Strategic alliances can provide an excellent route to growth. Successful alliances give organizations access to new markets or different sets of products and skills without the complexity, degree of interdependence, or capital required by an all-out acquisition or merger. For instance, if your company is oriented toward research and development, you may be able to find an alliance partner that possesses the marketing savvy to help find new customers for your ideas.

While not on the same scale as mergers or acquisitions, alliances are significant business arrangements that go well beyond the typical supplier-vendor relationship. An alliance partnership leverages the strengths from each partner to create greater profit power together, and the success of each entity is, in effect, dependent on the other.

For smaller companies with limited resources, an effective alliance can put them on more competitive footing with larger players. By combining complementary capabilities, two underdog companies can achieve some of the benefits of scale that would otherwise be out of reach.

But for all of their promises, a great majority of alliances fail. The reasons vary; mismatched partners, poorly structured deals, flawed contractual terms, and cultural clashes are all familiar pitfalls.

One common denominator is the lack of a strategy. If a proposed alliance is not driven by a well-defined and aligned strategy up front, it is almost certainly doomed from the start.

Framing the business purpose

The first step in developing an alliance strategy is to identify the capabilities needed for continued business success, and then determine whether your organization can and should develop these capabilities internally, outsource them, buy them outright, or team up with a partner to gain access to them. An alliance becomes the best strategy if it beats out the other options for growth.

Once an organization has identified its most promising pathways to growth, it can then target the right partnerships in direct support of these clearly defined opportunities.

Part of early strategic decision-making also includes determining how a potential alliance will be managed and ensuring there is adequate infrastructure and resources to support that management, not only at the start, but well into the future. That’s because successful alliances should evolve over time to create sustainable value. As such, the partnership will require ongoing maintenance, nurturing, planning, and adjustments.

Finally, as with every business plan or venture, an alliance strategy must remain consistent with, and developed in support of, a company’s overall business strategy.

Due diligence before doing deals

Many companies become too enamored with partnership opportunities or caught up in negotiations by viewing deal-making as the golden ring. An alliance isn’t an end, but a means to an end, and strategy must drive the process.

Only after designing a strategy and reaching key capability decisions should an organization move on to finding the right partner, much less constructing the deal.