Why early opt out of an alliance can be successful

Many people feel that an alliance is only successful when it delivers to its goals. I would argue that leaving an alliance early can be a matter of success. Take the situation at one of my clients. They were approached in 2011 by a Spanish company with the proposal to build a solution together. My client would have to take care of an appliance and the Spanish company would deliver the ingredients for the solution to work.

At first sight an interesting proposition, it seemed to fit with my clients strategy and looked to be a promising value proposition. In my work with the client I advised them nevertheless to take some steps back in the alliance lifecycle and do their due diligence work before diving into designing and building the appliance. This due diligence learned us three main things:

  • The product line needed for the proposition at my client was scheduled to sunset in 2011, the year we were talking to the prospective partner. Now by itself if the opportunity is right, it can be a reason to continue with the product line for a while. But it was a warning sign that the partnership might not fit with the companies strategy!
  • The prospective partner was a family owned company, where grandpapa, the founder, was in his eighties basically still running the company from the breakfast table. Even though this was already a large European player in their market, with a decent management structure in place. My client was a large corporation more run by meetings and consensus than by a single leader. Here we noticed a potential mismatch in culture. Warning sign number 2!
  • To be able to judge if the proposition is a workable solution my client and the partner needed to work closely together in drafting the detailed value proposition and the business plan. For that it was essential to share information both ways. Despite a joint non disclosure agreement being in place the potential partner refused to share some of the essential elements on the value proposition. This lack of sharing and trust turned into the third warning sign.

These warning signs combined with some other elements that became clear during the due diligence made me advice my client not to pursue with this opportunity. After some internal considerations my client indeed decided to stop efforts and informed the partner about it.

Many would feel this to be a failed attempt to create an alliance and hence a failure. However, in this case a solid partner qualification showed that an early out was the only sensible option for my client. The alliance itself may not have been successful, but the approach was! It saved my client time, investment and a possible failure in the market.

 


What is alliance success?

In the Alliance Masterclass there is a moment when we discuss alliance succes and failure. This discussion opens many eyes, sometimes an alliance seems to have failed and still earned both participants a lot of money. What is alliance success?


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