FRAMEWORK FOR DETERMINING WHAT TYPE OF BUSINESS ALLIANCE IS REQUIRED
The framework for determining what type of business alliance is needed is a high-level framework and can be determined by answering the five questions listed in Figure 1. Each question is reflected in a separate step in the framework, with the last step pulling the framework together.
Step 1: Do you need an alliance that is sales-based?
All alliances must be directly or indirectly sale -and-client-based. Alliances must generate additional sales for both alliance partners in order to be successful. This includes solution-based alliances, geographic-specific alliances, investment alliances, and joint ventures. If the answer to this question is “no” to any type of alliance, then the potential alliance should consider a “work for hire” arrangement with the other company. For the matrix in the figure below, all blocks should be filled in with a “Y” for yes to the question, “Do you need an alliance that is sales-based?”
Figure 1: Framework Questionnaire: What type of alliance is needed?
Type of Alliance
| Question | Sales | Solution | Geography | Investment | Joint Venture |
| Do you need an alliance that is sales-and client-based? | Y | Y | Y | Y | Y |
| Is there the need for joint solution development? | N | Y | N | Y | Y |
| Is the need geographic-based? | N | N | Y | N | Y |
| Is there a necessity for direct investment in the external company? | N | N | N | Y | Y |
| Is there an overriding reason to set up a separate company to acquire the needed products and services from the external provider? | N | N | N | N | Y |
Step 2: Is there a need for joint solution development?
In Step 2, the field begins to narrow. There is no need for joint solution development with a geographic -specific alliance. For these two questions, an “N” is entered in the appropriate spaces. However, there is a need for joint solution development in a solution-specific alliance. In addition, investment alliances and joint ventures rely on joint solution development as a cornerstone for their alliances. As a result, a “Y” is entered under solution-specific alliances, investment alliances, and joint venture alliances.
Step 3: Is the need geographic-based?
Sales-based alliances usually focus of products and services, although there are occasions when a sales-based alliance can be geographic-based. Solution-specific alliances are not geographic-based. Investment alliances are generally not geographic-based as well. Geographic-specific alliances and joint ventures usually have needs that are geographic-based. As such, an “N” is entered under sales, solution-specific, and investment, and a “Y” is entered under geographic-specific and joint venture.
Step 4: Is there a necessity for a direct investment in the external company?
Sales alliances, geographic-based alliances, and solution-specific alliances do not require direct investments. Investment alliances and joint ventures generally do require direct investments in an alliance partner. An “N” is placed under sales, solution-specific, and geographic-specific, and a “Y” is entered under investment and joint venture. Direct investment should be defined as an investment in capital for this framework.
Step 5: Is there an overriding reason to set up a company to acquire the needed products and services from the external provider?
There are many reasons why external partners may need to set up separate company. When there is an overriding reason to set up a separate company, a “Y” should be entered under the joint venture. For all other columns, an “N” should be placed in answer to this question. There is no overriding reason why a sales, geographic-specific, solution-specific, or an investment alliance needs to set up a company to acquire the needed products and services from the external provider.
Step 6: Pulling together the answers from the framework
To pull the answers together from Figure 1, first look horizontally at the type of alliance applied to the question, and then look vertically by the alliance to see the makeup of each alliance as framed by the questions. The completed matrix should follow the key Figure 1, with patterns of “Y’s” and “N’s” directing the framework user to the type of alliance that is needed by the alliance partners.
In a world moving at Internet speed, fewer and fewer companies can survive and thrive by being all things to all people. The days of total vertical integration are rapidly diminishing as the pace of technology creation and innovation accelerates. The need to rapidly recognize the need for alliance partners and then select the right alliance partner may mean the difference between being a world-class company and an average company. It may even mean disappearing from the competitive landscape in the worst-case scenario.
The framework to determine the need for a business alliance provides a roadmap to determine whether or not an alliance an alliance is needed. When it has been decided that an alliance is needed, the framework to determine what type of alliance is needed provides a roadmap into the five types of alliances. The combination of the two frameworks provides a sound way to begin the journey to establish successful alliances.
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