The Challenges

Demonstrating the Full Value. Alliance professionals struggle to demonstrate the full value of their proposed or in place alliances. They have difficulty showing a clear, hard line between corporate strategy and alliance contribution. Their challenge is to articulate that alliances are growth engines for the company and …“here’s how and here are the numbers.” The numbers are there but difficult to extract when the typical company accounting and sales systems are not designed and built to capture the incremental revenue and costs linked to the operation of an alliance.

Tracking incremental revenue. Starting with the top line, alliance revenue is not easily isolated from business as usual. Organizations tend to track sell-with sales in the CRM system, but identifying the level of influence a partner may have had in the sales cycle continues to be difficult, often dependent upon a direct sales rep to tag the sale as a partner sale. Our interviews reinforced the claim that sales reps, intentionally or not, at times disallow credit for a partner’s sales contribution.
 

Channels sales are clear-cut but when an alliance offer meets in the channel, the issue of what is attributable to an alliance becomes clouded again.
 

Isolating incremental costs. Tracking costs of operating an alliance is often difficult because again it is hard to separate what contributions are directly related to alliance activity and what is normal business operation. For example, marketing staff may be assigned to execute on alliance marketing activities, but there is no means to track how much time is dedicated to alliance activity versus other activities. This also means that since it is hard to isolate the contributions of these individuals, it is hard to recognize and reward their efforts.
 

Also problematic is that some portion of the alliance headcount and expenses are on the partner’s ledger which can be difficult to understand if as a company you are gaining an advantage in shared costs or are taking on an unfair burden of the total.
 

Applying Appropriate Tools for Collaboration. Our interviews showed that individual alliances often operate in silos. The alliance organizations have not built a ‘community of interest’ that shares or builds upon best practices within the organization. Fundamentals such as common tools and templates are lacking which means that alliance professionals are left to create and maintain their own. Those tools that are in wide use tend to be based on presentations and spreadsheets. Collaboration and community require input from all stakeholders and shuttling files back and forth stifles the vitality of both.
 

Alliance Business Management Enablers

Despite the challenges of managing an alliance business, many organizations do so effectively and with successful outcomes. What are the keys to managing an alliance business?

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Alignment with the Business Mainstream

Companies that partner are more successful than their peers2 and most successful alliances are aligned with the core business. Alliance best practice research has shown top performing alliances are more consistently aligned to corporate strategy and more collaborative in involving senior leadership, stakeholders, and partners in designing the strategic intent of the partnership3.
 

This includes becoming an integral part of the organizations’ strategic planning and adopting the discipline of tracking and managing the alliance contribution to the company at top line, bottom line and in creating innovative value.
 

Alliances are increasingly becoming sources of innovation for companies and so becoming more integral to future success. One study cites that 51% of CEO’s want innovation and access to new technologies from alliances4. This heightened importance of alliances in generating the innovation pipeline demands that businesses evaluate their capacity to do so and the investment model required to produce new streams of revenue just as they evaluate their product portfolios.