United We Stand

Rather than swim alone in today's murky business waters, entrepreneurs are pairing up through strategic alliances.

No man is an island. No business is an island, either. No matter how large or small, every company is just one tiny piece of the complex puzzle that makes up the business environment of the '90s. In reality, few companies are shaping their industries by generating all the innovations alone. Rather than ignoring what others are doing in the marketplace, many believe that success in today's competitive business world demands a keen sense of other companies' actions and how those activities shape, enhance and even benefit their own businesses.

Consequently, more and more companies are finding it advantageous--even necessary--to form strategic alliances. Businesses are forging partnerships in record numbers to develop products, share resources and pool expertise. The typically temporary nature of alliances makes them even more palatable to entrepreneurs. Partnerships foster mutual benefits, but unlike a merger, ownership remains with the respective parties--and the alliance exists only as long as it's advantageous to both.

Among the most notable recent pairings is the alliance Microsoft formed with longtime rival Apple Computer, sending shock waves through the computer industry. While alliances are commonplace in the hardware and software fields, they've also become prevalent in other industries--from communications to retail to manufacturing.

According to a recent Coopers & Lybrand LLP study, among America's fastest-growing companies, 48 percent more alliances exist today than three years ago. The number of alliances per company is also increasing. Of the firms surveyed, 61 percent are participating in an average of four strategic alliances, compared with 55 percent involved in an average of three alliances in 1993.

The fast pace of many industries, shrinking product cycles and changing technology are driving this trend. "The [motivation for] most alliances today is that markets [don't have] the patience to wait for internal growth," contends Robert Paglia, a partner at Coopers & Lybrand.

Alliances are particularly alluring to small businesses because they provide the tools businesses need to be competitive. "For some small companies, alliances are a matter of survival," says Robert E. Spekman, professor of business administration at the Darden School of Business at the University of Virginia in Charlottesville. "It's becoming too complicated and expensive to develop expertise, and market access is becoming much too hard to come by."

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This article was originally published in the April 1998 print edition of Entrepreneur with the headline: United We Stand.

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