BTD’s Spotlight on Alliance Management: Glancing Back, Looking Forward

BTD’s Spotlight on Alliance Management: Glancing Back, Looking Forward

Create value. Increase value.

Build or buy or borrow. Your menu. Most successful companies partake of all three. BTD’s deep roots are in maximizing clients’ “buy” success: Beyond the Deal. Now we have broadened our capabilities to serve clients across the spectrum of “inorganic” growth – from M&A and Divestments to Strategic Alliances and JVs.

Beginning in early 2000, I led Andersen Consulting/Accenture’s clumsily named MAASCE – Mergers, Acquisitions & Alliances Strategy Center of Excellence. I have participated in the coming-of-age of alliance management as a professional discipline. From pharmaceuticals & biotechnology to software & hardware to banking to oil & gas, alliances and JVs have reshaped competition. Professionalized alliance management has contributed to dramatic, sustained successes.

Twenty years ago BTD pioneered one simple concept: business-focused M&A integration. By turning integration from merely a project-management exercise into a value-creation one, our clients orchestrated their activities toward developing and extending critical capabilities. What had been mechanical became creative. This approach built a sturdy bridge from the gauzy PowerPoint and spreadsheets of the strategists to the new operating model that delighted customers.

BTD now brings that focus and expertise to Alliances and Joint Ventures. We support our clients in their drive to create new capabilities and innovative business models. By addressing all aspects of inorganic growth, we help senior executives with their toughest challenges – balancing tradeoffs and driving value from well-conceived deals. Whether those be acquisitions or alliances.

So, what has changed during my 20-plus year career helping clients successfully buy and borrow? My colleagues and I will share our reflections in our quarterly newsletters, in webinars and podcasts, on our website and in blog posts over the coming months. We will focus on action – What should a manager do?

Let me do two things in this introductory note.

First, look back 20 years to an alliance management classic. Second, share some thoughts on the road ahead in alliance management.

In October 1999 Andersen Consulting published a seminal article, Dispelling the Myths of Alliances. In that article, the authors contrast five then-common myths about alliances and present a counterpoint for each. This work was based on many years of research led first by Charles Roussel and later by me.

Here is that Myth-versus-Reality “Big Five:”

  • Myth: Alliances are like marriage
  • Reality: Alliances are like diplomacy
  • Myth: Alliance integration and post-merger integration are the same
  • Reality: Post-merger integration is about speed; Alliance integration is about bargaining power
  • Myth: One governance model fits all alliances
  • Reality: Governance must be tailored to resource capability and value
  • Myth: It is adequate for alliance expertise to reside within an elite corps of deal makers
  • Reality: Alliance capabilities must permeate the organization through line management
  • Myth: It is impossible to measure alliance performance
  • Reality: Innovative measures can accurately gauge the many dimensions of alliance performance

So, how far has alliance management traveled since 1999?

In leading organizations, quite a long way. In typical companies, not very far.

Subsequent essays and blogs will walk through each myth-reality pair to discuss the current state of practice. We will provide insights and practical suggestions to help both expert practitioners and newcomers to alliances. Here is a preview:

  1. Marriage versus Diplomacy – fundamental misunderstandings of this difference still doom an alarming fraction of alliances to underperformance and failure. All too often, experienced managers enter alliances with a “marriage mindset,” only to encounter disappointment.
  2. Alliance Integration versus Post-Merger Integration – mixed performance with industry leaders who really “get it,” while most firms insist on using hammers to drive screws. True M&A experts “blow up” alliances falling back on heavy-handed approaches.
  3. Tailoring Governance – most firms understand the need for bespoke governance. Fewer firms are truly adept at designing effective governance. Firms that limit alliances to a small number of “standard models” see much more consistent success.
  4. Broadening Alliance Expertise – we find a feast-or-famine situation. Some firms have become truly alliance friendly. These firms, few in number, see dramatic returns from their partnerships.
  5. Measuring Performance – a mixed bag. The past twenty years have seen many creative, and some ridiculous approaches to alliance metrics. Some standard metrics have become common, enabling more thoughtful management and discipline.

Leading the charge in alliance management has been a small handful of companies and executives focused on excellence unencumbered by superstitions. Side-by-side with those leaders has been the Association of Strategic Alliance Professionals. Chartered in 1999 A.S.A.P. has brought together leading alliance thinkers – executives, academics and consultants. I was privileged to be an A.S.A.P. Board member for nearly a decade. The organization has brought disciple and rigor to alliance management offering training and certification, disseminating best practices, and bringing together cutting-edge practitioners from across industries and across the globe.

As part of BTD’s expansion into alliances and JVs we are building strong ties to A.S.A.P. At its June 2020 Virtual Global Summit we ran four case-study workshops with senior executives. In these, the participants addressed the challenges faced by alliance managers moving into M&A. Currently we are managing a joint research program looking at building “multi-disciplinary teams” – groups configured to support both alliance management, and M&A and divestment.

Over the coming months, BTD will be helping to simplify and make sense of alliances and JVs. We truly believe that executives who get inorganic growth “right” will be positing their firms for long-term success underpinned by resilience to the inevitable shocks. The newly emerging teams configured to address this full spectrum of challenges offer great promise. I am thrilled to be working with some of the world’s leading M&A practitioners – inside BTD and at our clients.

 

Nick Palmer

Partner, BTD