Position:Keys to successful alliances

Caught up in alliance-forging ardor, companies share resources and team up on R&D. But what happens when your partnership dissolves and new allies turn back into rival forces?

I magine this: You've joined forces with another CEO, who you've known and trusted for years, to create a marketing alliance. The chemistry is good-the venture not only helping you to reach a broader market, but also producing ancillary benefits. People from both companies have pitched in to enhance the software used to track customers, and they've come up with a faster process for getting products ready for shipment. All looks promising, and the two partners are working together closely to plan for the future.

But then, the chemistry changes. Your alliance partner is acquired by Company X. The trusted CEO is gone. The relationship unwinds. And before long, some of the innovations produced by the alliance, as well as some of the former partner's executives with whom you've shared confidential plans for the future, show up in the European division of Company X--a unit that competes directly with your firm. What's to be done? Frankly, not much. Your options are limited. Essentially, you can call out the lawyers and devote a lot of energy to an uphill legal fight, or you can bite the bullet and move on-and get ready to explain lagging overseas results to investors.

That kind of scenario may have relevance for more and more executives at high-tech companies, simply because alliances have become a common way of life in the industry--a fundamental ingredient of the business, like microchips and software code. "With the speed of business, people realize they have to move faster," says Gregory Jones, CEO of, an online auction marketplace. "In order to continue to outpace the competition, you have got to get together with other companies--you can't build it on your own anymore.

For executives struggling in that environment, the upside of alliances is readily apparent. By working together, companies can reach new markets, gain access to skills, and speed up distribution. But in the search for such competitive gains, experts say, CEOs should not be blind to a critical problem that can arise when two companies join forces--the unintentional sharing of intellectual capital that can be exploited by partners and, ultimately, competitors.

An alliance is a "less-than-arm'slength relationship," points out Warnock Davies, an alliance consultant and author of the recently published Partner Risk: Managing the Downside of Strategic Alliances. In partnering, he explains, companies need to share a great deal of information,...

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