Strategic alliances — a fast and flexible way to access complementary resources and skills that reside in other companies — have become an important tool for achieving sustainable competitive advantage. Indeed, the past decade has witnessed an extraordinary increase in alliances.1 Currently, the top 500 global businesses have an average of 60 major strategic alliances each.
Yet alliances are fraught with risks, and almost half fail. Hence the ability to form and manage them more effectively than competitors can become an important source of competitive advantage. We conducted an in-depth study of 200 corporations and their 1,572 alliances. We found that a company’s stock price jumped roughly 1% with each announcement of a new alliance, which translated into an increase in market value of $54 million per alliance.2 And although all companies seemed to create some value through alliances, certain companies — for example, Hewlett-Packard, Oracle, Eli Lilly & Co. and Parke-Davis (a division of Pfizer Inc.) — showed themselves capable of systematically generating more alliance value than others. (See “A Dedicated Function Improves the Success of Strategic Alliances, 1993–1997.”)
A Dedicated Function Improves the Success of Strategic Alliances, 1993-1997
How do they do it? By building a dedicated strategic-alliance function. The companies and others like them appoint a vice president or director of strategic alliances with his or her own staff and resources. The dedicated function coordinates all alliance-related activity within the organization and is charged with institutionalizing processes and systems to teach, share and leverage prior alliance-management experience and know-how throughout the company. And it is effective. Enterprises with a dedicated function achieved a 25% higher long-term success rate with their alliances than those without such a function —and generated almost four times the market wealth whenever they announced the formation of a new alliance. (See “Research Design and Methodology.”)