Product Launch

The first major hurdle was integrating the partners’ customer databases. Each firm’s customer list was a significant corporate asset, and neither was willing to openly give the other partner access. Omega feared that Alpha’s own financial services division might target its customers. Managers at Alpha worried that Omega might lure away its existing customers with cobranded offerings developed with competing telecommunication providers. Furthermore, since many Omega managers involved in alliances with Alpha’s rivals were also assigned to work with Alpha, Alpha managers were concerned that confidential information might “leak” (even inadvertently) to Alpha’s competitors. At one point, Alpha managers even received promotional pieces at their homes that promoted Omega products affiliated with Alpha’s key competitors. According to one Alpha manager, “People here were genuinely offended!”

Omega was anxious to announce the new alliance and reassert its position in the marketplace. Omega’s marketing personnel would not wait for the customer database merger and negotiated a stop-gap “sticker campaign” to expedite the product launch. Small coded stickers, which granted access to Alpha’s telecommunication services, would be mailed to existing Omega corporate customers. These customers were instructed to apply the stickers to their Omega membership cards. Alpha complained that the sticker failed to convey Alpha’s status as an equal partner, but Omega was excited about the sticker campaign and launched it despite Alpha’s reservations. Unfortunately, it proved to be a disaster because most customers confused the stickers with junk mail and inadvertently threw them away. Trust eroded as each firm blamed the other.

Adding to the complexity, Alpha and Omega needed to identify mutual customers to supply them with the new cobranded product. They contracted a third-party vendor to integrate the customer databases because it required significant time and complex technical development. The systems crews on both sides were not yet convinced of the alliance’s value; it appeared to be a lot of work for a small set of clients.

After the customer lists had been integrated, the companies could formally issue new cobranded membership cards. But a new conflict surfaced because Omega refused to allow Alpha’s logo to appear on the front of “its” membership cards. After several months, they reached a compromise: the new cards would have an “Alpha side” and an “Omega side.” Although Omega was proud of what it touted as major concessions on the card design, Alpha managers were never completely satisfied with the outcome, feeling that Alpha’s logo was clearly given an inferior display.

First Year of Marriage

During the first year, several sensitive issues erupted concerning the overall alliance relationship. Frequent disputes centered on issues such as which company name customer service representatives would use when answering service calls from joint customers, or which company logo would be at the top of the partners’ letterhead. Another conflict arose from Alpha’s sudden withdrawal of a promised discount program to promote the cobranded product. Regulations prevented Alpha from offering an initially agreed-upon telecommunications discount with the cobranded product, but Omega believed that Alpha should have done more to offer some value in its place because the product was far less attractive without the discount. Omega’s frustrations were exacerbated when Alpha also withdrew a large set of customers from participation in the alliance program. Omega managers felt that Alpha never gave a reasonable explanation for this move, and they were upset that Alpha advertising for its financial services never mentioned Omega or the cobranded product. Personnel from both sides complained that the alliance was under-capitalized at both firms and that the cobranded product was not given high priority and enough senior-level management attention.

Some of the initial animosities festered at the personnel level. The negotiation process was moderated somewhat by programmed team-building exercises involving core team members responsible for the day-to-day partnership operations. While some managers thought these exercises were helpful for bridging the working relationship, others were less convinced. According to one Omega manager:

“We had a relationship consultant who was more like a marriage counselor [asking] questions like ‘How do you feel?’ I don’t respond well to that! You go to these Outward Bound exercises, and they make you toss balls and jump all over the place. I think what makes people feel more comfortable with each other is going to dinner and talking about your family and friends. Maybe I’m too much of a cynic, but pulling ropes and walking through boxes? I just don’t find it useful!”

A turning point that helped improve rapport between Alpha and Omega was a Key West “working vacation” that provided many relaxing social opportunities. One Alpha manager noted: “It was the first time we were able to just sit down, relax, and talk about what we wanted this alliance to be. . . . Now we were friends, and we had been through a lot. We had battle wounds and scars that had healed.”

Social meetings eventually fostered friendships and personal relationships between Alpha and Omega. Back in the office, however, the positive effects of team building and meetings appeared to be short-lived. The firms did not conduct these social events regularly and underlying frictions continued.

Omega personnel accused Alpha of being too bureaucratic and not assigning enough personnel who were able to approve decisions. Omega managers described Alpha as being structured around product “silos” (strategic business units) that inhibited internal communications. Omega, on the other hand, touted an organization around “customer segments,” with a better integrated internal structure. As compared to Alpha, Omega assigned higher level personnel to the alliance and, consequently, Omega managers could more readily make alliance decisions. One operations manager at Omega explained:

“Basically, there is someone different at Alpha for every little thing you have to do. For example, with our core team at Omega, I feel like we have been empowered to really resolve problems or make decisions. That’s not always the case with Alpha. They always have to take something back to senior management.”

