Alliance and Relationship Management

Alliance and relationship management is the set of practices and tools required to reinforce alliances/relationships with partners, outsourced functions or activities, and to maintain visibility into a relationship with another business entity. Relationships include entities that are part of creating and delivering the value proposition of an organization.

How Alliances Create Value
Value is created through synergy as the partners achieve mutually beneficial gains that neither would have been able to achieve individually (Teece 1992). Hamel (1991) argues that what partly drives the decision to ally is the importance of deriving value from the partnership. For example, Siecor, a joint venture between Siemens and Corning, combined Siemens' cabling technology with Corning's fibre optic expertise. This resulted in the development and early dominance of the fibre optics cable industry, at great gain to both partners. Similarly, networks created through the joint efforts of the partners can inexpensively leverage the market presence of each (e.g. Lewis, 1990; Lorange and Roos, 1993). Comarketing agreements, for example, permit partners to talk with a `louder voice'in the marketplace and quickly grow market share. In yet another way, synergy is gained when a partner internalizes knowledge, skills or expertise that ultimately enhances its own competitive advantage (e.g. Parkhe, 1991). The GM&Toyota alliance, NUMMI, is one example. As a goal of the alliance, GM attempted to learn Japanese manufacturing management processes, while Toyota sought to learn how to manage a diverse and heterogeneous US workforce. Since partners often enter alliances with different levels of skill and different expectations, it is likely that they will recognize and measure value differently (Borys and Jemison, 1989). Problems arise when expectations differ and/or are unrealistic; when partners learn at different rates; as well as when partners do not agree on the level each commits to the relationship or each takes from the relationship. Equity, as described by Ouchi (1980), is an important consideration in the formation and maintenance of alliances. Not only is the level of value contributed/gained important, there exists also a question of timing. The issue is one of fair dealing such that all partners receive benefits proportional to their investments over the life of the alliance. Balance might not be achieved at each point in time; however, one must trust that equity will be achieved over time. Korsgaard et al. (1995) refer to procedural justice which emphasizes both fairness and the fair distribution of resources.

Further Reading

• Collaborative Advantage: The Art of Alliances HBR
• Alliance Management (a.k.a. Supplier Relationship Management) Robert J. Engel, C.P.M
• Managing alliance relationships: Key challenges in the early stages of collaboration Mícheál J. Kelly, Jean–Louis Schaan, Hélène Joncas