Business intelligence aspects of alliances.

• Author: Herring, Jan P.

It is prudent to undertake certain intelligence activities to guard against losses of a company's intellectual property.

Strategic alliances are, in many cases, "bet-the-company" propositions. In cases such as the British Telecom/MCI and Merck/Medco deals, the results of the alliance will -- if successful -- determine the future competitiveness, if not survival, of both partners. The success of the alliances, in turn, depends on the choice of the right partners and the viability of the relationships. Furthermore, choosing the right alliance partners goes beyond the basic soundness of the business deal, requiring that the partners be compatible, including various "nonbusiness" attributes such as the personalities of the executives and the management styles of the companies.

Surprisingly, few companies spend much time assessing the nonbusiness attributes of a potential alliance or acquisition. Critical features such as the potential partner's management style and ethics, the corporate culture, and certain aspects of security, including how well the prospective partner protects its partner's intellectual property, are difficult to evaluate using traditional business techniques. For instance, the business attributes of GM's alliance with the Korean company Daewo to produce the Pontiac LeMans were positive and highly attractive, but the differences in management style and corporate cultures eventually tore the deal apart.

Finding a good business partner and ensuring that the partnership is compatible are two distinctly different tasks. Finding an appropriate partner, one that meets the company's particular business needs, is probably best managed by the business unit involved. Assessing the "business" attributes of the potential ally and conducting the related negotiations depend on the skills and experience of the company's officers and staff involved. The effectiveness and success of such endeavors vary widely.

In the 1980s, strategic alliances and acquisitions were often managed by a company's bank or an investment banker that specialized in such activities. Consulting firms, typically, were used to help a company's staff find and assess the potential business deal. The success rate was not outstanding. Today, more and more companies are initiating these deals themselves, with limited outside help. The pending Bell Atlantic/TCI merger is a good example. As companies do this more often, to ensure that the business "fit" is good and to prevent...