I recently received the following question about the use of. the words alliance or partnership:
“People often mix alliances and partnerships.
What is the definition in your perspective?”.
These terms are often mixed up indeed and used in one sentence with each other. Most of the time we do mean the same, but is there a difference?
In both cases we talk about a collaborative business relationship and both terms are used to cover a whole spectrum of relationships. In that spectrum we see amongst others collaborative relationships like outsourcing, licensing, contract alliances and joint ventures.
How you understand both terms will also depend on where you are in the world as the verbiage changes with the environment. A partnership is often perceived as a more loosely collaborative relationship. A relationship where two people or organizations can agree to work on a task or project together and the partnership ends when the project is completed. A partnership can be formed based on an oral agreement or a handshake.
An alliance on the other hand is perceived as a more serious collaborative relationship that is contract bound. An alliance will take more time and preparation to establish and will in general have a larger scope.
Why better use the term alliance?
Even though the terms are mixed up and for some have the same meaning, it is better to use the term alliance instead of partnership.
In some parts of the world the term partnership has legal implications. Late 1900’s England already established a partnership act and the USA followed in 1914. In these acts partners are seen as co-owners of the business, where the partnership does not have to be a distinct legal entity.
Agreeing that you have a partnership might create legally binding commitments which you had not intended when starting your collaborative relationship. Hence it is safer to steer away from the term “partnership” and use “alliance” instead.
When in doubt call it a collaborative relationship; it can always evolve into one of the other terms when the relationship matures!