United We Stand

A Perfect Match

Entrepreneurs sometimes enter into alliances without thoroughly analyzing their options, only to realize a merger or acquisition--or even selling the business--would have been best. This is a primary reason many alliances fail, so make sure an alliance is the best option for your company.

For Liquid Audio, the key to finding the best partners has been to select companies with whom it has experienced a meeting of the minds. Such was the case with N2K, a company that operates Music Boulevard, a top retail music site on the Web. N2K and Liquid Assets shared a common vision--digitally downloading music over the Internet. "That made us realize we were a perfect match," Flynn recalls.

Entrepreneurs interested in forming an alliance should look for companies that are one step ahead of their competitors. "Macy's has always been ahead of the game," says McAfee. "They set the pace for the industry. That was a key reason we chose them."

Researching a prospective partner is also crucial, according to Spekman. Find out about the business's key strengths, market position and, if possible, financial status. Ask current and past partners how they were treated; if they weren't equitable partners in the past, chances are they won't be with you, either, Spekman says.

Also, be clear with yourself why you're entering into the alliance--and what you expect to gain from it. "You need to understand how it fits into your business plan," Spekman emphasizes. Though the reasons may seem obvious, companies often rush into agreements unclear about how an alliance will prove beneficial. This frequently leads to poor choices.

Finally, there's the task of finding a company with a complementary corporate culture. While locating one with a culture exactly like yours isn't the goal, it's critical to look objectively at management styles, work ethics and values, and to admit where potential clashes could occur, says Richard Hagberg, Ph.D., a corporate psychologist and president of Hagberg Consulting Group, an executive development and organizational assessment company in Foster City, California.

Key questions to ask: How are decisions made? How controlling is management of its employees? At what pace do employees work? How competitive or aggressive is the company?

Honestly answering these questions leads to a better match, Hagberg says. Some companies, for instance, are known for their tight reign on employees or the long hours they keep; if your work style isn't similar to theirs, you could be headed for problems. Similarly, companies such as Intel are legendary for their aggressive style, Hagberg says. If you're considering an alliance with such a company, you must feel comfortable with their tactics. In the end, it's a matter of considering all the information and deciding if you can all get along.

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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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