Long Range Planning 42 (2009) 164e193
http://www.elsevier.com/locate/lrp
Building Successful
Strategic Alliances
Strategic Process and Analytical Tool for
Selecting Partner Industries and Firms
Stevan R. Holmberg and Jeffrey L. Cummings
Successful business alliances are a critical strategic component in many industries, but too
many strategic alliances fail to meet their partners’ objectives. While the reasons behind
alliance failures are complex, and vary according to type of alliance and industry, many
failures result from ill-conceived overall alliance strategies, narrowly focused industry and
firm partner selection analytical thinking and models, and poor alliance management,
execution and implementation. In particular, the well-informed and strategically driven
selection of alliance partners is a core element in building successful alliances. To that end,
this article provides alliance managers and researchers with (1) a strategic managementbased industry and partner selection process, (2) a new dynamic partner selection tool for
evaluating target industries and specific firms, which is applicable to multiple alliance and
industry contexts, and (3) an alliance-rich global travel industry application that illustrates
the robustness of our partner selection process and analytical tool. The article fills a gap in
the literature with respect to service-business alliances, which have traditionally been
understudied. Lastly, perspectives are offered for future managerial and research actions.
Ó 2009 Elsevier Ltd. All rights reserved.
Introduction
Strategic alliance formations have increased dramatically over the past decade and, in many U.S.
and E.U. industries, alliances are now a central strategic component and a core offensive and/or
defensive competitive weapon. Strategic alliances have shifted the fundamental competitive paradigm in many domestic and international markets from traditional firm-to-firm competition to
more alliance-based, network-vs.-network competition. Consistent with this shift, Booz-Allen &
Hamilton estimates that more than one-third of the revenues of the top 2,000 U.S. and European
0024-6301/$ - see front matter Ó 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.lrp.2009.01.004
companies come from alliances. Lorenzoni and Baden-Fuller characterize firms positioned at the
center of large multi-firm alliance networks as ‘shining examples of how firms can change the rules
of the game by creative and imaginative thinking.’ Moreover, as strategic innovations (such as online
travel, auctions and banking; digital communications and entertainment, including mobile phones,
digital television, Apple’s iPod and iPhone and RIM’s Blackberry; pharmaceuticals, etc.) create
powerful shifts in customer value propositions through new combinations of performance attributes, an individual firm’s competitive advantages can be taken back to zero. Joel Barker found
that paradigm shifts are often created by firms using non-traditional thinking, unrestrained by current industry practices, which raises the importance of having a strategic perspective about alliance
formation. Firms seeking to identify, develop and maintain sustainable competitive advantage increasingly use a collaborative paradigm that looks beyond their own boundaries to develop sophisticated, effective and flexible alliance strategies.1
However, despite the growing numbers and increasing significance of strategic alliances, many
fail, while an even greater proportion perform poorly.2 Although such failures may be for many
interrelated reasons - and may be defined in various ways - two common causes are poor partner
selection and poor alliance management. Even superior alliance management skills may not be able
to overcome poor initial screening and targeting. This article focuses on partner selection, presenting a strategic management-based process for evaluating target industries and firms that can help
managers avoid the emotional drive to ‘do the deal’ - a key partner selection pitfall - as well as other
factors that may inhibit appropriate partner selection.3 This process also provides a new dynamic
partner selection tool for evaluating target industries and specific firms, and we illustrate its use by
applying it to the alliance-rich global travel industry, one of many industry contexts where the tool
can be used.
This article fills a number of important gaps in the existing alliance partner selection literature, much of which: neglects to link partner selection to broader strategic management issues;
fails to consider an overall strategic alliance partner selection process; focuses on general rather
than specific motivations behind selection; tends to be conceptual, rather than offering operationalized analytical tools; pays insufficient attention to dynamic considerations and changes
over time; and neglects the needs for weighting and rating the many specific elements embedded in an alliance partner selection analysis. Our process and analytical formation criteria help
address both the multiple problems associated with ‘strategic expediency’ (where, as Bierly and
Gallagher note, alliance decisions must be made with limited time and information) and those
situations where firms, and/or individuals, trust of potential partners is based on their knowledge of them as derived from social networks, cultural and organizational similarity or reputation, rather than as a result of conducting a rigorous analysis of their potential fit as alliance
partners.4
We provide a practical illustration of the utility and robustness of our proposed partner
analysis process and analytical selection tool in the context of the travel-tourism industry
which Lorenzoni and Baden-Fuller noted that the travel industry is ideal for studying
alliances, given its wide variety of alliance types and cross-industry relationships and the
rich diversity of significant strategic and/or tactical impacts these different collaborative
arrangements have on the industry and on its players. However, our process and tool can
also be applied to other service and product industry alliances, and to different alliance types.
As service businesses have been underrepresented in the alliance partner selection literature,
we have chosen co-marketing alliances, increasingly common in the service-related sector,
as this article’s context.
Any collaboration begins with analyzing potential partners. realizing
potential alliance benefits depends on selecting appropriate partners.
Long Range Planning, vol 42
2009
165
The crucial importance of alliance partner selection
Any collaboration begins with the need to analyze potential partners, as realizing the potential benefits of an alliance will depend on the selection of appropriate partners. Draulans et al. find that the
knowledge, skills and competencies needed to both select appropriate partners and then manage the
ensuing collaboration make ‘an important contribution towards enhancing alliance success.’ Simonin
called this capability ‘collaborative know-how,’ while Kumar and Nti termed it ‘alliance process
knowledge.’ Hoffman notes that, no matter how it is characterized, this collaborative capability extends from managing individual dyadic alliances to large and complex multi-firm alliance portfolios, and demands not only expertise in alliance management and governance, but also in alliancerelated searching, negotiations and terminations.5
As one might expect, the alliance literature widely agrees that partner selection is an important
topic, and that partner selection know-how is central to operating successfully in an alliance rich
environment. Ireland et al. found that ‘effective alliance management begins with selecting the right
partner’, while Geringer’s study of international joint ventures strongly supported ‘the assertion that
the partner selection ‘process’ as a whole, and partner selection criteria in particular.’ is an important
topic for managers and researchers and has ‘received relatively scant attention’. Gomes-Casseres
found that selecting partners is critical to ‘knowing how to maximize the benefits and minimize
the risks of partnerships’ and that ‘the choice of partners determines the raw material, so to speak,
for collaboration’, while Harbison and Pekar note that ‘Partner selection is of critical importance to
any alliance. Inexperienced firms often fail to pay enough attention to this, concentrating on their objectives and rationales instead of conducting a detailed analysis of potential partners.’ Finally, Pangarkar’s alliance study documents the importance of pre-alliance preparation and deliberation and
indicates that short-lived alliances produce limited benefits and have high out-of-pocket and
opportunity costs.6
The many diverse types of alliance (including joint ventures, marketing agreements, research
and development arrangements, project-oriented alliances and so on) and the variety of organizational types involved (e.g., firm to firm(s); firm to nonprofit organization/association; nonprofit to nonprofit; firm to government agency) make partner selection and other alliance
competencies even more important, and the need for superior collaborative know-how is particularly acute considering the high percentage of alliances that fail to meet their stated partner
objectives.7
Methodology
We used three resources to develop and refine our strategic management-based process and analytical tool for selecting alliance partners. First, we conducted an extensive review of the strategic alliance literature and, more specifically, the alliance partner selection literature, which revealed that
a structured, strategy-focused process and a new partner selection tool were needed. We extend the
current literature by developing a process that links corporate objectives and alliance objectives and
strategies. The tool presented in this article also incorporates specific critical success factors (CSFs)
for the firm conducting the analysis and the industry in which it operates.
Second, we performed a thorough review of the academic and professional literature on alliances
in the travel, tourism and hospitality industry and related segments, seeking to identify industry
issues and trends, firm strategies, and more specifically, alliance activities and partner selection
issues. (One particularly informative publication was the 1999 Travel Industry Association of
America’s Building Strategic Alliances.) We used this information to develop our application of
the tool to the travel/tourism industry.
Third, we tested this article’s overall process and analytical tool with seasoned executives and
managers in Executive MBA classes. Testing the tool in this situation allowed us to further refine
both it and the process, and illustrated the advantages of using a strategy-connected dynamic partner selection tool to assess alliances first-hand (a detailed methodology explanation is presented in
the Appendix). We observed that, when not using the tool, executives focused on current critical
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Building Successful Strategic Alliances
success factors, ignoring the fact that they might change over time, and also tended to go straight to
the firm level, a narrowing of scope that meant bypassing important questions that would have been
revealed by an industry or industry-segment analysis of strategic alliance opportunities. Specifically,
working without the analytical tool, executives tended to focus on the general importance of CSFs,
without considering any specific weighting per success factor, or developing any underlying
assumptions about how they might be given relative ratings. Their subsequent use of the partner
selection tool demonstrated its ability to overcome each of these shortcomings.
Executives [tend to] focus on current critical success factors, ignoring
how they might change over time, go straight to the firm level and
bypass alliance opportunity analysis at industry or segment level.
The following sections review the gaps in the current literature and then present our partner
selection process and its related analytical tool, illustrating their use with online travel industry
examples. While our focus here is primarily on an alliance-rich service-related industry, the process
and its associated selection tool can also be applied in analyzing product-related alliances, and in
analyzing existing as well as potential new alliances.
