Insourcing Outsourcing Smartsourcing

Executive Summary

This white paper sets out to show (with supporting evidence) that;

1. Alliance Best Practices Exist. There is such a thing as alliance best practices. These practices are those activities, conditions processes or behaviours, which have been identified as contributing significantly to the commercial success of alliance relationships by the executives charged with reviewing those relationships.

2. Critical Success Factors. The most common and repeating of these best practices can be seen as critical success factors (CSFs) because their presence or absence has such a high impact on the probability of success for alliance relationships. These CSFs repeat consistently over time apparently regardless of business sector, location or type of relationship.

3. Partnering Competence. The ability to apply the CSFs in an efficient and effective manner is described in this paper as 'partnering competence' and the collection of tools, processes, training, and methodologies which support this competence is referred to as the Alliance Best Practice Framework ABPF™.

4. Partnering Maturity. There are broadly three stages of partnering maturity identified by the research; i) Opportunistic ii) Systematic and iii) Endemic. Every organisation researched went through these stages in a sequential manner although some made the journey more quickly than others. The commercial return of each stage was significantly higher than the previous one.

5. Long Term (LT) Impactors / Short Term (ST) Impactors. Whilst all the identified 52 critical success factors contribute to success some do so more quickly than others and their impact is more limited (ST Impactors) whilst others take longer to develop but their effect is more long lasting (LT Impactors).

6. Build / Buy / Ally. Organisations typically use three key strategies for growth:

a. Build - Develop resources organically to grow the business. (e.g. recruiting staff and building factories).

b. Buy - Purchase resources to grow the business (e.g. by mergers and / or acquisitions).

c. Ally - Leverage other organisations' resources to grow the business (e.g. through new products, new access to markets, new innovations).

7. The ROI of the Ally Model. The commercial return of the 'ally' model is typically higher than the other two models. Organisations are increasingly turning to the third generation business growth model of 'ally' because it represents a more flexible and cost effective growth model. In addition it is easier to achieve in a recession.

8. Systematisation. Organisations are now applying alliance best practices in an increasingly systematic manner driven both by internal and external pressures.

9. Commercial Return. Those organisations which use identified best practices are significantly more successful than those that don't.

10. Alliance Myths. There are a number of commonly held views which appear to be negated by the evidence in the database.

11. Alliance Challenges. Despite the high value of success in this area there are considerable hurdles to satisfactory operation. Some of them personal and some of them organisational.

Evidence from the ABP database strongly suggests that a business development programme based around the efficient and effective establishment and management of business to business strategic alliance relationships is particularly effective in a slow moving or sluggish economy when business deals are few and far between and little investment money is available to build or buy growth.

Introduction to the detailed research findings

This white paper is based on research conducted by Alliance Best Practice Ltd (ABP) from 2002 - 2009. So far over 300 organisations have contributed to the research which is ongoing. (For a complete list of contributing organisations and research reviewers see Appendices).

The ABP database of findings from the research currently contains over 97,000 entries from organisations in multiple sectors. In each case at least three key stakeholders were interviewed in detail, these stakeholders were;

* Executive Sponsor - Usually responsible for setting strategic direction and primarily concerned with cost benefit analysis.

* Alliance Executive - Usually responsible for managing more than one alliance and principally concerned with integrating multiple alliances as efficiently as possible.

* Alliance Manager - Usually responsible for the day to day running of the alliance and most concerned with a specific relationship and its operational challenges.

The research was conducted by telephone and face to face interviews with alliance professionals in the following sectors; IT Software, IT Hardware, IT Systems Integrators, Airlines, Manufacturing, Logistics, Pharmaceutical, Financial Services, Telecommunications, and FMCG.

It is this breadth and depth of practical observation which allows ABP to suggest trends and key aspects in alliance management with confidence.

Collaborations have been around for many years. Some of them have been formal others less so. In the USA over the last 15 years alliances have been studied with more rigour than that which has been applied in Europe. Alliances and collaborations have generally been easier to form in the USA due to a number of significant common factors; language, tax structure, accounting procedure, currency and legal system.

Organisations observed that when partnering went well it went very well and showed exponential growth (research from Booz Allen and Hamilton from 1996 - 2002) however when it went badly it went terribly wrong (Ford and Firestone Case Study ).

Editorial Note - Throughout this paper the term 'strategic alliance' is used to denote those relationships examined. In practice although this term was used extensively by companies it was by no means exclusive. Terms such as strategic partnership or collaboration were also used, and depending on the context many of the relationships were viewed as key accounts or key customers or suppliers. However, the characteristics of the relationships examined were consistent in that 'strategic' invariably meant important in both the business and commercial sense and 'alliance' denote a high degree of collaboration.

Further as a convenient simplification in this paper the nature of the relationships examined are