Your initial reason for a partnership defines its scope. This reason will be one of the leading elements in the process of creating the alliance or partnership. Once you are talking to your prospective partner, you will learn to know their organization better. This communication may lead to spotting new opportunities for partnering, and it might be very challenging to decide not to include these opportunities in the creation of the alliance.
New additional opportunities can be included as a list with potential areas for later expansion. However, it is essential to limit the scope of the initial alliance, as it will make the process of alliance creation easier. Laurence Capron and Will Mitchell indicate in their book ‘Build, Borrow, or Buy: Solving the Growth Dilemma’ that the cost of coordinating the alliance will also rise substantially when the scope expands. In a research study they surveyed among telecom companies 65% of the executives involved in alliances reported high cost and coordination tensions with their partners. The most successful firms were the ones using alliances for focussed collaboration only.
Capron and Mitchell also concluded that an alliance will be most effective manageable when a limited number of functions and activities are involved and with that a limited number of people. This is how they put it in chapter 4 of their book: “Limiting the points of contact helps you control the alliance’s direct and indirect costs, by avoiding duplicative investments in R&D, plants, staff, and coordination activities.” It also indicates that from an alliance management perspective a limited scope is desired when starting an alliance or partnership.
Focus on the initial reason and the initial scope for partnering during the formation of the partnership. Once the partnership is formed and operational, growing the scope of a partnership into other areas is generally easier than initially creating a partnership that has a continuously expanding scope. When you create your list of potential areas of growth during alliance formation, you can then, during the formation, also decide at what stage the alliance partners will evaluate if an expansion is desired.
This article is part of a series of articles extending upon the 25 tips for successful partnerships & alliances article. These 25 tips have been rewritten and published in the eBook “25 tips for successful partnerships & alliances” that can be downloaded for free.