Gaps in the alliance partner selection literature
Somewhat surprisingly, almost all the research efforts addressing partner selection have used the
lens of generic strategic alliance motivations or partner-attribute considerations, rather than
presenting specific selection processes or tools for day-to-day management use. Doz and Hamel
identify (but do not operationalize) three primary motivations behind strategic alliances: (1) co-option e co-opting potential rivals, as well as those with complementary products/services, helps
a firm gain competitive strength; (2) cospecialization e synergy from combining complementary
specialized resources, skills etc. contributes to a firm gaining unique skills and resources; and (3)
learning and internalization e learning and internalizing new skills contributes to a firm’s stock
of tacit or embedded skills. Generic alliance formation motivations are also described by other
researchers. Child and Faulkner group generic motivations into five primary categories (some of
which overlap) consisting of: (1) transaction-cost motivations e where the primary alliance motivations revolve around achieving transaction-cost economies and efficiency of assets, operations
and strategies; (2) resource-based motivations e supplementing existing resources or securing
missing resources (3) strategic-positioning motivations e increasing the strength of the firm’s strategic competitive positioning in the industry (including both offensive and defense alliances); (4)
learning motivations e alliances involving formal and tacit learning as a core motivation (which
all alliances feature, to some degree); and (5) other motivations e risk reduction/management,
first-mover advantage, speed-to-market, increased flexibility, reduced uncertainty etc. Park and
Zhou note that alliance motivations are generally based on market positioning and uncertainty
and the firm’s resource conditions, including the anticipated industry and competitive dynamics
generated by alliance activities. From a slightly different perspective, Bierly and Gallagher note
the roles that trust and a rational strategic-fit approach play in partner selection, and develop
the concept of ‘strategic expediency’ as a way to deal with the challenges of having limited time
and/or information and the tendency to overvalue trust when making partner decisions. They
believe firms develop strategic-expediency competencies by having policies, procedures and analysis
templates in place and by giving managers opportunities to practice their use. While prior research
is typically more general in nature, this article builds on these suggestions by providing a specific
partner selection process and template, in this case, in the form of an analytical, dynamic partner
selection tool.8
Long Range Planning, vol 42
2009
167
Some research has attempted to develop more specific procedures for choosing alliance partners.
Unlike the generic-motivation approaches, Pan develops alliance partner selection criteria based on
a review of 13 published studies on the topic. His motivations and partner selection criteria include:
complementary strengths, task-related and partner-related criteria; considerations of culture, economic behavior, and other criteria; how a potential partner fits into the value chain of a firm’s partners; 30 criteria grouped into partner and task related factors; tangible and intangible assets; trust
that benefits can be achieved by both parties; criteria or resources that can be bundled and bridged
to offer superior value to consumers; criteria varied over different market goals; coordination, commitment, communication and conflict resolution; complementary strengths; and the reality that
most businesses do not employed formal, sufficiently rigorous partner-selection processes.9 However, while the papers he reviews discuss the overall concepts and criteria that need to be considered, his analysis demonstrates that they do not produce a coherent strategic partner selection
process, or an operationalized selection tool adaptable to individual firm use.
Selection research focused on partner motivations results in conceptual
approaches, checklists and criteria that [don’t] consider critical strategic
factors or operationalize practical selection tools.
Not surprisingly, the predominant focus of prior partner selection research on generic motivation
considerations has resulted in conceptual partner selection approaches, checklists and criteria that often fail to consider critical strategic factors fully or to operationalize a practical and specific partner
selection tool. Firms using such static, general models may realize only limited benefits from the alliances they form. As an example, early managers of airline alliances typically used partner selection
checklist methodologies that emphasized economies of scale and extended geographic scope. This
was exemplified when Delta and Swissair formed a strategic minority equity alliance (the companies
purchased 5% of each other’s common stock) essentially aimed at capturing code-sharing and marketing advantages to bridge the U.S. and European markets.10 But Gomes-Casseres notes that the original alliance logic began to melt very quickly and strains began to appear in the relationship. First,
Delta bought European landing rights to expand its own flights into Europe, and second, as it did
not share Swissair’s focus on quality service, Swissair customers increasingly became dissatisfied
when they were transferred onto Delta flights. The selection checklist process, criteria and tools
used by the two partners seemed unable to pick up on the dynamic aspects of the relationship such as each firm’s future expansion plans - and failed to recognize the potential problems involved
in the partner’s divergent goals and strategies. This example illustrates (as Geringer suggests) that
a more complex and systematic partner selection process is needed. With international joint ventures,
for example, he notes the need for weighting different critical success factors to differentiate task- and
partner-related selection criteria, and to consider the potential of dynamic changes over time when
evaluating and selecting appropriate partner firms. Although still conceptual, his paper represents
a major step forward in recognizing the need for an analytical approach to alliance partner selection.
This article builds on these (and other) conceptual advances to extend the existing alliance-partner selection literature by presenting:
A Practical Alliance Partner Selection Process e Determining alliance motivations is useful, but
is only one part of a rigorous approach. Partner selection motivations need to be linked back to
overall corporate objectives, and forward to specific alliance objectives and strategies, all within
a strategic management-based approach. Many alliance-focused papers present topic areas that
should be included in a comprehensive partner selection process, but do not offer a systematic
overall process with analytical tools: this article fills this gap.
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Building Successful Strategic Alliances
A Practical, Operational, Dynamic Analytical Alliance Partner Selection Tool e The existing
partner selection literature does not operationalize various partner selection considerations, or
present specific analytical tools for managers’ use. This article presents a practical and flexible
tool that can be applied to product or service alliances - new or existing - and incorporate
firm-specific considerations. Following Geringer’s conceptual paper, our tool also incorporates
dynamic considerations of how variables, weights and ratings may change over time.
Industry snapshot: travel industry and online travel alliances
The travel industry is a major service industry, and exemplifies the increasing role and prevalence of
service-related alliances. Ireland et al. define strategic alliances as ‘cooperative arrangements between
two or more firms to improve their competitive position and performance by sharing resources’, and
(consistent with this definition) Pansiri notes that travel industry alliances are mainly targeted towards improving competitive position, increasing revenues and sharing and leveraging resources
and learning. Travel industry alliances range from strategic to tactical in nature; vary in their objectives, scope, structure and management; may be simple or complex; can take many forms;
and can be short- or long-term. The long-standing existence of these alliances - and their rapid
growth since the 1980s - has been well documented by prior research: indeed, Evans, reviewing
past travel industry alliance research, found that ‘collaborative arrangements of various types have
become an increasingly important strategic method of development in the travel industry’.11
In the late 1980s and early 1990s, for example, airlines formed strategic alliances with other airlines that focused on code sharing (allowing travellers to book seamless tickets on one or more participating airline), coordinated flight scheduling, marketing agreements, joint frequent-flyer points
programs, and shared arrangements for aircraft maintenance, equipment purchasing and baggage
handling. During this same period some airlines also created joint ventures - for example, British
Airways and the Soviet airline Aeroflot created an independent airline to service routes between Europe and the Soviet Union. In this early period, car companies and hotels also formed cross-marketing alliances with airlines.
Today, travel industry groups have been formed among and between airlines, online travel websites, hotels, rental cars, tour companies, destination sites, resorts, cruise lines, etc., and strategic
alliances are at the core of almost every firm’s business model and revenue streams. Paul Brown,
President of Expedia’s Partner Services Group, reports that Expedia is ‘focusing on longer-term relationships with these companies [partners]. This means longer-term business contracts, so we can focus
more of our efforts on what’s driving business between us and these hotel partners’. Sam Gilliland,
Chairman and CEO of Sabre Holdings (owner of Travelocity), who recently signed five- to
seven-year agreements with major airline suppliers, stated ‘We’re focused on developing a balanced
distribution model for everyone, including travel agents and corporations. The deals are cost-efficient for
airlines, require us to continue our own cost reduction focus at Sabre, and drive acceptable balance between long-term stability and efficiency, and incentive reductions for travel agents.’12 Travel and tourism have been recognized as among the most highly integrated industry sectors, one where (as
Pansiri notes) ‘one defining characteristic .. is the proliferation of strategic alliances within the industry., and between the industry and other sectors of the economy’.
The online travel industry is composed of firms of many types, all of which receive substantial
amounts of their revenue from strategic alliances with suppliers, customers, channel facilitators
and e in some cases e their traditional competitors. Some large online travel firms have diversified
travel product portfolios that include reservation systems (global distribution systemsdGDS), direct reservations with consumers, services to travel agents and corporate customers and, in many
cases, extensive non-travel product portfolios. Major such U.S. and European firms include IAC/
Interactive (Expedia.com, Hotels.com and other online travel sites, etc.); Sabre Holdings, Inc.
(Sabre Global Distribution System, Travelocity.com, etc.); Cendant Corporation (Apollo and Galileo Global Distribution Systems, etc.); two other major traditional GDS companies (Amadeus
Global Travel Distribution S.A. and Worldspan, L.P.); and a number of GDS regional reservation
systems. The three major diversified online travel firms have expanded their brand offerings, largely
Long Range Planning, vol 42
2009
169
through acquisitions, to address many differentiated market segments. Table 1 shows the major
distinct Internet travel sites of these three firms (many of which have been recently spun off).
The travel industry also encompasses traditional brick-and-mortar travel agencies with online
components, as well as smaller online travel firms, and suppliers (airlines, hotels, rental car agencies,
cruise lines, etc.) who sell direct to individuals and business customers online. Many online search
engines and other Internet sites also have partnerships with travel industry firms, while other businesses (such as American Express and the American Automobile Association) also have significant
travel components, both traditional and online. As the table shows, the travel industry also contains
numerous other online and offline businesses selling services and products in travel or related
industry segments.
As with many other industries, the online travel industry has been experiencing two significant
challenges: one from ‘channel shifts’ (where suppliers are increasingly selling direct to consumers),
and the second from industry consolidations involving suppliers (airlines, hotels, rental car
agencies, cruise lines, etc.), traditional travel agencies, online travel service companies and corporate
in-house travel departments. Such channel and firm complexities are further accentuated by some
online travel firms participating simultaneously in both the traveller-direct and distributionintermediary channels (e.g., Sabre Holdings’ Sabre GDS and Cendant’s Apollo and Orbitz GDS),
where subscribing travel agents and corporations can book airline, hotel, car rental, cruise line
and tour packages.
The global travel industry’s gross revenue is estimated to rise from $768 billion in 2004 to $903
billion in 2008, with the online industry accounting $198 billion (approximately 22 per cent) of this
Table 1. Three Major Online Travel Firms’ Differentiated Market Segment Internet Sites
IAC/InterActive Corp.
