11.5.1 What are strategic alliances

Establishing a strategic alliance is a process of arranging and maintaining collaborations between different companies or between businesses, universities and research and technology organisations. The principle of these alliances depends more on trust between partners than on legal contracts although in practice, contracts are also used quite extensively in collaborative arrangements.

A formal definition could be described as follows:

A strategic alliance is a formal relationship formed between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organisations.1

A strategic alliance can support significantly innovation in your company by using the knowledge and expertise of other partners. This is particularly important in many SME’s who do not have enough resources to run their own R&D sections. Besides knowledge, expertise and intellectual property companies can also share products, distribution channels, manufacturing capability, project funding and resources. The objective is to obtain more benefits by working together to share knowledge, resources and risks (than would be obtained from individual efforts).

In a nutshell, an alliance may be seen as the joining of forces and resources, for a specified or indefinite period, to achieve a common objective.2

Strategic alliances allow companies to share skills, resources, information or expertise. In some situations each individual company might see an alliance as a way to help their own company; they see their company gaining access to other companies’ skills etc. There are also situations where the alliance is the key focus of the organisations involved - they share the production of the product or service and no one company is directly responsible.

Strategic alliances are linked to trends in the business environment which include:

  • De-layering (flattening the hierarchy)
  • Divestment and a focus on core business
  • The application of core-competence analysis
  • Increasing complexity of technology and faster development cycles.

Strategic alliances are an approach to business that can be managed as a technique, but the new alliances can also be viewed as a new model or business structure.

Strategic alliances allow organisations to:

  • Improve and extend their capability and not just to solve or satisfy contracts
  • Acquire knowledge for future needs
  • Pro-actively implement the technology strategy of the business.3

Organisations can establish strategic alliances to solve scheduling and resourcing problems in an ad hoc way; some organisations form consortia4 just for this purpose.

1 http://en.wikipedia.org/wiki/Strategic_allianc    
2 Fundación COTEC, CENTRIM, IRIM, Manchester Business School, Socintec (1998) TEMAGUIDE. A Guide to Technology Management and Innovation for Companies. A research undertaken with support of the EU Innovation Program. 
4 Consortia are more common in the non-profit sector.