Design, management and dynamics of successful strategic alliances

Guest contributor: África Ariño

Professor of Strategic Management · Holder of the Joaquim Molins Figueras Chair of Strategic Alliances · IESE

As explored in the first article in this series on the conclusions drawn at the Family Business Reflection Forum, strategic alliances enable two or more companies to share resources and capabilities to either undertake new activities or carry out existing ones with greater efficiency.

Despite their advantages, many family-owned firms are disinclined to engage in these partnerships for fear of ceding too much control, compromising their core values or being subject to inter-partner dependencies, which lead to their own unique challenges.

In this post, IESE researcher María del Mar Revilla and I share some insights.

The challenges of strategic alliances and their root causes

When considering a strategic alliance, companies need to make several key decisions, which can be grouped into three main areas–why, with whom and how– and which define the scope of the potential partnership:

> Strategic scope: the objectives of each partner in creating the alliance
These don’t necessarily have to coincide, but should at least be compatible. Conflicts emerge when organizational strategies are misaligned.

> Economic scope: the activities carried out within the alliance and those carried out independently by each partner.

Alliances can sometimes generate an asymmetric flow if one partner procures corollary benefits outside of its scope. This could pose a challenge given the laws of human nature since, despite an alliance’s clear advantages, people often end up comparing their benefits to their partner’s.

> Operational scope: While the degree of integration of partner activities depends on the type of alliance, the coordination of each partner’s processes and capabilities is paramount.

The root cause of these challenges is that, under a strategic alliance, partners operate as independent entities while sharing resources, which can generate both high levels of value creation and friction.

In this regard, the success of strategic alliances relies on managing processes and inter-partner dynamics, and remembering that alliances aren’t static–they develop over time based on the evolving overall context and partners’ strategic objectives and organizational structures.

Three success stories

During the Forum, I had the pleasure of moderating a round table with representatives of three leading family businesses–Alibérico, Barceló and Ficosa–who shared their firsthand experiences of the power of strategic alliances as growth engines and the importance of trust, transparency and flexibility.

First, Alibérico is a prominent aluminum manufacturer that pointed that trust and keeping one’s word are key to a successful alliance, which in their case entails technological exchanges with no need for formal written contracts.

In this regard, they view mutual trust and transparency as tightly interwoven threads in effective strategic partnerships, while at the same time, recognizing the challenges inherent in international partnerships due to cultural and leadership differences.

Meanwhile, Barceló is a well­-known family-owned business in the tourism sector that formed strategic alliances to drive its international expansion. During the Forum, they stressed the need to protect the balance sheet and including escape clauses when signing alliances.

They also believe potential partners should also closely consider their ownership strategy by asking questions such as Should we open it up to other partners? Should we go public? These questions, essential when defining a growth strategy, should be posed in a forbearing and timely manner to avoid missing out on business opportunities.

Finally, Ficosa, a premier player in the automotive sector, underscored the strategic value of partnering with technology giants to serve as innovation leaders in their industry.

With a focus on agility and operational efficiency, they shared how partnerships can promote transformation and growth in highly competitive sectors. In the case of Ficosa, this transformation has been profound, with shifts from mechanical to mechatronic processes to an to eminently electronic operation in a relatively short time span.

While creative, innovative and precarious in equal measures, strategic alliances have numerous benefits that often outweigh their risks, giving companies faster access to new markets and technological innovations.