Businesses form alliances to promote growth and access new
markets and technologies. Despite this "alliance reliance," 60 to
70 percent of business-to-business (B2B) pacts fail, according to
Tayloe Murphy Professor of Business
Robert Spekman. The University of Virginia Darden School of Business expert on B2B marketing recently published research in
which he offers tools to help managers counter this trend.
"This failure rate has not decreased significantly in 20 years,"
Spekman said. "Such mixed results present a paradox: Firms need
alliances to compete effectively in the global economy, but their
track record is not very encouraging."
Corning and Siemens are two companies that got it right.
Their alliance eventually formed Siecor, a fiber optics company
located in North Carolina. Spekman explained that Corning had
the fiber optics skills and Siemens had the cabling expertise.
Together, the companies tapped into a whole new market for network
"The skills that each party brought were complementary, and they
established a governance structure that had a no-blame review
process in which the partners attempted to solve problems through
conflict resolution techniques," Spekman said.
He added that the managers who handled the alliance on both
sides worked well together, recognizing the "give and take"
required in any relationship. The attitude served them well.
"Corning's name comes second in this formation, for
example," said Spekman. "While both firms have egos, Corning and
Siemens did not to let them get in the way."
Corning is no stranger to successful alliance formation. It has
formed a myriad of partnerships with companies, including Dow (Dow
Corning), Owens (Owens Corning Fiberglass) and Ciba
To form alliances successfully, Spekman advises that managers
from command-and-control backgrounds acquire certain "soft skills"
in addition to humility.
Elements of Alliance Competence
Spekman puts forth three main activities associated with
managing an alliance:
His work also defines the five elements that enable a firm to
support alliance-like behavior and affect alliance performance.
know-how entails knowledge and experience in alliance
management. It is the ability to articulate, codify, share and
internalize alliance management wisdom that is critical. In
starting from a point of competence, managers are able to build
upon existing strengths, which is bound to lead to better
mindset relates to those relational variables -
trust, commitment, communications - that enhance a firm's ability
to partner. It captures the underlying social contract that guides
the interactions between partners and addresses the question of
what it means to partner.
bench depth is simply the depth of
talent within a firm that is "alliance ready." These types of firms
can easily assign the role of alliance manager. Alliance managers
cross many boundaries and may be considered "boundary-less." They
must balance the needs and desires of the parent companies and
their home companies and the day-to-day management of the alliance.
On an interpersonal level, alliance managers maintain relationships
with superiors, peers, and subordinates both in the alliance and
the parent organizations.
learning addresses the institutional mechanisms by
which alliance skills are recognized and taught and are
institutionalized. Learning is the codification of the processes
that foster alliance competence and can be accomplished a number of
ways. An example is through the use of templates and forms that
encourage others to ask questions and collect data that they might
not otherwise do.
- Supportive processes and
structures are the mechanisms that facilitate the
sharing of alliance knowledge among partners as well as within the
firm. Organizational structure and processes can impact both the
firm's ability to leverage its existing alliances and its ability
to develop new skills in the future. In alliances, bureaucracy can
stifle the firm's ability to innovate due to the rigid rules that
standardization and centralization manifest. On the other hand, an
adhocracy — a primarily unstructured organization focused
on addressing challenges — encourages the expression of
communication, discussion and information sharing that, in turn,
promotes a culture in which alliances are more likely to
"We believe that these five elements explain much of the
variance between high and low- performing alliances," Spekman said.
"Successful alliances do not just happen by accident. They take
effort and hard work."
In addition, trust is an essential ingredient to the transfer of
knowledge because it acts as a counterpoint to opportunistic
"Said simply, trust is the currency that determines knowledge
accessibility. It is fragile, easily damaged and should be repaired
quickly," Spekman added.
Building Essential Processes
Spekman also found that supportive structures and processes are
critical to the success of alliances because they enable the type
of behaviors upon which successful alliances are built.
Processes that enable the free flows of information encourage
risk taking and establish reward systems that facilitate teamwork
and are more likely to result in high-performing alliances,
according to Spekman.
Structural elements that discourage silo-like thinking and
encourage higher levels of participation in decision-making are
more likely to exist in higher performing alliance
The degree to which firms are alliance-friendly converges on the
following four factors:
- Not silo-bound: the
absence of internal barriers that prohibit an enterprise
sharing: the firm's encouragement of information
transfer and communication among units.
the decision-making ability of the firm's people and their ability
to take action.
systems: the existence of systems that self-correct
and oversee performance.
"To be a good alliance partner means that a firm must
demonstrate internally the type of behavior that it wishes to see
in its external relationships," Spekman advised.
In addition, Spekman's work demonstrates the counter-intuitive
nature of being competitive - the requirement of effective
About the Darden School of Business
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