The research into alliance failure and success rates continues to display a broad spectrum of figures. The figures range from a mere 20% alliance failure rate at best, to a daunting 80% alliance failure rate at worst. It is this notably high alliance failure rate of 80% that sparks disbelief!
This prompts one to wonder whether companies would genuinely invest in something they believe has a 4 in 5 chance of failure?
The 80% Rule
In 2012, ASAP conducted the State of Alliance Management study, delving into the subject of alliance performance. The report illustrates an average alliance success rate of 53%, a figure that still consistently resonates with other studies.
The most significant findings reveal that companies adhering to a structured alliance management process constantly report a superior success rate with their alliances compared to the average success rate – achieving up to 80% success! Conversely, companies that approach alliances in an impromptu manner report a mere 20% success rate.
This is what I term, the 80% rule: 80% of ad hoc unstructured business partnerships and strategic alliances fail, while contrariwise, 80% of the companies that follow a structured approach establish prosperous business partnerships and strategic alliances.
Causes of Alliance Failure
Alliances falter due to a range of reasons, including:
- Insufficient communication.
- Poor partner assessment.
- Incompatible objectives.
- Absence of executive commitment.
- Ineffective governance structure.
- Poor alliance management.
Adequate preparation, alliance management, and communication can help alleviate most of these causes. Companies that invest in building skills and competencies before engaging in alliances generally report higher success rates. They shape and handle alliances systematically, following an alliance life cycle methodology.
Companies new to alliances and therefore less seasoned, conceivably face a higher failure rate compared to organisations possessing an established, experienced alliance management capability.
Methods to Amplify Alliance Success
Attaining maturity in alliance creation akin to that of more experienced companies will require time and lessons learned. Here are some key steps and considerations to apply to your own alliance endeavours:
- Compatibility and Complementary: Ensure that the cultures, values and goals of the companies are aligned. The strengths and weaknesses of each company should complement each other, creating a synergistic effect that benefits both sides. Perform a proper partner assessment.
- Mutual Benefits: Focus on creating a win-win-win situation. Each party should derive value from the alliance. If one company feels like it’s giving more than it’s receiving, it could lead to resentment and potential problems down the line.
- Clear Communication: Open and transparent communication is essential. Regularly update each other on progress, challenges and changes. Miscommunication can lead to misunderstandings and conflicts.
- Trust Building: Trust is the foundation of a successful alliance. Consistently deliver on promises and commitments. This builds a strong foundation for long-term collaboration.
- Dedicated Resources: Allocate resources specifically for managing and nurturing the alliance. This could involve assigning dedicated personnel, budget and time to ensure the alliance’s success. Assign an alliance manager to the alliance.
Enhancing alliance success requires a long-term commitment to building and nurturing relationships. By prioritising mutual benefits, transparent communication and strategic planning, companies can forge alliances that fuel growth and innovation.