5.why Are Many Strategic Alliances Temporary
Mirthe Luria
5 Reasons Why Many Strategic Alliances Are Temporary
Strategic alliances are cooperative arrangements between two or more independent companies to pursue a common goal or objective. Strategic alliances can offer many benefits to the participating companies, such as access to new markets, technologies, resources, skills, or customers. However, strategic alliances are also often temporary and may dissolve after a certain period of time or after achieving a specific outcome. Why is that?
In this article, we will explore five reasons why many strategic alliances are temporary and how to manage them effectively.
1. Strategic alliances are formed for specific purposes
One of the main reasons why many strategic alliances are temporary is that they are formed for specific purposes that may not last forever. For example, two companies may form a strategic alliance to enter a new market, develop a new product, or overcome a competitive threat. Once the purpose is achieved or becomes irrelevant, the alliance may lose its value and rationale. Therefore, it is important for the alliance partners to define the scope and objectives of the alliance clearly and monitor its progress and performance regularly.
2. Strategic alliances involve complex coordination and integration
Another reason why many strategic alliances are temporary is that they involve complex coordination and integration of resources, capabilities, processes, cultures, and goals of the alliance partners. This can create challenges and conflicts that may undermine the alliance's effectiveness and efficiency. For example, the alliance partners may have different expectations, preferences, standards, or incentives that may cause misalignment or disagreement. They may also face difficulties in sharing information, knowledge, risks, or rewards. Therefore, it is important for the alliance partners to establish clear roles and responsibilities, communication channels, decision-making mechanisms, and conflict resolution procedures.
3. Strategic alliances face dynamic and uncertain environments
A third reason why many strategic alliances are temporary is that they face dynamic and uncertain environments that may change the conditions and assumptions of the alliance. For example, the alliance partners may encounter changes in customer needs, competitor actions, technological innovations, regulatory policies, or economic situations that may affect the alliance's viability or attractiveness. These changes may create new opportunities or threats that may require the alliance partners to adapt or adjust their strategies or operations. Therefore, it is important for the alliance partners to conduct regular environmental scanning and analysis and review their alliance's alignment and fit with the external context.
4. Strategic alliances create interdependence and vulnerability
A fourth reason why many strategic alliances are temporary is that they create interdependence and vulnerability between the alliance partners. By sharing resources and capabilities with each other, the alliance partners become more reliant on each other for their success and performance. This can create benefits such as synergy, learning, or innovation but also risks such as opportunism, leakage, or lock-in. For example, one partner may exploit the other partner's resources or information for its own advantage; one partner may lose its proprietary or competitive edge by sharing it with the other partner; or one partner may become too dependent on the other partner and lose its flexibility or autonomy. Therefore, it is important for the alliance partners to balance trust and control and protect their core competencies and interests.
5. Strategic alliances evolve over time
A fifth reason why many strategic alliances are temporary is that they evolve over time as the alliance partners learn from each other and from their experience. This can lead to changes in the nature and direction of the alliance that may affect its continuity or stability. For example, the alliance partners may develop new capabilities or goals that may make them more compatible or incompatible with each other; they may discover new opportunities or challenges that may make them more cooperative or competitive with each other; or they may experience success or failure that may make them more satisfied or dissatisfied with each other. Therefore, it is important for the alliance partners to manage the life cycle of the alliance and anticipate its potential evolution and outcomes.
How to Manage Temporary Strategic Alliances Effectively
Given the reasons why many strategic alliances are temporary, it is essential for the alliance partners to manage them effectively and proactively. Here are some tips on how to do so:
- Plan ahead: Before entering into a strategic alliance, the alliance partners should conduct a thorough analysis of their own and each other's strengths, weaknesses, opportunities, and threats. They should also identify their mutual goals and expectations, as well as potential risks and challenges. They should then develop a clear and detailed alliance agreement that specifies the scope, objectives, roles, responsibilities, resources, processes, performance measures, rewards, and exit clauses of the alliance.
- Communicate frequently: During the implementation of the strategic alliance, the alliance partners should communicate frequently and openly with each other. They should share information, knowledge, feedback, and suggestions. They should also resolve any issues or conflicts promptly and constructively. They should also review and evaluate the alliance's progress and performance regularly and make any necessary adjustments or improvements.
- Learn continuously: Throughout the duration of the strategic alliance, the alliance partners should learn continuously from each other and from their experience. They should seek to leverage each other's resources and capabilities and create value for both parties. They should also seek to innovate and create new solutions or opportunities that can benefit both parties. They should also capture and document the best practices and lessons learned from the alliance.
- Exit gracefully: At the end of the strategic alliance, the alliance partners should exit gracefully and respectfully. They should acknowledge and appreciate each other's contributions and achievements. They should also celebrate and celebrate their success and outcomes. They should also maintain a positive and cordial relationship with each other and explore any possibilities for future collaboration or cooperation.
By following these tips, the alliance partners can manage temporary strategic alliances effectively and proactively and reap the benefits of such arrangements.