Omega managers also complained of Alpha’s personnel turnover; Alpha frequently promoted or transferred employees to other projects. “They are always in training,” charged one mid-level Omega manager about the Alpha counterparts.

Alliance personnel from both organizations also accused each other of withholding important information. Omega managers seemed especially frustrated with Alpha’s unwillingness to openly share details necessary to execute the alliance. Omega had designated one knowledgeable manager to be the key contact for alliance-related communications, whereas Alpha allowed all of its participating managers to discuss alliance issues with their Omega counterparts. Thus, the perceived lack of openness on Alpha’s part may simply have reflected the inability of junior managers to distinguish nonproprietary from proprietary information. Again, a lack of senior executive involvement on the Alpha side made the goals and objectives of the alliance unclear, and neither partner seemed to totally trust the other. One Alpha manager called it “a cautious trust.”

By the end of the first year, the cobranded product generated only modest profits; this was particularly disappointing to Alpha, whose expectations for first-year performance were high. Many Omega managers expressed concern that Alpha’s underlying financial assumptions for the product revenues were inappropriate. Although Omega managers would have preferred greater profitability in the first year, they had their sights set on building an expanded set of relationships with Alpha and launching a host of other collaborative offerings. Luckily, profitability improved in the second year.

Relationship Patterns and Themes

At the time of this study, the alliance was stabilizing and moving into its second year of operation. Partnership norms had emerged, and the alliance had become an intertwined set of interpersonal relationships among various levels of managers from the marketing, computer systems, and customer service functions.

The second phase of our research examined the pattern of these relationships by collecting data from forty-two managers from both firms (twenty-two Alpha managers and twenty Omega managers). First, these managers identified the alliance personnel with whom they interacted at their own firm and the partnering firm. Second, they evaluated each of these contacts on three dimensions: the frequency of alliance communications, the importance of those communications, and the closeness of the relationship (see Figure 1).

The alliance network is composed of core and peripheral participants. Core participants were those with strong communication and closeness linkages (including friendships) with others in the alliance network, indicating their central role in the alliance’s day-to-day operations. These managers were “in the know” about the alliance. Although assigned to the alliance, peripheral participants had weak communication and friendship ties in the social network.

Alpha managers with strong social ties were predominantly junior and middle managers from marketing, with a few managers representing the computer systems function. In general, Alpha personnel with weak linkages were either senior managers (#7 represents Alpha’s highest-ranking executive in the alliance) or junior and middle managers involved in the customer services function. Thus, the communication and friendship network within Alpha did not tightly integrate its management levels and functions.

Alpha’s original project manager, responsible for overseeing alliance operations, was a middle manager from marketing (ranked #20). However, during the second year, Alpha reassigned many members of its management team — including the project manager — to new projects outside the alliance. The second project manager was #29. When she was reassigned, #19 became the third project manager. Both #29 and #19 were junior marketing managers.

By contrast, Omega managers with strong communication and friendship ties represented all levels of Omega’s management hierarchy in marketing, systems, and customer service. Unlike Alpha, two high-ranking Omega executives, a vice president and a marketing director (#24 and #26), maintained close communication and friendship linkages with other managers in the alliance. Thus, Omega’s upper management was more actively involved in the alliance than Alpha’s senior management. In fact, Omega’s project manager (#26) held a significantly more senior management position than her Alpha counterparts (#19, #20, and #29), who were junior or middle-level managers. Similar to Alpha, however, Omega’s most senior-level executive assigned to the alliance (#30) maintained weak communication and friendship linkages with other managers in the alliance’s social network.

Among the core managers, a unique set of boundary-spanning participants emerged. These managers maintained strong communication and friendship linkages with other managers both within their own organization and the partnering firm. With two exceptions, all boundary-spanning participants occupied the lowest management level. The two exceptions, one from Alpha (#12) and one from Omega (#39), were middle-level managers. Omega designated manager #39 as the key contact for communicating all alliance-related information. In contrast, Alpha had a large number of managers assuming boundary-spanning roles. All boundary spanners were affiliated with marketing.

We gained further insights into the Alpha-Omega alliance by examining three relationship characteristics — trust, commitment, and compatibility — and by exploring the meaning of each to the participants.15 Consistent with a case-study approach, however, our goal was to isolate the meaning that managers ascribed to these relational dimensions. Some revealing differences emerged.

Trust, as defined earlier, involves accepting vulnerability, on the basis of positive expectations of the intentions or behavior of a partner.16 Relationship commitment, another important attribute of a partnership, exists when a partner believes that an ongoing relationship with another firm is so important that it warrants maximum effort to maintain it.17 Finally, compatibility reflects complementarity of goals and objectives of partners, as well as similarity in operating philosophies and corporate cultures.18

(Reprint #:4124)

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