With the present economic conditions, many companies are working hard to identify new opportunities to reduce cost and increase revenues with projects that don’t require significant additional capital.
One area that has great potential for in these areas but is receiving little attention in most companies is their Alliance Channel Partner Program.
Over the years, many companies have found that implementing an effective alliance partner program can be a significant contributor to revenue. It can also be an innovative and interesting way to compete against fast and nimble competitors. Also, if executed correctly, it can allow them to be more cost effective than their vertically integrated competitors.
In short, a properly designed and managed alliance program can provide both the economies of scale and scope offered by a traditional integrated model of organization.
It is no wonder that such alliances are growing quickly in the technology industry where the environment has included significant competition with rapid change and quick innovation.
Opportunity to Increase Sales & Profits
However, our research, supported by our experience, concludes that many companies have not been very successful in maximizing the sales & profit opportunities available in their alliances programs.
For example, Bonocore Technology Partners recently conducted a review of over sixty high-technology companies actively managing over 420 strategic alliances partners. We analyzed the present success rate of their programs.
We asked the company executives responsible for the individual results of each alliance to evaluate their strategic partner’s success in meeting the company’s goals. The results were disappointing.
The corporate executives who responded reported that less than 13% of their alliance partners are meeting the company’s annual corporate goal expectations.
Another significant key finding of the study is that many technology companies do not manage their alliance channel programs as a key strategic core activity of the company. All too often alliances are seen as outside ‘core’ operations and therefore less deserving of the resources necessary to make them reach their full potential. This is one factor leading to the disappointing results of the executives that we noted above.
One example identified in our study where the alliance program is not viewed as a key core activity is in the alliance partner selection process. Alliances are much more successful when they are the result of a well thought out Alliance Strategy. Alliances that arisen suddenly either because they were a response to a sudden move of a competitor, or from an inquiry from a potential strategic partner, or a certain conversation the Chief Executive’s had with another executive were much less likely to be successful. In these cases, little time was given to examine how these alliances fit into the company’s business strategy.
One famous example of a company with an effective alliance program is Cisco Systems. Over the years, Cisco has leveraged its capabilities through a large number of alliances with significant bottom line results. Some Cisco alliances have been their partners for a long time and a number were eventually acquired. Many people agree that Cisco’s alliance partners were key contributors to their long term success. Cisco never looked at any individual alliance as an end in itself but how they contributed to their overall alliance strategy.
The survey included both product & service companies. As you might not expect, many of the alliance partners that were identified as “not meeting expectations” are well known national technology companies with extensive alliance networks.
During our review, we also found that formal measurement systems to gauge alliance success rarely existed. When they did exist, they were not standardized. Executives noted that it was very difficult to adopt standard performance measures within their company’s culture. A number of executives noted they only provide generic information about alliances. Many stated that each unit has its own rationale for entering into alliances. Most stated that units have their own criteria for evaluating those alliances.
While these findings were disappointing to many of our clients, it does identify opportunities for revenue and profit improvement in many technology companies today.
Another key conclusion in our study was that companies that were successful in managing their alliances to exceed their goals had some common traits. They included:
· The alliance program was considered a “core function” within the company;
· They followed a set of management principles or “best practices” in managing their alliance program: and
· They managed their alliance program based on an alliance strategy rather than just doing individual “deals”.
Alliance Channel Best Practices Diagnostic
Bonocore Technology Partners has developed an Alliance Channel Best Practices Diagnostic to assist our clients in evaluating their present alliance program and identifying opportunities to increase their sales and reduce their cost. This diagnostic is built around answering eight key questions developed by our consultant’s extensive experience and our alliance channel best practices developed through our research in this area. This diagnostic provides the foundation to evaluate their present alliance program and determine where opportunities exist for profit improvement. We then assist our clients in implementing the recommendations.
It may be very profitable for your company to conduct such a diagnostic as the first step in generating increased revenues from your strategic partner program.
We welcome any questions or any comments including approaches you have taken to improve this function in your company.