Examples of Temporary Strategic Alliances
To illustrate the concept and practice of temporary strategic alliances, here are some examples of such arrangements in different industries and contexts:
- Starbucks and Spotify: In 2015, Starbucks and Spotify formed a strategic alliance to create a digital music experience for Starbucks customers and employees. The alliance allowed Starbucks customers to access Spotify's music library and playlists through the Starbucks app and influence the music played in Starbucks stores. The alliance also allowed Starbucks employees to receive Spotify premium subscriptions and curate the music for their stores. The alliance aimed to enhance the customer experience and loyalty, as well as the employee engagement and satisfaction. The alliance lasted for five years until 2020, when Starbucks decided to end its partnership with Spotify and switch to Apple Music.
- NASA and SpaceX: In 2008, NASA and SpaceX formed a strategic alliance to develop and launch commercial spacecrafts to transport cargo and crew to the International Space Station (ISS). The alliance was part of NASA's Commercial Orbital Transportation Services (COTS) program, which aimed to stimulate the development of the private space industry and reduce NASA's reliance on foreign rockets. The alliance involved NASA providing funding, technical support, and oversight to SpaceX, while SpaceX providing launch services and spacecrafts to NASA. The alliance resulted in several successful missions and milestones, such as the first commercial spacecraft to dock with the ISS in 2012 and the first commercial crewed flight to the ISS in 2020. The alliance is still ongoing and expected to continue until at least 2024.
- BMW and Toyota: In 2011, BMW and Toyota formed a strategic alliance to collaborate on various projects related to fuel-efficient and environmentally-friendly technologies. The alliance involved BMW supplying diesel engines to Toyota for its European models, while Toyota supplying hybrid systems and hydrogen fuel cells to BMW for its future models. The alliance also involved joint research and development on lithium-ion batteries, lightweight materials, and sports cars. The alliance aimed to leverage each other's strengths and expertise and create competitive advantages in the global market. The alliance ended in 2020, when BMW and Toyota announced that they had completed their joint projects and would pursue their own paths.
These examples show how temporary strategic alliances can be beneficial and effective for different companies in different situations.
Challenges and Risks of Temporary Strategic Alliances
While temporary strategic alliances can offer many benefits and opportunities, they also pose some challenges and risks that need to be addressed and managed. Some of the common challenges and risks of temporary strategic alliances are:
- Lack of commitment: One of the challenges of temporary strategic alliances is that they may lack the commitment and dedication of the alliance partners, especially if they have a short-term or uncertain horizon. The alliance partners may not invest enough resources or efforts into the alliance or may prioritize their own interests over the alliance's interests. This can lead to poor performance, low quality, or missed deadlines. To overcome this challenge, the alliance partners need to establish a clear and shared vision and mission for the alliance and align their incentives and rewards with the alliance's goals.
- Cultural differences: Another challenge of temporary strategic alliances is that they may involve cultural differences between the alliance partners, such as differences in values, norms, beliefs, or practices. These differences can create misunderstandings, conflicts, or mistrust that can hamper the communication, collaboration, or integration of the alliance partners. To overcome this challenge, the alliance partners need to respect and appreciate each other's cultures and perspectives and foster a culture of openness, diversity, and inclusion.
- Loss of control: A third challenge of temporary strategic alliances is that they may involve a loss of control over some aspects of the business or operations of the alliance partners. For example, the alliance partners may have to share sensitive or proprietary information or resources with each other or with third parties. They may also have to comply with certain rules or regulations that may limit their autonomy or flexibility. This can create risks such as leakage, theft, or misuse of information or resources or legal or regulatory liabilities. To overcome this challenge, the alliance partners need to establish clear boundaries and safeguards for their information and resources and monitor and enforce them regularly.
- Competition: A fourth challenge of temporary strategic alliances is that they may create competition between the alliance partners, either during or after the alliance. For example, the alliance partners may compete for the same customers, markets, or resources. They may also learn from each other and become more similar or capable in their offerings or strategies. This can create threats such as cannibalization, substitution, or imitation of products or services or erosion of competitive advantages. To overcome this challenge, the alliance partners need to maintain their differentiation and uniqueness and avoid direct or excessive competition.
These challenges and risks show that temporary strategic alliances are not easy or simple to manage and require careful planning and execution.
Conclusion
Temporary strategic alliances are common and useful forms of cooperation between independent companies that pursue a common goal or objective. Temporary strategic alliances can offer many benefits and opportunities to the participating companies, such as access to new markets, technologies, resources, skills, or customers. However, temporary strategic alliances also pose some challenges and risks that need to be addressed and managed, such as lack of commitment, cultural differences, loss of control, or competition. Therefore, temporary strategic alliances require careful planning and execution and effective management throughout their life cycle.
We hope that this article has given you some insights and information about temporary strategic alliances and how to manage them effectively. If you have any questions or comments, please feel free to leave them below. Thank you for reading!
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