other words, when it comes to businesses, love at first sight isn’t enough.

In their study, Kale and his co-authors analyzed the links between major software vendors IBM, Microsoft and SAP and an array of software service providers. Among the issues surveyed: did managers think they could “intuitively feel” what their business partners needed to discuss with CEOs?

The findings showed that, much as in individual relationships, forging social bonds, managing information and sharing knowledge are critical for a full partnership to flourish.

These conclusions are particularly important since many firms see alliances can offer a competitive edge — but pay less attention to keeping those alliances strong for the long haul. That attention is key: Organizations that do a better job of this have better outcomes.

Kale and his colleagues also looked at how considerate, supportive and attentive one firm was toward another, as well as how well they respected each other’s viewpoints; how disagreements were resolved; and if they stood together in tough times. 

Far from touchy-feely details, mastering these skills equaled improved business outcomes. Here are some of their findings:

• Companies forging a partnership must prioritize trust. Executives, managers and the rank and file all benefit from open, honest sharing of information.
• As in the world of startups, it isn’t board rooms or showrooms but one-on-one informal chats in the hall or coffee breaks that can generate pivotal information or ideas.
• If the partnering firms are too similar, there won’t be much of a spark. But if they are too different, harmony can be elusive.

Successful partnerships with other companies, the researchers conclude, requires being nice, open and getting acquainted. 

The best modern business alliances, in other words, share traits with successful marriages. Social bonds may not be the first priority for the union, but in the end they can transcend economic interests, and ultimately make the firms more powerful. 

Kale, et al (2009). “What Really is Alliance Management Capability and How Does it Impact Alliance Outcomes and Success?” Strategic Management Journal.