I recently came across a TV program about disco which brought up a memory of 8-track tapes. When it was the rage among my friends, I had to have them, but soon enough, I realized that they did not work for me (I could not replay my favorite sound tracks). I went for the “next new thing” (stereo audio cassettes, at the time).

Fads can be fun when there’s not a lot at stake. But when it’s your business, it helps to look before you leap. And little by little, I’m now hearing about the fallout from “strategic alliances”… largely because people rushed into them as the “next new thing” without thinking it through. How can you make sure yours succeed?

View your alternatives from the point of view of the end result. Do you really need to strike up an alliance? Many entrepreneurs enter into strategic alliances because everyone else is doing it, rather than critically evaluating whether they will serve their business needs. Therefore, ask instead if an alliance will get you to where your business needs to be.

What are your immediate business goals? Maybe the goal is to increase your visibility in a certain market so that you can attract more clients. If so, what kind of clients? More of what you already have? Larger clients? Clients in a different industry? Will these be clients for your current product or service offerings, or do you want to branch out into new areas? The answers to these questions are vital, because they help you hone in on (1) whether you will truly benefit from an alliance at this point, (2) if so, who will be the most appropriate allies for your company, and (3) what will be the best approach in working with them.

After you have decided that an ally is the right way to go, you next have to find appropriate “power partners”. “Power partners” are either companies or people that can move your business in a way that you have not managed. As you are making your choices, think through the business goals you want to achieve and ask the following of yourself:

- Does this person/company offer products or services that complement mine (direct competitors are often not a good power partner choice)?

- Is this person/company well regarded in the marketplace? (check this out before hand as you do not want a bum as an ally)

- Is the person/company in an industry that I want to move into?

- Is the person/company a bigger or smaller business than mine, and will it matter who runs the alliance?

- Do I enjoy working with this person/company? What is their “corporate culture” like?

- What is this person/company planning to get out of this collaboration with me/my company? Are our goals compatible?

With a new alliance, it is okay to start out slow. It is better to let the strategic alliance develop naturally on their own rhythm, rather than forcing it to grow. A modest start is fine.

Finally, because the law doesn’t clearly define “strategic alliances,” it’s crucial that the parties to the alliance do. Whatever you call your relationship with your “power partner,” be sure to put your expectations in writing – particularly in situations where money changes hands, intellectual property is created, and you serve clients jointly. When you have a clear understanding in writing, you can forge a powerful alliance with your power partners!

Copyright (c) 2010 Ask The Business Lawyer

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