Sabre Holdings
Travelocity
Expedia.com
B travelocity.com
hotels.com
B Travelocity Business
Hotwire
B lastminute.com
TripAdvisor Media
B Travelocity Europed28 whollyNetwork
owned brands
Classic Vacations
Expedia Corporate Travel
B Travelocity Asia-Pacific (zuji)
(Egencia)
B Cubeless
Expedia International
B GetThere
Brands
B Holidayautos.com
B eLong
B IgoUgo
B 9 other international
B Nexion
B ShowTickets.com
brands
B SynXis
QuickConnect
Expedia Local Expert
B Trams
B TripTailor
B World Choice Travel
Sabre Travel Network (GDS)
Sabre Airline Solutions
Formerly Owned by Cendant Corporation
(now separate corporations)
Orbitz Worldwide
B Orbitz
B CheapTickets.com
B ebookers.com
B HotelClub.com
B RatesToGo.com
B Away.com
B Asia-hotels
B Orbitz for Business
Travelport
B Galileo by Travelport GDS
B Worldspan by Travelport GDS
B GTA Travel Intermediary (Gullivers
Travel Associates; Ociopus Travel.com;
Needahotel.com; Travel Bound)
B Business Intelligence (Shepherd
Systems)
B IT Services & Software
As of October 2008. Notes: IAC/InterActive Corp. – Completed a spin-off of Expedia, Inc. to IAC shareholders on August
9, 2005 (Nasdaq National Market, Symbol EXPE). Sabre Holdings e Acquired by Silver Lake and TPG, March 2007.
Cendant e In April 2006 announced its intention to divide its businesses into four separate companies through a spinoff to stockholders. The consumer travel business (Orbitz.com, CheapTickets.com, ebookers.com, etc.) and business-tobusiness (Galileo, Travelport, etc.) travel businesses would be combined into Travel Distribution, and then sold to The
Blackstone Group and other partners (announced June 30, 2006). In July 2007, Orbitz Worldwide became a separate publicly traded company.
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Building Successful Strategic Alliances
figure.13 Table 2 shows 2008 projected global travel gross revenues by region, supplier, segment and
channel, as well as by offline and online categories.
Strategic alliance partner selection process
Despite the significant growth in alliances, and firms’ growing sophistication and experience with
them, ‘much of the conventional wisdom and strategic analytical tools used by senior managers actually encourages impulsive alliance formation.’14 In contrast, a strategic management-based selection process would include a more comprehensive analysis of issues and variables than just
trying to answer the question ‘Which firms would make the best alliance partners?’ Dyer
et al. note that some of the risks in alliances can be mitigated by linking corporate objectives
to alliance objectives systematically and specifically through a comprehensive partner assessment
and section processes - in other words, by following a strategic management-based approach
such as we outline here. As Hambrick and Fredrickson find, ‘true’ strategy is more comprehensive than simply linking objectives and actions; it is also about intentional, informed and integrated choices about arenas (where the firm will be active); vehicles (how the firm gets there,
including alliances); differentiators (how the firm will win in the market); staging (pace and sequence of actions); and economic logic (how profits and returns will be generated).15 Each of
these components of strategic decisions also apply to alliance strategies, and therefore to partner
selection considerations.
Informed by the strategic management, strategic alliance and travel industry alliance literatures,
our partner selection process (Figure 1) includes four key steps: (1) aligning corporate and strategic
alliance objectives; (2) developing appropriate sets of critical success factors against which to evaluate potential alliance activities; (3) mapping potential partner industries, industry-segments and
firms; and (4) using a dynamic partner selection analysis tool to evaluate the potential of various
targets. Each step is described below, and illustrated with practical applications in the online travel
industry.
Step 1: Aligning corporate and strategic alliance objectives
While the degree of performance tracking and objective alignment is likely to vary by company, it is
vital to clarify how a prospective alliance might create value for a firm, and to identify specific links
to corporate objectives, so the first step in our selection process is to ensure that alliance objectives
and strategies are explicitly aligned with overall corporate objectives. Based on work with numerous
firms’ alliance strategies, Harbison and Pekar found that ‘too much emphasis cannot be given to the
importance of rigorous evaluation in defining strategy and objectives. The most successful alliance
Table 2. 2008 Projected Global Travel Gross Spending (in US$ Billions)
Region
Supplier
Asia/Pacific
Latin America
Europe, Mid. East & Africa
U.S. & Canada
$267
$53
$290
$293
Total Gross Spending
$903
Rail
Cruise
Hotel
Car
Air
Segment
$82
$12
$436
$42
$331
$903
Corporate
Leisure
$361
$542
$903
Channeld
Indirect-Direct
Channeld
Offline-Online
Indirect
Direct
Offline
Online
$508
$395
$903
$705
$198
$903
Channel direct sales are sales by providers (airlines, hotels, etc.) directly to the customer; indirect sales are sales made by
third parties to the customer. Source: Sabre-Holdings 2004 Annual Report. Data source: PhoCusWright, Jupiter, Euromonitor,
Sabre Holdings Analysis.
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Step 1: Align Corporate and Strategic
Alliance Objectives
(see Table 3)
Step 2: Develop an Appropriate Set
of Critical Success Factors (CSFs)
(see Table 3 for input re- potential CSFs)
Step 3: Map Current and Potential Alliances
on a Value Net
(see Figures 2 and 3 for industry-group
and industry-segment maps)
Step 4: Analyze Targets Using Dynamic
Partner Selection Analysis Tool
(see Figure 4)
Figure 1. A Strategic Management-Based Alliance Partner Selection Process
companies have learned that an ad hoc or soft evaluation places an alliance in a precarious position
from the start’. Firms facing dynamic external and/or internal environments have an even greater
need to align their corporate and strategic alliance objectives systematically. However, this critical
alignment step may often be missing in practice, as Sleuwaegen et al. found in most of the Dutch
companies they studied.
As we have noted, alignment of objectives is an important and often overlooked step in the
process of forming alliances. Alliance ‘deals’ only make sense if they support and leverage corporate objectives and strategies more effectively than alternative approaches. Inkpen and Ross indicate that deferring such considerations to after alliance formation increases the likelihood of
alliance issues becoming intertwined with individual managers’ personal career implications
and internal political agendas, rather than following the broader objectives of the firm. From
their extensive review of alliance literature, Todeva and Knoke found that specific alliance objectives, which can vary according to both firm-specific factors and environmental considerations,
can include:16
172
market seeking;
acquiring means of distribution;
gaining access to new technology and converging technology;
learning and internalization of tacit, collective and embedded skills;
obtaining economies of scale;
achieving vertical integration, recreating and extending supply links to adjust to environmental
changes;
diversifying into new businesses;
restructuring, improving performance;
realizing cost sharing and pooling of resources;
developing products, technologies, resources;
reducing and diversifying risk;
Building Successful Strategic Alliances
developing technical standards;
achieving competitive advantage;
gaining cooperation of potential rivals or pre-emptying competitors;
achieving complementarity of goods and services to markets;
obtaining co-specialization;
overcoming legal/regulatory barriers; and
legitimization and bandwagon effect, following industry trends.
As noted earlier, alliance-related objectives that are tied to corporate objectives must be developed
beforehand: this process will then inform the design of the alliance, the search for potential partners
and the analysis of partner fits. The following industry snapshot shows how alliance-related objectives
can be specifically linked to corporate objectives as part of the initial strategy development
process.
Alliance objectives [must be] tied to corporate objectives beforehand:
this informs alliance design, the search for partners and the analysis of
partner fits.
Aligning online travel corporate and alliance objectives e an example
Based on our extensive review of online travel firms’ corporate and financial documents, press releases
and trade and academic literatures (including Todeva and Knoke’s excellent overview of past theoretical
and academic alliance research) we identified eight basic corporate objectives central to online travel
firms’ ability to create superior value propositions and economic returns (see Table 3, column 1).
Research indicates that travel industry alliances are formed both for efficiency and effectiveness
objectives,17 although, of course, many are designed to address both simultaneously (see Table 3,
column 2). Efficiency objectives are targeted towards reducing costs (as when airline alliances facilitate
sharing information systems, maintenance facilities and personnel, or take advantage of economies of
scale in distribution and marketing), while effectiveness objectives are focused on growing revenues and
increasing market share (as illustrated by the United Airlines/Lufthansa alliance, where customers gain
extra value through code-sharing reservations and expanded geographical market coverage).
While both sets of objectives in Table 3 were developed for the online travel industry, some are
likely also to be appropriate for other types of industries (R&D, technology, software, manufacturing, etc.). However, non-service sector firms will need to identify the items and their related metrics
that are most relevant to their internal and external situations – fundamentally, the process here is
designed to ask specifically ‘Which corporate objectives should the alliance be designed to support?’
Although undeniably important, aligning corporate and alliance objectives and strategies is not
easy. While at first blush the process involves simply identifying congruent objectives - such as
accessing new knowledge, driving innovation or learning - realizing these objectives often requires
implementing well-thought-out systems and processes to facilitate and support the alliance, and not
attending to these matters as part of the partner analysis and selection process may lead to lessthan-desirable outcomes.18 As Lie and Slocum found, mismatches can result when alliance partners
have incompatible alliance goals, such as where one firm’s overarching objectives are long-term (focused perhaps on learning new skills) while the other seeks primarily short-run financial gains.
Aims/objectives may also vary across organizational units of both partners, or be further complicated by individual manager’s objectives and career aspirations e and those who eventually implement the alliance may have very different perspectives, incentive systems and organizational or
personal aims than those who negotiated the deal in the first place.
The role of knowledge facilitators and inhibitors is magnified in industries such as the online
travel industry where multiple partners (travel/tour firms, suppliers such as airlines and hotels,
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2009
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Table 3. Step 1–Alignment of Online Travel Firms’ Corporate and Strategic Alliance Objectives
Corporate Strategic Objectives
Strategic Alliance Objectives
Strengthen Customer Value Proposition
Product Mix and Diversification
Effective cost position/structure
Enhance Net Income
Strengthen Defensive
Competitive Position
Spread Risks
Speed to Market
Enhance Firm’s Intangible
Assets and Organization Skills
Attract new online customers
Improve, recreate, renew price-value relationship
Provide more complete customer solution
Offer new travel related products/services
Enhance offering scope
Increase customer loyalty and reduce customer turnover
Fill product gaps
Provide total travel and related solutions
Enhance cross-selling
Extend products
Expand international product markets
Increase website traffic
Lower market access costs
Lower product development costs
Lower R&D/technology costs
Increase economies of scale e purchasing,
distribution/supply chain management, marketing, etc.
