Just a few short years ago, strategic alliances were decidedly out of favor as companies focused on consolidation and restructuring. No longer.
“Strategic alliances are coming back quicker now than M&A activity,” says Kees Cools, co-author of “The Role of Alliances in Corporate Strategy,” a November 2005 report by Boston Consulting Group. In fact, BCG says, strategic alliances in the United States were up 20 percent last year. Similarly, alliance activity grew 30 percent year-to-year in Asia.
This latest round, however, is benefiting from lessons learned in the 1990s, when companies viewed alliances strictly as “vehicles of growth,” says Cools. Many couplings — particularly in the airline industry — failed partly due to a lack of clear governance policies and exit strategies, he adds. Others didn’t take full advantage of complementary assets.
Still, the benefits of forming alliances to achieve growth while reducing new product development and marketing costs are as real as ever. For example, General Motors, DaimlerChrysler, and BMW, playing catch-up with Toyota and Honda, recently joined forces to bring a new hybrid engine to market faster than either could on its own. In addition to sharing design costs, says Eric Ridenour, Chrysler Group chief operating officer, “our goal is to find efficiencies in such areas as engineering, working with suppliers to develop and purchase components, and in purchasing manufacturing equipment.”
Going forward, Cool expects strategy alliances to “continue to grow some 10 to 15 percent in the next few years before stabilizing.”