Business alliances - one night stands that can lead to a happy marriage
Strategic alliances can offer big benefits. Amanda Cropp looks at reasons for joining hands instead of going it alone.
After the 2011 earthquakes Christchurch construction company founder Anthony Leighs knew times would be tough until the city rebuild got rolling, so he joined forces with a US demolition company.
"Demolition was one of the biggest games in town, and we were keen to be part of that."
The alliance between Leighs Construction and Grant Mackay Demolition gave the Christchurch builder technical expertise in large scale multi-storey demolition and acess to specialist American machinery.
More recently a Leighs joint venture company with Australian-based Cockram Construction built the new Burwood Hospital, and the Leighs Cockram JV has since scored the contract to build the Otago University's new dental school and is working on Christchurch's new Metro Sports centre.
* Christchurch's Metro Sports Facility to be largest leisure pool in NZ
* Two contractors to ensure 'competition' in metro sports facility tender process
* Crown pledges additional funds for Christchurch's metro sport facility
* Poor planning behind Christchurch's metro sports facility
* Building a future part of the planBuilding a future part of the plan
* Govt moots state-business alliances
* Contract awarded for Hamilton section of the Waikato Expressway
Leighs, who chairs the Master Builders Association, says alliances with international partners are the way to go if the construction industry is to cope with the unprecedented amount of work ahead.
Done well, strategic alliances have much to offer according to corporate advisor and international business consultant Patrick Rottiers, who is a senior lecturer at universities here and internationally.
"It should be among the tools in any senior management tool belt."
Rottiers says alliances are less common here than in the northern hemisphere, but with the New Zealand Transport Agency actively encouraging them on big projects, he expects acceptance to increase.
And alliances come into their own following major disasters because traditional procurement methods do not work. In the case of Christchurch post-earthquakes, the SCIRT alliance of five major contractors allowed them to quickly get on with fixing roads and underground services.
Rottiers suggests the Kiwi reluctance to sign up for alliances is down to the fact that companies are smaller, and managers unused to the concept are wary of working with outsiders or competitors.
"[The attitude is] it's my business, it's my baby, I don't want people coming in looking at things they shouldn't look at and telling me what to do. … What if there's a leak, or I can't trust you and you were to steal my customers?"
Why alliances pay
But forging alliances can help spread the cost of research and development, provide access to new technology, and grow markets.
An alliance may prove a better option than negotiating a potentially risky merger or acquisition to obtain technical expertise, says Rottiers.
"Occasionally companies from very different fields achieve things that in more traditional formats would have been very difficult."
A prime example was Philips and Sara Lee setting up Senseo as a competitor to Nespresso in Europe.
"Sara Lee knew nothing about hardware and Philips knew nothing about distribution of coffee."
Working with a rival can pay off too.
"The heart of the Nikon Camera comes from arch competitor Sony. You are competing in the same field and your success depends on the other [party].
"Obviously you don't sit down together and start sharing everything, you share what's functional for the outcome of that alliance."
Making them work
A successful alliance is based on finding the right partner, setting firm ground rules, and communicating well, says Rottiers.
A formal charter should lay out specific goals, time frames and outcomes.
Good communication is essential and Rottiers recommends regularly asking the other party to rate how well things are going.
"If you say it's 2.5 and I give it a 4, then we have something to work on.
"I saw two alliance partners who were about to take each other to court, that's how bad the situation was, and by taking that approach they managed to stay out of court."
If an alliance fails - because organisations are incompatible, or the technology simply does not work - you just shut it down, says Rottiers, which is a lot easier than extricating yourself from a hasty merger that turns sour.
Successful alliances can develop into long term relationships. Anthony Leighs says the partnership with Cockram works well because the two companies share a similar philosophy and approach to doing business.
"If you don't have that level of cultural alignment, if you have a contractor who follows a particular path and another one that does things differently, that can be a very fractious situation."
Benefits for non-profits
The University of Canterbury College of Business and Law has been working with 60 leaders from non-government organisations, and plans to run a course on collaborative partnerships for the NGO sector next year.
David Shearer, director of the college's executive development programmes, says NGOs and not-for profits are quite vulnerable because they constantly compete for funding, and there are definite benefits if they can form strategic alliances.
The Rata Foundation is the South Island's largest philanthropic trust and chief executive Louise Edwards says collaboration is the way to go for social service providers struggling for funding.
Last year the foundation gave $250,000 to help a collective of six health and welfare groups establish shared premises in the Eastgate Shopping Centre.
"You have like minded organisations that are in a shared office space sharing everything from photocopiers, to kitchens to reception areas and meeting rooms.
"For any building projects we're funding we ask 'who else is going to use this facility and how are you all working together?'"
Getting alliances right
- Support at executive level ensures the project doesn't become an "orphan" that fails.
- Train management in how to operate an alliance if they are new to the idea.
- Develop a formal charter.
- Ring fence intellectual property and commercially sensitive strategies so you share only essential information.
- Keep talking about how well the partnership is working for all parties.
post disaster... e.g quakes..