Reduce asset/investment needs
Ensure shared risk and returns
Reduce financing and capital needs
Offer new travel and related products/services
Build brand recognition/visibility quickly
Support new business and leisure customer segments
Utilize new technology and R&D
International customer, supplier or production access
Enhance knowledge, skills and learning
Support technology and R&D
Develop standards of practicedsecurity, services and accessibility
Support international markets and business practices
Enhance leadership and organization culture
Improve business processes
Leverage assets to use same or smaller asset base
to generate higher revenues and profits
Increase revenue
Lower operating costs
Co-opt active and/or potential competitors
Lock out competitors from strategic alliances and positions
with other competitors, customers, suppliers, and others
Lock in potential customer, supplier, etc. potential alliance partners
Manage government intervention
and traditional travel agents) all depend on timely and sophisticated customer and product knowledge and technology.19 In addition, successfully aligning corporate and alliance objectives also
depends on a firm’s ability to address the variety of short- and long-term orientations that are likely
to exist in different levels and areas of both the focal firm and its potential partners. It is important
to recognize, as Das and Teng noted, that ‘a long-term orientation provides needed commitment to
a good working relationship, whereas a short-term orientation stresses prompt results that vitalize
the alliance . . . strategic alliances need to walk a thin line by maintaining an uneasy balance.’20
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Building Successful Strategic Alliances
Step 2: Developing an appropriate set of critical success factors
The specific activities a firm must perform well and that act as sources of advantage over its
competitors can be called its critical success factors (CSFs). These CSFs would be selected from
a broader list of strategic alliance objectives appropriate to the specific projects scope. The second
step in considering any potential alliance is to develop a set of firm CSFs, and then determine how
well they each fit with each potential partner.21
The second step is to develop a set of firm CSFs, and determine how
they well each fits with each potential partner.
A firm entering a new foreign market, for instance, will generally be exposed to several entry
challenges that might be too difficult, costly or time-consuming for it to overcome alone. Gaining
access to local distribution channels, building a local brand, developing customer knowledge and
establishing positive host-government relations are all likely to be particularly difficult in foreign
countries where the entering firm has no foothold. (Other factors associated with successful
foreign-market entry can include access to local capital markets, strong local management, legal rights,
transferable patent rights and distribution channel sophistication.) For a focal firm to find a hostcountry partner that can offer an appropriate fit for its foreign market entry objective, the foreign
partner (be it an industry group, segment or firm) needs to possess resources and/or capabilities
that can ease the challenges facing the entering firm. The CSFs to use in evaluating whether a firm
is worth considering as a potential partner are those that directly relate to the focal firm’s strategic
objectives (as illustrated in Table 3 for the online travel industry case). In other words (consistent
with a strategic management-based perspective) developing the CSFs a firm needs to use to assess
potential alliance partners begins with identifying which CSFs relate to its specific strategic objectives.
Making this connection back to firm-level strategic objectives ensures that the key contexts and
considerations that experts suggest are essential to alliance analysis - including firm strategy, project
needs and industry and technological environments e are included.22 Specific alliance-related CSFs
are then developed to guide alliance strategy development and implementation, based on alliance
objectives (as illustrated in Table 3).
Identifying online travel critical success factors
Dev et al. note how travel industry alliances are frequently marketing-focused, and involve CSFs
that seek to capitalize on complementary relationships to improve efficiency and/or effectiveness,
often based on customer feedback. For example, airline marketing alliances with car rental firms
and hotels can provide an enhanced customer experience. Specific travel industry CSFs can be developed from the objectives and strategies presented in Table 3, and alliance CSFs generally relate to
‘bridging’ gaps in product and or market offerings (e.g., the United/Lufthansa alliance) and/or to
‘bundling’ complementary products/services that provide customers with one-stop shopping for
multiple reservations (e.g., with airlines, hotels, car rental firms, restaurants, cruise lines, etc.).
One group of business analysts identified eight CSFs for leading U.S. and E.U. online travel firms.23
Building brand recognition quickly and attracting new online customers are important, because the
major emerging online travel industry players are using their first-mover gains to create strong positions in these markets, and buying out smaller entrants. Consumers’ concerns for privacy and
needs for assistance have also been identified as important, so establishing standards of practice related to security, services and accessibility is necessary to attract a critical mass of customers sufficient to allow firms to achieve some economies of scale in operations. However, other analysts claim
that credit card security and privacy concerns limit online travel activities.24 Increasingly, well structured alliances, with appropriate security and privacy components, can help alleviate those fears and
increase the online share of the broader travel industry. Managing government intervention to gain
approval for delivering transaction services to non-U.S. and eE.U. customers and avoiding policies
Long Range Planning, vol 42
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175
that lead to reductions in commissions are also very important to online travel firms. Other CSFs
include increasing website traffic, deepening existing customer relationships and introducing new products. The online travel industry could seek to form strategic alliances with firms in other industry
groups within and beyond the travel industry to pursue these CSFs, as well as others that may arise
in the future.
Step 3: Mapping alliance targets
Once corporate-to-alliance objectives are clearly delineated (Step 1), and related supporting CSFs
have been identified (Step 2), firms have a tendency to jump ahead to analyzing specific potential
partner firms, bypassing important considerations about the different players already or potentially
involved in related industries. But a better analysis of potential partnering options is achieved by
focusing first at the macro level, specifically on those industry groups and segments most closely
connected with the firm’s broader goals and objectives. Making such explicit linkages ensures
that the assessment of potential alliance targets is related back to the firm’s value creation strategies
and overall strategic management process.
Step 3 in our partner selection process begins by creating a ‘potential partner map’ that conceptualizes
the range of industry players and their component sub-segments and firms. We adapt Brandenburger
and Nalebuff’s ‘value net’ framework to classify current and potential industry participants (suppliers,
customers, competitors and complementors) who are, or might become, alliance partners.25 Competitors are firms that reduce the (actual or perceived) value of the firm’s offerings to customers, or make it
harder for a focal firm to access needed supplies (represented by the negative (black) arrows in Figure 2).
In contrast, complementors or ‘‘channel facilitators’’ - firms that make it easier to satisfy customers, enhance the overall value proposition or facilitate obtaining supplies - enhance customer value or supply
opportunities (the positive (white) arrows in Figure 2). As in the previous step, the Step 3 value net mapping should show existing and potential linkages consistent with and relating back to the focal firm’s
overall goals and alliance objectives identified in Step 1. The process, therefore, provides an important
check on whether the firm’s alliance-related decision criteria are aligned with its overall strategies. While
Competitors
-
-
Make it harder to satisfy
customers and obtain
supplies
Suppliers
Provide goods &
services in
exchange for
money
+
Company
(Focal Firm)
Offers goods & services
and
supply opportunities
Customers
+
Provide money in
exchange for goods
& services
Value Chain
Complementors
+
Make it easier to satisfy
customers and obtain
supplies
+
Figure 2. Basic Value Net Framework
adapted from A. M. Brandenburger and B. J. Nalebuff, Co-opetition, Doubleday, New York (1996)
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Building Successful Strategic Alliances
sequential in design, in practice, these steps are likely to be iterative mapping current and potential linkages in step 3 and checking them back against previous steps allows for refining previous lists of
objectives.
There are several key aspects to be kept in mind when developing an alliance-focused value net.
First, mapping both current and potential participants is greatly facilitated by starting with the construction of the value net at the macro level, focusing on potential target industries and industry
segments, with specific target firms identified later in the process. At this level, firms create value
in four fundamental ways: 1) by reducing input costs relative to their competitors and substitute
products/services/channels; 2) by reducing operating costs relative to these same players; 3) by increasing customers’ willingness to pay more for their goods and services; and 4) by accessing profitable new markets (through innovative product development, effective prospecting, erecting barriers
to direct competition, etc.).26 The value net sketches out the combinations of ways through which
the focal firm seeks to create value, which are operationalized as links to various participants in each
player category. For example, a firm that focuses on reducing input costs will naturally have extensive or deep linkages to suppliers, while one focused on maximizing customer willingness to pay
more will have linkages to various participants that support its reach into the customer’s total
economic system.27
In our work with executives, we have found that focusing initially on these four generic valuecreation approaches, rather than on specific strategic objectives or CSFs, encourages them to think
more broadly about potential collaborators rather than immediately focusing on the micro or firm
level. Just as there is often a ‘local search’ problem in firms’ environmental scanning efforts, there
can be a similar affect on alliance assessments, with executives tending to think of known firms,
rather than considering broader categories of industries and firms that may be new to them, but
which also meet the ultimate test of creating value - or might even herald the next alliance and/
or industry consolidation wave: starting at the broader, macro level can help overcome this tendency. (Of course, initial project and incremental approaches still provide useful avenues to get
to know new, unfamiliar firms to clarify their potential as partners).
Second, the ‘value net’ framework should include all the current and potential future players who
might affect the focal firm’s value creation activities. Whereas most firms start by only listing current participants in each player category, it is also instructive to engage in creative discussions and
scenario-sketching activities about potential participants who are not currently operating in the industry, but who might affect the firm were they to become involved in the future. Some current and
potential industry participants might seem to be unlikely partners initially, but should be included
as they might provide significant offensive and/or defensive strategy potential over time. Indeed, it
is exactly this type of analysis that can help firms identify potential future opportunities for crossindustry consolidation.
Third, the value net framework allows firms to occupy multiple player positions, acting, for example, as customers and simultaneously as competitors. Thus, in the American and Delta example,
the two firms compete for customers, gates, pilots and other supplies, but also collaborate as complementors in code sharing arrangements and other activities: today, many other airlines have developed similar joint arrangements.
Fourth, ‘potential alliances’ can be included on the value net to identify and highlight the
competitive opportunities and threats both within and across industry groups and subsegments, as well as the opportunities and threats related to alliance networks. Lorenzoni
and Baden-Fuller have noted how, in some industries and industry segments, firms may occupy
the strategic centers of one or more constellations of alliances, acting as value creators for partners, setting rules, building partner capabilities and leading the evolving network’s strategy and
structure. It is particularly important in evaluating multi-firm alliance networks to identify
systematically all the existing and potential industry-groups and segments in each category.
