“While their failure rate in early years is no higher than that of new ventures, alliances tend to get into serious trouble—sometimes fatal—when they succeed. Often when an alliance does well, it becomes apparent that the goals and objectives of the partners are not compatible. The problems can be anticipated and largely prevented by following five rules:
- Before the alliance is completed, all parties must think through their objectives and the objectives of the ‘child.’
- Equally important is advance agreement on how the joint enterprise should be run.
- Next, there has to be careful thinking about who will manage the alliance.
- Each partner needs to make provisions in its own structure for the relationship to the joint enterprise and the other partners. The best way, especially in a large organization, is to entrust all such ‘dangerous liaisons’ to one senior executive.
- Finally, there has to be prior agreement on how to resolve disagreements. The best way is to agree, in advance of any dispute, on an arbitrator whom all sides know and respect and whose verdict will be accepted as final by all of them.”
— Peter F. Drucker
In the 1990s, it became evident to me that improvements in information processing would lead organizations increasingly to rely on alliances and networks.
Among those from whom I gained much insight in this area is Karen L. Higgins, who ran the Naval Air Warfare Center Weapons Division in China Lake, California. She had just completed her dissertation at the Drucker School, which involved a study of 23 inter-organizational teams at Texas Instruments.[EXPAND More]
These teams were made up of members from multiple partner organizations, each contributing their expertise to a common project. The most successful among them provided lessons for executives engaged in managing alliances—lessons consistent with Peter Drucker’s rules. For instance, each organization in the alliance identified an executive who would be in charge, and he or she was empowered to manage the alliance exclusively to achieve its goals.
In addition, team-building exercises were conducted to promote complete understanding of the goals of the alliance. Clear responsibilities were established for each participant, and a procedure was established for dissolving the alliance once its goals were met.
Whenever conflicts occurred between participants in different organizations and a team member went to the executive in charge of the alliance in his organization, he often got the shocking response: “We do not want to hear this. You work it out because we are all working together.”
That is the true measure of an effective alliance.