Building, Leading, and Managing Strategic Alliances: How to Work Effectively and Profitably with Partner Companies

286 Pages·2002·7.25 MB·English

by  Jeff Hook

BUILDING, LEADING,
AND MANAGING
STRATEGIC
ALLIANCES: How to
Work Effectively and
Profitably with Partner
Companies
Fred A. Kuglin
AMACOM
B ,
UILDING
L ,
EADING
AND
M
ANAGING
S A
TRATEGIC LLIANCES
B ,
UILDING
L ,
EADING
AND
M
ANAGING
S A
TRATEGIC LLIANCES
How to Work Effectively
and Profitably with
Partner Companies
Fred A. Kuglin
with
Jeff Hook
American Management Association
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Kuglin,FredA.
Building,leading,andmanagingstrategicalliances:howtoworkeffectivelyand
profitablywithpartnercompanies/FredA.KuglinwithJeffHook.
p. cm.
Includesbibliographicalreferencesandindex.
ISBN0-8144-0683-1
1. Strategicalliances(Business) I. Hook,Jeff. II. Title.
HD69.S8 K83 2001
658(cid:1).044—dc21
2001055226
(cid:2)2002CapGeminiErnst&YoungU.S.LLC.
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Contents
Acknowledgments vii
Introduction ix
1. What Is an Alliance? 1
2. Great Idea, but How Do I Get Started? 23
3. 3GWirelessNetworks:TheFuture Is Now...or
Is It? 49
4. Telecom Providers and 3G Wireless Device
Manufacturers: A $1 Trillion Investment, yet
Where’s the Value? 74
5. Mission Impossible? From Intense Competitor
to Alliance Partner! 98
6. Transportation: Win-Win Must Mean Profit-
Profit 124
7. Health Care: Alliances and a Healthy Supply
Chain 151
8. Software Companies and Consulting Firms:
Alliances Viewed from Both Sides 189
9. Know When to Hold, and Know When to Fold 214
v
vi Contents
10. Critical Success Factors in Establishing Alliances 238
11. The Alliance Hall of Fame 251
Index 269
Acknowledgments
Theinspirationtowritebookscomesfrommanysources.Thisbook
was inspired by my passion for alliances and the growing value of
alliancesinourever-changing globaleconomicworld.
I want to thank my wife and children for their patience, support,
andunderstandingthroughoutthewritingprocess.Thisbookcameat
a difficult time for me given the health issues with my Mom and the
passing of my Dad, and it placed an intense time burden on my wife,
towhomIamverygratefulforherever-presentsupport.
In addition, I want to thank Phil Robers for sharing with me the
passion to write and for his support to make this book a reality, and
Dr.LesWatersforhisongoingmentoringandsupport.Also,Iwantto
thank Jeff Hook of i2 Technologies for his contribution of Chapter
vii
viii Acknowledgments
Eight.Thebookisdefinitivelystrengthenedasaresultofhiscontribu-
tion. It was a pleasure to work with Jeff, who is a business associate
andafriend.
Also,IwanttothankDianeRicheyforhercontributionstoChap-
terOne;mymanycontactsinTelecommunicationsandHighTechfor
material in Chapters Three and Four; my daughter Heidi for her re-
search contributions to Chapters Three and Four; Stephen Justice of
Lockheed for his input, contributions, and permission for material in
Chapter Five; David Keirsey for his advice and his permission for ma-
terial in Chapter Five; my many friends in the trucking industry for
their contributions to Chapter Six; and Lydon Neuman and Ken Got-
tesman of CGE&Y for their contributions for Chapter Seven. I also
want to thank the anti-capitalists from my May Day experience in
London for their contributions to Chapter Nine, and General Electric
and Cisco, whose outstanding commitments to hall-of-fame alliances
formed the basis of Chapter Eleven.Finally, all quotations not specifi-
callyreferencedintheendnotescomefrommypersonalinterviews.
Lastly, I want to thank my Mom and Dad for giving me the en-
couragement to be the best I can be. My Dad passed away on July 24,
2001 after a long bout with complications from heart surgery. He was
notonlyastrongcoachinlife,butabestfriendaswell.MyDadhada
philosophy to learn every day of one’s life, and to make the choices
necessary to continue to both learn and add back to others. Despite
hisphysicalabsence,Iwillcontinuetodrawsupportandstrengthfrom
his coaching and advice. I am also thankful for having had him as a
Dadforforty-eight years.
—FredA.Kuglin
Introduction
Alliances have been around for some time. In fact, alliances were
formed among ancient peoples as they banded together to fight
common,sometimesdominantenemies.Inmoderntimes,weseealli-
ances in war (the Desert Storm coalition, or the NATO forces in Ko-
sovo), in politics (coalitions in government), and in the business
marketplace. As commonplace as alliances have been in our history
andourcurrentworld,theyareoftenmisunderstoodandmisused.
Early in 2001, I was visiting a highly regarded CEO of a major
global company based in Europe. As we discussed his favorite topic—
how to drive the shareholder value of his company to new levels—the
subject of alliances surfaced. He rose from his chair, pointed to the
flipchart that had the words ‘‘strategic alliances’’ on it, and said, ‘‘I
ix
x Introduction
want one of those. Get me one this quarter, so that I can announce it
at the next shareholder meeting. And please, make sure that there is a
small ‘e’ in front of a catchy name for this alliance. That will get the
analysts’attention.’’
Needless to say, I was flabbergasted as to how little regard this
CEO had for alliances. In addition, he displayed a surprising naivete´
that totally underestimated the degree of difficulty involved in setting
up an alliance. Unfortunately for his company, the security analysts
havecometotheirsensesaboutvaluationsoftechnologystart-upsand
allianceswithsmalle’sinfrontofcatchynames.
ItisattitudeslikethoseexpressedbythisCEOthatareresponsible
for alliances being announced solely for the purpose of hyping the
company’s stock and feeding the ego of the CEO. These ‘‘empty press
releases’’frustratesecurityanalysts,employees,andcustomers—aswell
as alliance partners. If you want to have fun, track the press releases
around major trade events, and then follow-up six months later with
the PR departments of the companies releasing the press releases. You
may be surprised by how many companies are very liberal in their
interpretationofavalidreasontoissueapressrelease.
The problem lies with the understanding of what an alliance is,
the value of an alliance, when to use an alliance, and when not to use
analliance.Manylarge,successfulcompanieslikeCiscoSystems,IBM,
andGeneralElectricareusingstrategicalliancesinsignificantnumbers
with wonderful results. Many others recognize that other companies
aredoingalliances,butdonothaveaclueforhowtostartanalliance.
Still others do not even consider alliances, and adhere to a ‘‘not in-
ventedhere’’philosophy.
Thisbookisintendedtoprovideyouwitharoadmaponhowto
doalliances.Itisdesignedtowalkyouthroughaseriesofevents,with
each event presented in a separate chapter. In each chapter, a specific
industry is showcased, with examples used to support the industry
and the events. Let’s take a brief look at each chapter and at how the
constructionofasuccessfulallianceisconnectedthroughoutthebook.
Chapter One introduces the definition of alliances. It also intro-
duces the five types of alliances, and how to determine each alliance
type. These five types of alliances are sales, solution-specific, geo-
graphic-specific, investment, and joint venture. Chapter One also in-
troduces the framework to determine the need for an alliance. This is
critical for anyone considering starting up an alliance, because it pro-