Once industry-groups and segments are identified as being attractive in terms of alliance potential, the likely potential partner firms/organizations within these segments can be identified
and evaluated carefully.
Long Range Planning, vol 42
2009
177
The value net mapping process begins with identifying broad industry
groups that might give opportunities to create value. .. attractive
segments within these groups and specific firms are then identified.
To recap, the alliance value net mapping process begins with a wide scope, seeking to identify
broad industry groups that might give the focal firm opportunities to create value. Once attractive
industry groups are identified, the most attractive segments within these groups, and then specific
firms within them, are identified. In order to assess ‘attractiveness’ at each analysis level, the firm
draws upon the CSFs developed in Step 2 to conduct a congruence or fit analysis, the subject of
Step 4. But first, we present a value net for the online travel industry.
Developing an online travel value net
Airlines have been the early leaders in travel industry alliance activities: for many years, they have
systematically and proactively formed code-sharing alliances amongst themselves and channel alliances with major online travel firms, as well as leveraging extensive and diverse global alliance portfolios with many other travel and tourism industry groups. Many hotels, car rental agencies and
other industry players have also been active in alliances: for example, tour companies such as Mayflower Tours have developed multi-product and multi-geographic alliances with industry groups,
including other tour operators, airlines, travel agencies, international travel administrators/operators, hotel, cruise and other suppliers, and with destination marketing organizations.
A value net of current and potential alliances related to the online travel industry is presented in
Figure 3. (The industry-types and industry-groups listed in the Figure are illustrative; others could
be added, defined differently, and/or segmented in a more granular manner.) Supplier alliances and
customer alliances represent the industry’s core alliances, but substitute/complementor alliances
and channel facilitator/complementor alliances also have significant effects on the industry. A traditional value net (as in Figure 2) shows competitors and complementors acting primarily through
suppliers and customers (rather than directly on another firm) to make it more or less difficult for
the focal firm to do business. In an industry as complex as online travel, however, substitute/complementor alliances and channel facilitator/complementor alliances abound to such a degree that
they can have direct positive and/or negative effects on the focal firm, as indicated by the additional
positive and negative arrows from these players towards the online travel industry in Figure 3.
Supplier Alliances e The online travel industry is based on strategic alliances providing reservation, cross-marketing or other services to a variety of travel service supplier groups. The online
travel industry provides an important distribution channel for such suppliers, as well as providing value-added services for its customers. On the one hand, strategic supplier alliances consist of
those where a firm has alliances with a number of competing and complementary firms simultaneously e thus, while hotels have alliances with multiple online travel companies, airlines,
travel agents and so on, they are likely to still be available to other firms as prospective alliance
partners. On the other hand, some travel industry segments form alliances with a limited number
of selected partners: a particular airline may already be locked into an existing network alliance,
and thereby not available as a potential partner for other airline networks. The partner selection
tool presented below allows for the addition of variables such as these to account for the likely
availability as a partner of a targeted industry or firm.
Complementor/Channel Facilitator Alliances e Alliances with firms in this category have significant potential to support online travel firms’ strategic objectives. The category includes a number
of very diverse industry groups, such as online and traditional meeting-management firms, meeting/event planners, Internet search engines, Internet service providers, mobile phone, media,
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Building Successful Strategic Alliances
Substitute/Competitor Alliances
-
Traditional and Online
Supplier Direct Sale to
End-Use Customers
Tour Operators
Traditional and Online Travel
Agents (Domestic and
International)
GDS Subscriber
Services/Software
-
-
Customer Alliances
Online Travel
Industry
+
+
Consumer-Direct Channel -Individuals
Business-Direct Channel -Businesses
Small to Mid-Size Businesses
Corporate Travel Departments
Travel-Agency Channel
Governments
Associations/Nonprofit
Organizations
Value System
-
+
Channel Facilitator/Complementor Alliances
+
Online and Traditional
Meeting and Event
Planners
Online and Traditional
Travel Agents
Internet Search Engines
Traditional, Broadband
Cable and Satellite ISPs
Telephone and Wireless
ISPs
Other Internet Sites
(Travel, History, Books,
Weather)
Wireless Phone Companies
-
+
Supplier-Customer Direct
Bypass
Supplier Alliances
Individual Airlines
Airline Code-Sharing Alliance
Networks
Hotel Chains and Independents
Resorts and Theme Parks
Rental Cars
Ground Transportation
Cruise Lines
Local Sightseeing Companies
Museums, Art Galleries,
Entertainment, Shows, Sporting
Events, and other Destinations
Restaurants
Supplier-Owner Online
Travel Companies
Corporate Travel
Departments
Media Company Online
Websites
Automobile Roadside
Concierge/Vehicle
Communication
Credit Card Companies
Financial Institutions,
Currency Exchange
Tourist Organizations
(Government and Private)
Air Travel Insurance
Internet Hot Spots
Software/IT Suppliers
+
Travel Magazines (InFlight and Freestanding)
Travel Sections in
Newspapers/Magazines
Travel and History
Television
Channels/Programs
Travel Guides, Books and
Internet Sites
Other Media Companies
Online and Traditional
Map Companies
Figure 3. A Value Net of Current and Potential Alliances in the Online Travel Industry
travel guide/book and map companies, financial institutions and credit card firms, retail locations and software suppliers. Search engines such as Google, Ask, MSN and Alta Vista, and
ISPs such as America Online, MSN, AT&T, Earthlink, Comcast and Verizon, are strong potential
allies, as they control the major gateways through which consumers access online travel services.
As just one example, when IAC/InterActive Corporation (owner of hotels.com and other online
travel brands) acquired the Ask Jeeves (now Ask) Internet search engine in 2005, the corporate
literature noted that Ask Jeeves would be able to ‘vertically integrate transactions and offers from
IAC . and . utilize IAC network to drive traffic.’28 Expedia was formerly owned by Microsoft
Network in a fully integrated relationship, although this has since been transformed into an
alliance: clearly, alliances with such corporate giants have a potential reach far beyond the ISP
dimension. Media companies such as travel magazines and television channels and shows are potential allies that can facilitate online travel firms in building affinity programs and stronger
brand recognition, while travel guide firms (Frommers, Fodors, etc.) and map companies
(Rand McNally, Mapquest, GoogleMap and YahooMap, etc.) also provide offerings that directly
complement online travel services.
Competitor/Substitute Alliances e A third industry category that has strategic significance for
the online travel industry is composed of competitor/substitute alliances. In the travel industry
Long Range Planning, vol 42
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(as can be found increasingly in other industries) current and potential alliance partner firms/
sectors can co-exist as both collaborators and competitors. Note that while suppliers represent
a separate industry group (as described above), their direct selling to the end-use customer
through their own web sites, call centers or individual brick-and-mortar facilities also puts
them in the competitor/substitute industry group. Traditional domestic and international travel
agents are a significant industry-group alliance category to which online travel firms provide numerous services, including online reservation systems, private-label web site development and
management, software systems, and agency management systems. But when a customer books
a trip through a travel agent, rather than using an online company, the travel agent is being
used as a substitute, and thus, effectively, becomes a competitor. Corporate travel departments
and tour operators are other important groups that can exist both as competitors/substitutes, but
with whom mutually beneficial linkages with the online travel industry can also exist.
Groups can exist as competitors/substitutes, but nevertheless offer
mutually beneficial complementor/channel facilitator linkages.
Customer Alliances e Online travel firms develop customer alliances within the business-direct
channel, assisting small- and medium-sized businesses with their travel needs and even managing
large corporations’ entire travel operations. (In January 2005 Travelocity Business announced
a new alliance to provide all travel management services/support for Aetna’s employee travel).
Traditional travel agencies, while forming part of the substitute/competitor segment, are also
customers for a variety of online travel reservation and other services. Governments, nonprofit
associations and other organizations purchase significant amounts of travel products and services, so diverse opportunities exist for strategic alliances to develop exclusive deals to provide
all travel-related services for such customers. (Travelocity also has alliances with the American
Medical Association and AARP, while Expedia provides travel services for the American Bar Association’s staff as well as its 400,000 members).
Of course, strategic travel industry alliances can be found within and across all its many different
categories and industry segments, not just those involving online firms. The market in which such
alliances operate is made more complex by the fact that firms in many segments often (partially or
entirely) bypass the online distribution channel to sell directly to end users (as shown by the shaded
arrow in Figure 3). While online travel firms have long-standing strategic alliances with many suppliers, other supplier industry groups and segments (see Figure 3) might also offer the potential to
contribute to the overall value system of an online firm’s alliance network. The exercise of mapping
a firm’s current and potential alliance opportunities thus creates a comprehensive perspective for
examining the inherent complexity to be found in this (and indeed, in most) industries.
Step 4: Dynamic congruence analysis tool for alliance partner selection
Focusing on linking corporate and alliance objectives (Step 1) and mapping industry-group and
industry-segment potential partners (Step 3) helps firms avoid the frequent tendency of jumping
to firm-specific partner issues when seek alliance partners, paying only cursory attention to their
overall corporate strategic objectives or macro-industry considerations. Lei and Slocum have noted
that executives too often encourage quick alliance formation ‘while discouraging careful thinking and
strategizing of prospective partners’ intentions.’ The new ‘partner selection analysis’ tool presented in
this article is designed to assist managers to assess proactive and/or reactive-follower alliance strategies, and to identify potential new alliance opportunities and partners. Evaluating the potential of
partnering with various industry groups, segments and firms involves assessing the congruence or
fit of each entity’s resources, capabilities, plans and prospects with those of the focal firm, as expressly delineated in the focal firm’s CSFs identified in Step 2. By testing industry groups and
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Building Successful Strategic Alliances
segments and individual firms identified as potential partners in Step 3 against the focal firm’s
CSFs, we are able to systematically evaluate how well a segment or a partner might help or hinder
the firm in pursuing its strategic objectives.
