United We Stand

Built To Last

An alliance is rarely a match made in heaven. Misunderstandings, compromises and disagreements are natural. Developing methods for clear communication and conflict resolution will put you on the path to creating an enduring partnership.

Early on, establishing key objectives and goals that reflect what both parties expect to gain from the alliance is critical. Clearly outline your objectives. Be sure they are realistic based on the amount of resources both parties are willing to put forth, and make adjustments as necessary. When Liquid Audio first entered into an alliance with BMG Entertainment, the parties developed grand plans--one involving software bundling--that needed to be brought back down to earth. "We didn't want to create expectations that were too difficult to meet," says Flynn, "so we scaled things back to make sure what we were trying to accomplish was possible."

Disappointments and misunderstandings can be avoided by establishing an effective process for working with your partner. Assess each company's strengths, and define responsibilities along these lines--especially in the area of management. Many alliances fail because of poor management relationships, so clearly document what's expected.

Also consider all the accounting, tax and legal ramifications of the alliance. Form a game plan for how the alliance will operate from the beginning to the end of the relationship.

Strike a balance. Nothing sours an alliance faster than the notion that one party is giving everything while the other is getting a free ride. "I think both sides have to feel as if they're being treated fairly," says Flynn. "In some strategic relationships we've developed, there was the feeling we were getting everything we wanted, but we had to give up so much in return that we didn't necessarily feel good about the partnership."

This is particularly important when forming an alliance with a large firm. For example, when Liquid Audio began its relationship with Microsoft, it wanted to make sure its needs were considered. "Microsoft is a huge company that puts fear into some people's hearts, and when we negotiated the relationship with them, we wanted to make sure we didn't feel we were giving too much away," Flynn says. "So we kept renegotiating the deal until there was equal consideration. For everything we're giving them, they're giving back."

You need to keep the lines of communication open. McAfee, for instance, receives weekly sales reports from Macy's store managers and talks with senior management at Macy's headquarters each month to discuss important issues. The relationship must be developed to the point where both parties can be honest, regularly evaluate progress and offer recommendations for improvement. Moreover, when there are disagreements, resolve them as quickly as possible. Spekman says it's best to meet in neutral territory where both parties can speak openly and honestly. Then, focus on solutions rather than placing blame.

As is true of any good relationship, you can't measure an alliance's success by one incident or moment. The measure of any successful alliance is what you gain from the relationship over time.

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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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