Step 4 in the selection process involves using the dynamic partner selection analysis tool to analyze the levels of congruence offered by different industry groups, segments and firms. The tool is
used to ‘winnow down’ potential partner targets by helping managers identify the most attractive
industry groups, the most promising segments within those groups and, finally, the most desirable
potential partner firms within each segment. Since the analytic process is similar across each of
these levels, we illustrate the tool through its application to the online travel industry within the
complementor industry category, although nuances that apply to the tool’s use at various other
levels of analysis are also discussed.
As Figure 4 shows, the dynamic partner selection analysis tool involves applying a decision matrix process, where the focal firm uses the following steps:
Step A e Identify one or more strategic objectives (obtained from Step 1 in the overall selection
process);
Step B e Identify and list key CSFs related to the firm’s strategic objective(s) (obtained from Step
2 in the overall selection process);
Step C e Assign relative importance weights to each CSF across two time periods (new action);
Step D e Rate the extent to which each industry group, industry segment or firm might help the
firm achieve its CSFs (new action);
Steps E to H e Compute weighted average scores and assign time-based importance factors (new
actions).
Step A
Define strategic objective(s):
To grow online travel revenues by 20 percent above the industry growth rate.
To expand our number of customers and market share in the online travel industry.
To increase our market share by 5 percentage points.
To provide new high margin, value added travel related services.
To reduce operating costs by 5 percentage points.
Step B
Identify CSFs related to
the strategic objective
Step C Assign relative importance
weights to each CSF for
EACH TIME PERIOD
Current
Future
Task-Related CSFs:
Build brand recognition/visibility quickly
Add new online purchasers
Increase traffic on Internet site
Enhance consumer value proposition
Improve economies of scale/lower costs
Manage government intervention
Introduce new products/services
Deepen customer relationships
25
20
15
15
10
5
5
5
20
20
10
5
0
10
15
20
100
100
Step D Rate each potential collaborator on each CSF (1 to 10)
Internet
Search
Engines ISPs
Media
Maps
Financial
Institutions
Software
Firms
9
9
10
4
6
0
7
2
8
7
9
4
4
0
9
2
10
6
3
2
5
4
5
1
4
3
2
3
2
1
2
1
3
2
3
3
3
3
2
1
1
0
0
7
3
3
9
9
Partner-Related CSFs:1
Past alliance experience
Alliance skills and systems
Culture compatibility
Willingness to partner
Total Relative Importance Weights
*
**
Step E
Compute CURRENT congruence rating
7.2
6.3
5.5
2.8
2.7
2.7
Step F
Compute FUTURE congruence rating
6.3
5.9
5.0
2.4
2.3
4.0
Step G
Assign TIME importance weights:
Step H
Compute OVERALL dynamic congruence rating
6.9
6.2
5.3
2.6
2.5
3.1
CURRENT
FUTURE
***
70
30
Figure 4. Step 4 Conducting Dynamic Partner Selection Analysis
1
Note: This example illustrates the tool applied at the industry level of analysis, so partner-related CSFs do not
apply; for firm level applications, partner-related CSFs similar to these would be added. * Weighted average of
current weights ratings. ** Weighted average of future weights x ratings. *** Current time weight current
overall fit rating + future time weight future overall fit rating for each segment
Long Range Planning, vol 42
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At the industry-group level of analysis, the key question is ‘To what extent can different industry
groups provide resources and capabilities, mitigate industry threats or open new industry opportunities so as to make important contributions to accomplishing the focal firm’s corporate objectives?’ Answering this question gives insights into potential future linkages and relationships across
industry groups, thereby contributing raw data for developing scenarios and making strategic
decisions. The answers also help managers assess shifts across and within industry groups and
segments.
Analyzing online travel industry groups
As in many industries, the complementor/channel facilitator category has been identified as providing significant growth opportunities to leading U.S. and E.U. online travel firms that can leverage the segment’s resources and capabilities. As a result, we focus on this value net category to
illustrate our analysis tool. For this task we will use the eight critical success factors identified
earlier in Step 2.
Step C: Assign relative importance weights to each CSF
To evaluate the potential of the various industry groups within this category (see Figure 3 for industry groups within each of the four main alliance categories), we enter the eight CSFs from Step 2
into the matrix and then analyze each channel facilitator group against them in Steps C and D. A
critical aspect of this analysis is assigning each CSF an importance weighting (which add up to 100
percent). While advanced statistical methods such as multidimensional scaling, administrative hierarchy process and conjoint analysis may be used to support this weighting process, executive
teams that have applied the tool have found they gain valuable insights by having to make explicit
arguments for each CSF’s importance weighting themselves, as doing so requires them to reveal and
examine their underlying assumptions. Alliance evaluation processes that simply list CSFs without
thoroughly considering and weighting their relative importance are simply checklist approaches
that can lead managers to erroneous conclusions regarding potential alliance options. In Figure 4
(consistent with the earlier discussion of the online travel industry’s CSFs) increasing brand recognition and attracting new online purchasers are weighted more heavily than the other current CSFs,
with increased traffic on Internet site and enhancing consumer value proposition falling into a second current importance grouping, and so on.
The relative importance of CSFs may change due to strategic and
environmental conditions .failing to factor this in may lead to erroneous
decisions about their importance, and about potential partnering fits.
Note that in Step C, relative importance weights are assigned in two time periods - current and
future (the specific time scale for ‘future’ will vary depending on the objectives, type of alliance,
management judgment, etc.). These dynamic considerations are important since (as Hipkin and
Naudé note) a ‘shortcoming of past academic studies of alliances is that they are frequently examined
at a single point in time e usually in the formative stages e without following the alliance through its
life or even a business cycle as strategic and environmental conditions change.’29 Each CSF’s relative
importance may change over time due to strategic and environmental conditions, and failing to
factor this in may lead to erroneous decisions not only about each CSF’s importance, but also about
each potential industry group’s partnering fit. (For example, actions by airlines to increase their direct online sales and decrease agent fees for ticket sales may decrease revenues and margins for alliances with airline suppliers: such changes may provide a basis for adjusting this industry group’s
relative weighting and rating over time.) Similarly, strategy evolution research has shown that while
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Building Successful Strategic Alliances
access to distribution channels may be key to initial market entry, other resources and capabilities,
such as other distribution channels/supply chain dimensions and improved managerial skills, may
become more important over time and as alliance networks are restructured.30 Note also that allocating different weightings across the two time periods allows managers to add, modify or delete
CSFs in the future. For example, in Figure 4, economies of scale drops in importance from 10 percent
currently to zero in the future, on the assumption that once a critical mass is reached, additional
efficiency gains will be negligible, which effectively removes this factor altogether in evaluating potential partner segments or firms for the future. Its elimination in the future demonstrates that the
CSF analysis is doing its job, and that partner industry groups, segments and firms should perform
well both today and in the future. For example, increasing brand recognition might be a key CSF
today as online travel firms seek new customers, but new services that deepen customer relationships to create customer retention (or ‘stickiness’) could prove even more important in the near
future.
Step D: Rate the potential of each industry group, segment or firm to achieve the focal firm’s CSFs
This step uses a 10-point (or other) scale to assess how well each potential industry group (or
segment or firm, depending on the level of analysis being conducted) might address the focal
firm’s CSFs, and fills these values into the matrix presented in Figure 4. Developing an understanding of how well a partner might support the focal firm’s CSFs is not an easy process; it often
takes significant research, and sometimes initiating small alliance projects may be an effective way
to gather more information and insight about prospective partners. Our interactions with executives indicate that better results are achieved by using this matrix to drive discussions that expose underlying assumptions and firm-specific experiences, rather than focusing solely on the
precise numbers entered. Indeed, with respect to both CSF weightings and potential partner ratings, it is important that senior management use the process to surface and test their team’s
assumptions.
To illustrate Step D in relation to the online travel industry, of the six major channel facilitator
industry groups identified in Figure 4, Internet search engines, ISPs and media groups are all seen as
potentially strong contributors in driving increased end-user Internet purchases and enhancing brand
name recognition and visibility, and thus received relatively high ratings on these CSFs. In addition,
the new products and services that software companies might offer to online travel firms are seen as
strongly enhancing the CSF’s related to customer relationship and establishment of standards CSFs,
resulting in high ratings for software firms on these factors.
Steps E and F: Compute current and future congruence ratings
Once the firm’s CSFs have been weighted for their relative importance and the various industry
groups or segments have been rated for how well they support the achieving of each, the next
steps involve computing each time period’s weighted average scores. Figure 4 shows current
(Step E) and future (Step F) congruence ratings for each industry group. Higher scores,
such as those for Internet search engines (7.2 and 6.3 respectively) and ISPs (6.3 and 5.9), indicate that these industry groups provide a better fit than other industry groups (all rated less
than 5.5) in terms of helping the focal firm accomplish its CSFs and thus realize its strategic
objectives.
Step G: Time-weighted congruence scores
In combination with the current vs. future importance weighting of the individual CSFs accomplished in Step C, Step G allows for a dynamic perspective on CSFs by allowing executives to decide how much emphasis should be placed on current vs. future time periods. In
our discussing this element with executives, we have found that they sought to incorporate
such temporal factors within the CSF weightings implicitly; but as their assumptions were
not explicit, they were not communicated transparently, and such dynamic factors were not
fully incorporated in their selection processes. Similar shortcomings may also be due to the
Long Range Planning, vol 42
2009
183
use of more informal alliance development processes, executive reluctance to disclose assumptions, the firm’s culture, a lack of strategic thinking and insufficient due-diligence prior to
alliance development.
This tool addresses such problems in considering dynamic factors (i.e., factors over time) directly
by including an overall time-based weighting in the matrix in Step G. One benefit of including the
time-based element is to help identify expected change patterns over time across industry groups
and segments. If analysis shows one or more industry groups or segments as predicted to increase
or decrease in importance, assumptions may be made about the likelihood of future industry-group
convergences or inter-industry-group/segment alliances taking place. Significantly, the same analysis can also be conducted retrospectively, furthering managers’ ability to discern meaningful change
patterns over time.
Step H: Compute overall current and future weighted average congruence ratings
The final step in the dynamic congruence analysis is to compute an overall weighted average congruence (or ‘fit rating’), for each industry group. Figure 4 shows that Internet search engines and
ISPs appear to provide the highest congruence over both time periods, suggesting (assuming the
underlying critical success factor weightings and ratings are sound) that one scenario worthy of further consideration is alliances between online travel industry firms and Internet search engines and
ISPs. If no alliance activity had yet occurred between these two groups, these findings would provide insights about potential proactive alliance opportunities and co-option strategies. On the other
hand, if an alliance wave has already hit a given industry group or segment (such as the alliances
currently being formed between online travel companies and Internet search engines and ISPs) the
analysis can be used to identify alternative convergence opportunities e perhaps by highlighting
other groups and segments that might soon follow, or to discern competitors’ first-mover strategies
and identify potential counter-moves.
Where alliances have already [formed] . other segments that might
soon follow, or competitors0 strategies and potential counter-moves
[can be identified]
Dynamic congruence analysis can also be used to identify CSFs that might support follower or
imitation strategies. If other firms’ existing alliances fail to incorporate certain important future
CSFs, viable potential partner industry groups or sub-groups may have been overlooked. Although
alliances have already formed among online travel firms and Internet search engines and ISPs, for
example, few have been announced with travel-guide firms and, given online travel firms’ increasing
need for new service offerings, opportunistic co-option alliances with premier travel-guide firms
might be available for proactive online travel firms.
Managers can also use the matrix to conduct a dynamic congruence analysis from their potential
partners’ viewpoints to ascertain their own firm’s potential alliance value points and the likely components of an alliance deal. Dynamic congruence analysis can also be shifted to the firm level to
allow for assessment of potential target firms from the focal firm’s (or the target’s) perspective:
such a firm-level analysis is discussed in the next section.
Firm-level analysis using the dynamic tool
Ring and Van de Ven argue that alliances are ‘socially contrived mechanisms for collective action,
which are continually shaped and restructured by actions and symbolic interpretations of the parties
involved’. This points to the importance of conducting a rigorous analysis of the potential partner
firms chosen from promising industry groups and/or segments previously identified. Firm-level
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Building Successful Strategic Alliances
analysis works the same as industry-group analysis, with individual firms being rated against the
CSFs in the same manner. However, at this level, the list of CSFs is expanded to include not just
the task-related factors identified above, but also those related to the potential firm’s partnering
characteristics.
Research has shown that successful alliances involve high levels of congruence - not just
between partner firms’ resources and capabilities, but also (as Geringer has noted) between
certain organizational attributes. Thus firm-level analysis involves the focal firm in identify
important partner-related CSFs and incorporating them in Step B of the assessment tool. These
might include a potential partner’s management, organizational and national cultures, favorable
past alliance associations, and organizational size and structure - all of these (even given that
task-related CSFs show high dynamic congruence ratings) could impact the degree to which
that partner’s resources and capabilities are ultimately sharable by its potential partners.31 Given
the wide range of alliance experience, organizational cultures and business environments affecting
different firms, their partnering-related CSFs may vary considerably. Companies will need to
dedicate some resources to and develop some expertise in identifying potential ‘good fit’ partners
and appreciating their characteristics, which might include considering (as Hoffmann notes)
‘creating a dedicated alliance function and develop company-wide standards and customized tools
for multi-alliance management.’
The analytical tool also accommodates varying situations relative to past experience with or
knowledge about a potential partner firm. Managers can incorporate those considerations into
Step 4 by adjusting their ratings of task- and/or partnering-related CSFs. As Hipkin and Naudé
have noted, alliance governance structures can have profound effects on alliance activities, both intended and unintended. Partnering-related CSFs may help determine what is acceptable and unacceptable in a workplace and define the likely types of interactions and working relationships
between the parties, all of which can affect how well partners transfer knowledge, proprietary information and best practices between them, as well as the degree to which such resources risk being
appropriated by the other.32
Additional considerations may come into play in such a firm-level analysis. First, Anderson and
Narus suggest that identifying superior value contributions may require analysis be taken down to
the level of specific product/service offerings (i.e., in our context, airline tickets, hotels, cruises, vacation packages) as well as by geographic area. Within each major industry groups, sub-groups also
exist: for example, even alliances with airlines focused only on ticket sales could include two types one that sells tickets on a commission basis, and another that only handles them on a merchant basis, reselling them to various customer sub-groups e and each approach needs to be analyzed to
determine which is the better alliance option. Second, alliances with specific industry groups may
operate differently depending on the rules and norms governing behavior in the target industry.33
Thus focal firms may elect to use different alliance arrangements to span multiple industry groups
and/or segments, thereby creating a diverse portfolio of strategic alliance relationships - or, alternatively, they may elect to treat all partners within industry groups, segments or sub-segments in a
similar fashion.34 Dynamic congruence analysis facilitates evaluating the focal and potential partner
firms’ mutual value contributions, as well as helping to identify a competitor’s positioning more
accurately.
Managers may benefit from further extending their firm-level analysis to individual strategic business units (SBUs) within their broader firms, which can provide an even deeper
multidimensional understanding of potential alliance strategies. While many alliances are
based on corporate-level objectives, equally relevant considerations in terms of reacting to
competition and developing competitive advantages may take place at this level (or even
below). While product offerings can be tailored to specific alliance partners, SBUs and/or
product/service/geographic/account segments to achieve a coherent and effective strategy,
some caution needs to be exercised. Many CSFs are process- and corporate-based and/or
track across multiple SBUs; they will need to be identified, analyzed and fully captured in
the analysis.
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Perspectives for managers and opportunities for alliance researchers
Alliance partner selection perspectives for managers
Ad hoc alliance deals focused solely on short-term goals, while common at various organizational
levels, may be partly to blame for the widely reported failure rates for strategic alliances. Alliance
strategies that produce win-win results for all parties over time are based on clear linkages between
a firm’s alliance strategies and its corporate strategy foundation. Winning alliance strategies are also
produced by using robust analytical tools that incorporate potential alliance complexities appropriately. Table 4 highlights some perspectives for managers in selecting partner industries and partner
firms.
While checklists are frequently used in the partner selection process, it is more valuable to commit to a more systematic and analytical partner section process. The process presented in this article
avoids basing alliance discussions largely on short-run, financial or economic-focused alliance issues, promoting instead a broader, longer-range view of interrelated corporate and alliance objectives and strategies. This shift also facilitates a focus on enhancing businesses’ strategic health and
overall competitive positions, and allows analysis and decision-making to be based on a more complete set of variables and alternatives. A thorough analysis of potential industry groups and segments, rather than just of potential partner firms, is a critical step that results in stronger links
between corporate and alliance strategies. These explicit, quantitative links help sharpen a firm’s
strategic thinking and ensure that a particular alliance strategy has the best chance of fulfilling
its strategic intentions. Systematic and analytical partner selection processes and tools are also excellent management development mechanisms, as each can be used to enhance strategic thinking.
Particularly if an alliance strategy is initiated by upper management, it
can gather a momentum that can be difficult to slow down or stop.
It often is expedient for managers to get caught up in making alliance deals happen, focusing too
heavily on information about historical, current and near-term payoffs and risks. Once an alliance
strategy emerges - particularly if it is initiated by upper management, as is often the case - it can
gather a momentum that can be difficult to slow down or stop. Our recommended selection process
and tool can help navigate the complexities of alliance conceptualization, development, negotiation
and execution. Not only is partner selection critical for successful alliances, but successful alliances
also requires that time be available to perform a comprehensive and accurate analysis including
likely corporate- and alliance-strategy payoffs and risks, as well as trying to predict changes that
may occur in the future.
Table 4. Perspectives for Managers
Commit to a systematic alliance partner selection process - the process can have powerful strategic benefits;
Analyze potential partners within industry groups and segments, not just potential partner firms;
Use alliance strategy development and analysis as an opportunity for learning and executive skill development;
Make explicit the links between corporate and alliance strategic objectives prior to initiating detailed analysis and
concluding the deal;
Test underlying market and alliance assumptions in a systematic way;
Broaden partner selection criteria beyond immediate deal criteria;
Shift from an historical and short-term focus to include a dynamic analytical element e recognizing that market
dynamics, a firm’s CSFs and alliances change over time;
Build collaborative know-how on alliance industry and firm partner selection processes and analytical
toolsdsuccessful alliances start with successful partner selection.
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Building Successful Strategic Alliances
Being based at only one point in time, static alliance analysis may provide flawed advice. The
multi-level dynamic analytical congruence tool presented in this article provides robust guidance
to help managers deal with complex dynamic decisions, and to identify and verify their assumptions
about alliances and potential partners explicitly. When used at the firm level, the tool provides valuable flexibility to identify the focal firm’s most significant CSFs, and to include both dynamic taskcongruence and partner-congruence factors. The relative importance and ratings of the critical success factors identified for focal firms and their potential partner industry groups and/or firms will
shift over time - some CSFs may disappear from the future list altogether, and new factors will need
to be included in the partner analysis. Evaluating potential industry groups, segments and specific
firms as potential alliance partners involves using dynamic considerations to evaluate both the present and future appropriateness of each target. A dynamic analysis is critical to account for and ideally - to anticipate future changes.
Future opportunities for alliance academic researchers
Alliance partner selection processes and analytical tools are important areas for further academic
research, and many opportunities exist for alliance researchers to extend and enrich our strategic
management-based process and partner selection tool (see Table 5). One important lesson consistently found by strategy literature, and confirmed by users of our approach, is that process matters.
Heracleous and Jacobs suggest that the process of crafting strategy can be powerful in actively engaging participants, crafting their strategic territory, identifying managers’ perceptions and assumptions, and developing a strategic map; our approach extends this process to include alliance
strategies.35 Research could explore the various elements of the partner selection process, as well
as the relative emphasis of its deductive approach in contrast with their view of crafting strategy
as an integrative, inductive process. Strategy is often conceptualized as creating a mental framework. While the need to develop the strategic-thinking skills of those involved in strategy process
and alliance development processes has been recognized,36 our approach could be readily adapted
to support a quasi experimental design to assess how managers’ alliance partner selection strategy
mind-sets are changed by using similar tools. As part of such experiments, researchers could examine how managers’ thinking and analysis shifts when the partner selection tool requires them to
consider broader macro and industry considerations before moving down to the firm level of
analysis.
Carefully controlled planning processes are often discarded in turbulent
times, and avoided altogether by entrepreneurs in favor of more
‘inspired’ approaches.
A second area of future research involves the continuing inquiry into linear, planned approaches
to partner selection versus emergent ones. The partner selection tool suggests a rational, structured
and analytical approach to potential (or actual) partner industry, group or specific firm analysis
that results in an action plan. Embedded in this approach are strategy concepts of environmental
scanning and sense-making, and scenario development. However, researchers have found that such
carefully controlled planning processes are discarded by many organizations in turbulent times, and
avoided altogether by entrepreneurs in favor of more ‘inspired’ approaches.37 The existence of such
contrasted approaches to making strategy raises several research opportunities with respect to our
process. First, there is the opportunity to examine modifications that could allow for inclusion of
emergent strategy aspects, including fostering debate across hierarchies, educating various audiences, enhancing the inclusion of peripheral strategy considerations, and promoting flexibility.38
Second, given the apparent inclination of some managers to adopt less-structured strategy processes
in uncertain environments, it could be interesting to test the extent to which tools of varying
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Table 5. Future Opportunities for Alliance Researchers
Expand this exploratory alliance partner selection analytical tool to other service and product businesses;
Exploring in more detail the impacts of the partner selection tool in analyzing alliances engaged in more in
a learning transfer mechanism as opposed to access to resources, customers, suppliers, etc.;
Test the potential for shifting managers’ mind sets and the ability to engage various actors throughout the
organization;
Research the value of the partner selection process and the roles of deductive and inductive approaches;
Examine how the tool can be effectively implemented in different organizations, taking into account existing
structures, routines and various actors’ roles;
Explore potential adaptations of this exploratory alliance partner-selection analytical tool for diverse types of
alliances, including equity-alliances and non equity alliances;
Conduct experiments to test the proposed strategic alliance partner industry group, industry segment and firm
selection process vs. a firm-only partner selection process;
Explore longitudinal applications of the proposed partner selection strategic process and dynamic congruent
analytical tool;
Examine the political, social and cultural aspects of using the alliance partner selection process and the partner
selection analytical tool. Examine implications when organizations are faced with one or more turbulent
environments;
Identify what process or tool modifications, if any, are needed for nonprofit organizations and smaller,
entrepreneurial firms seeking to build successful alliances.
degrees of structure, linearity and complexity remain useful in more volatile situations. Third, important dimensions and insights would be added by additional research that blends this article’s
analytical methodologies with the myriad external/environmental issues such as the political, social
and cultural aspects that are part of any strategy development, selection process and implementation. King found that ‘venture capitalists are ‘bifurcated strategists’, using carefully controlled planning
for their portfolio companies [but] more emergent strategies on their own behalf’ due, in large part, to
the turbulence of their own operating environments. Research on possible adaptations of the partner selection process and tool when the focal firm is faced with one or multiple turbulent or fastchanging environments would add to our understanding. Fourth, further research that incorporates
the inclusion of external analysis and strategy exploitation and exploration approaches to partner
selection would be useful. Fifth, research could be conducted on how the emergent opportunismbased strategies that are part of an overall consistent stream of alliance strategy behavior (as noted
by King), are impacted by and/or can be imbedded in the partner selection tool. Sixth, the further
development of exploitation and exploration alliance strategy approaches would allow the inclusion
of peripheral strategy considerations, and promote flexibility - all important considerations (as Giraudeau notes) in a more inclusive approach to alliance strategy development and execution.
A third area of research interest involves improving our understanding of how an organization actually uses approaches such as ours within its ‘practice of strategy.’ An ‘effective practitioner needs to understand both the local routines and the different roles involved in strategymaking’.39 How can the partner selection process and tool be most effectively implemented
in different organizations, taking into account its existing structures, routines and the roles
of its various actors? How can the most appropriate mix of insights, thinking, explicit and tacit
knowledge, strategic and local experiences all be brought together in using the strategic alliance
partner selection process and tool? Further research could lead to an improved understanding
of how organizations actually work on alliance formulation, including partner selection and
strategy implementation.
Fourth, further research focusing on longitudinal applications of the partner selection process
and analytical tool could explore the evolving effectiveness of linkages between corporate and
alliance objectives and strategies. Longitudinal analysis could also include a more detailed exploration of the partner selection process and tool’s effects in analyzing different types of
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Building Successful Strategic Alliances
alliances - those formed to increase access to resources, customers, suppliers, etc. and those intended to facilitate the transfer of knowledge and learning - as well as how the CSFs associated
with these contrasting motivations coexist and how their comparative weightings shift over
time in a single alliance.
A fifth opportunity for further research is in extending our approach and tool to other contexts.
For example, research has found that learning alliances are likely to require different CSFs than resource-seeking alliances, and modifications or additions to our process and tool may be needed to
accommodate the different CSFs important to various alliance forms. Thus it is important in learning alliances that the knowledge gap between parties be not so great as to limit knowledge transfer,
and the ‘knowledge gap’ concept suggests the need to examine the knowledge levels of both focal
firm and its potential partner: how might our tool accommodate such measures? Similarly, our approach and tool was applied to a service industry: service sector alliances are growing rapidly and
would benefit from additional research across all phases of alliance strategy, partner selection, deal
making, and alliance implementation and management. Extending our selection process and tool to
multiple types of service and product businesses, and to different types of alliances, would provide
additional insights on building successful alliances through using systematic and rigorous partner
selection methodologies. Future research could also explore adapting the tool to different types of
alliances, including equity-alliances and non-equity alliances, and those with or between nonprofit
organizations.
Finally, it would be useful to explore how the alliance partner selection process and/or analytical
tool might need to be adapted for use in smaller, entrepreneurial firms. Such firms often turn to
alliances as a mechanism to accomplish their goals of rapid growth, learning, and access to resources. Additional research that more fully considers the dynamic (as opposed to static) impacts
on partner selection and on the entrepreneurial firm, the impact of an entrepreneurial firm’s use of
the tool on how the prospective partner perceives the entrepreneurial firm, and the potential value
of the partnership for both parties would be beneficial.
Conclusion
Strategic alliances are an increasingly important core element in many firms’ strategies to create and
sustain their competitive advantages in dynamic market environments. Alliance partner selection is
an important topic in service-sector firms, as well as in other types of organizations, and merits
further research and management consideration. Thoughtful partner selection is a key factor in
building more successful strategic alliances. This article’s strategic management-based alliance partner selection process and related analytical tool provide a foundation from which firms can begin to
evaluate alliances in a more systematic, dynamic and strategic manner, at multiple analysis levels.
Acknowledgements
We would like to thank the Editor in Chief Professor Charles Baden-Fuller for his constructive
comments and suggestions that were very helpful in improving the focus, substance and clarity
of the paper. In addition, we would like to express our appreciation to the three anonymous reviewers for their suggestions and helpful comments.
Appendix
Executive MBA test of partner selection process and analytical tools
More than 150 Executive MBA students in seven classes participated in testing the partner selection
process and analytical tool. The students (average age 39) had an average of 13 years experience in
manufacturing, service or technology fields, and across a wide range of industries, notfor-profits and businesses. They were divided into teams of four or five, each of which was asked
Long Range Planning, vol 42
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189
Table 6. Results Before and After Using Proposed Partner Selection Process and Tool
Initial Partner Selection Process and Analysis
Second Analysis using proposed Partner Selection
Process and Tool
Focused on a narrow scope of analysis
Expanded the scope of analysis to include more variables and considerations
Considered industry issues prior to analyzing potential
partners
Included industry and country considerations and
their impacts over time in their expanded analysis
Considered future as well as current CSFs and the
issues driving CSF changes over time
Used the analytical tool to weight the importance of
each CSF
Used CSF weighting and partner rating process to
expose underlying assumptions
Result e Chose a different partner or developed a significantly different rationale for choosing same partner
Went directly to the firm level of analysis in evaluating
the two potential partners
Omitted key industry and external country issues in
their analysis
Focused on current CSFs
Did not consider potential changes in CSFs over time
Only at the margin did the teams evaluate the relative
importance of their CSFs
Did not expose underlying assumptions
Result e Chose an alliance partner on the basis of
incomplete analysis and weak rationales
to develop an initial international market-entry alliance strategy for a U.S. firm in an assigned industry. The teams were required to research the industry and evaluate two potential alliance partners currently operating in the foreign country, with the objective of identifying the most
appropriate alliance partner for the focal U.S. firm. The teams worked to develop their alliance partner selection rationale and approach, and then made an initial partner selection.
This article’s partner selection process and tool was then introduced, and the teams were asked
to reanalyze the two potential alliance partners. By using this article’s partner selection process
and tool, all the Executive MBA teams expanded the range of their considerations, enhanced the
quality of their analysis, weighted and rated their CSFs, and added dynamic considerations incorporating likely changes over time. As a result, virtually all teams either chose a different partner than in the first round, or chose the same partner, but based on a very different rationale.
(A generalized comparison of the results of their initial and tool-based approaches is provided
in Table 6).
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Biographies
Stevan R. Holmberg is a Professor, Management Department Chair and former Acting Dean at the Kogod School
of Business. His research interests focus on strategic alliances, strategic management, and U.S. and E.U. franchise
business failure. He has published in the Journal of Business Venturing and other entrepreneurship and management
journals, and presented papers in the U.S., the U.K., the Netherlands and Sweden. Kogod School of Business,
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Building Successful Strategic Alliances
American University, 4400 Massachusetts Ave., NW Washington, DC 20016 USA Phone 202-885-1921
E-Mail: sholmbe@american.edu
Jeffrey L. Cummings is an Associate Professor at the Sellinger School of Business and Management, where he
teaches executive business strategy and international business. His research and consulting focus on strategicanalysis frameworks and knowledge transfer mechanisms. His work has been applied at the World Bank and U.S.
Navy and has appeared in Academy of Management Executive, California Management Review and Journal of
Engineering and Technology Management. Sellinger School of Business and Management, Loyola College, 4501
North Charles Street, Baltimore, MD 21210, USA. Phone 410-617-2453 E-Mail: jcummings@loyola.edu
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