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Strategic Alliances as a Small Business Growth Strategy A Contribution to the 2012 WiSense Entrepreneurship Series

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Title: Strategic Alliances as a Small Business Growth Strategy A Contribution to the 2012 WiSense Entrepreneurship Series


1
Strategic Alliances as a Small
Business Growth Strategy A Contribution to the
2012 WiSense Entrepreneurship Series
  • By
  • Peter MacKinnon, WiSense Project Manager
  • School of Electrical Engineering and Computer
    Science
  • uOttawa, Canada
  • pmackinn_at_site.uottawa.ca
  • 613.562.5800 x 2177
  • WiSense Seminar 73
  • April 5, 2012

2
Agenda
  • Learning Objectives
  • A Context for Strategic Alliances
  • Managing Innovation
  • Partnerships/Alliances
  • Partnership Options
  • Understanding Strategic Alliances
  • Tools to Aid in Structuring Managing Strategic
    Alliances
  • Lessons Learned Summary

3
Learning Objectives
  • To gain an understanding of the range of
    partnerships the differences between tactical
    strategic alliances and how they relate to
    fulfilling a business strategy
  • To appreciate the role of tacit knowledge
    associated with practical experience gleaned from
    creating managing strategic alliances

4
A Few Questions to Get Started
  • So, who has started a company?
  • Who wants to start a company?
  • Who wants to be part of the management team?
  • Has anyone had an opportunity to work within a
    partnership such as a strategic alliance?
  • What do you think are the main reasons to make
    use of partnerships in general strategic
    alliances in particular?

5
So Why am I here?
  • Basically, to tell stories based on . . . ?

6
So Why am I here?
  • Basically, to tell stories based on . . . ?
  • SHARING EXPERIENCE

---gt that intangible ingredient that parallels
formal learning and is so essential in the
workplace (i.e., tacit knowledge)
7
Two Kinds of Knowledge
  • Explicit Knowledge
  • (e.g., codified knowledge)
  • Tacit Knowledge
  • (e.g., know-how contained in peoples heads,
    experience)
  • ? My task is to share with you tacit knowledge
    based on my experience and know-how
  • ? Explicit knowledge makes up many other aspects
    of this seminar

8
Knowledge in Business Terms
  • Explicit Knowledge
  • - Subject domain (e.g., marketing, finance,
    sales, territory knowledge)
  • Tacit Knowledge
  • - Relationships
  • - Customs/traditions/conventions
  • - The way a system actually works despite
    rules, regulations documentation

9
A Context for Strategic Alliances
10
Changing Views
  • Old View
  • Tariff Walls
  • Regional Competition
  • Industrial Development
  • Multiple Supplier Chains
  • Basic Production
  • Investment in Market Access
  • New View
  • Leveling the Playing Field
  • Global Competition
  • Wealth Creation
  • Strategic Supply Chains
  • Value-added Production
  • Investment in Innovation

11
Components of the Globalizing Economy
New Competitors
Changing Pattern of Borders
Rise of Global Standards
The Globalizing Economy
Information Communications Technologies
Privatisation
Global Products Customers
Growing Trade Investment
12
Change Policy Environments
Science Technology Policy
Innovation Competitiveness Policy Environments
Business Policy
Trade Policy
13
Threats Uncertainties
  • New technologies are transforming the means to
    create wealth through accelerated technology
    penetration shortened product life-cycles
  • Common technologies are globalizing products
    services
  • Changing policy environments cause confusion
    uncertainty
  • Rising cost risk in RD timely market entry
  • Scarcity of highly qualified people
  • Increasing competition among firms
  • Erosion of traditional trade barriers

14
The New Dynamic
  • Technology, trade investment are intertwined
  • They represent different inter-related states
    of global activity
  • Regional global imperatives are eroding
    national roles
  • Investment in all its forms is a response to this
    new global dynamic

15
Managing Innovation
16
Business Approaches Organic versus Systematic
  • Organic
  • Why bother? Who knows what will happen tomorrow?
  • Decisions evolve
  • Authority is based on trust
  • Procedures are traditional
  • Jobs are vaguely defined
  • Communication is informal as in the grapevine
  • The right connections earn promotion
  • Honour calls
  • Title describes your status
  • Systematic
  • Planning influences what happens tomorrow
  • Decisions are made
  • Authority is based on competence
  • Procedures are rational
  • Goals are precise
  • Communication through official channels
  • Competence earns promotion
  • Duty calls
  • title describes your job

Source Adapted from When in Rome, by J. Mole,
American Management Association, 1991 ISBN
0-8144-7769-0
17
Different National Approaches to Business
Individual
Spain
France
USA
Portugal
Belgium
Germany
CANADA
Switzerland
LEADERSHIP
Australia
Ireland
China
UK
Denmark
Japan
The Netherlands
Group
Organic
Systematic
ORGANISATION STYLE
18
Managing Innovation from a Technology-driven
Perspective
Arrows represent direction of flow and relative
intensity of information exchanges
World Pool of Knowledge
Research
Development
Marketing
Production
Sales
Distribution
Customers
19
Managing Innovation from a Market-driven
Perspective (2)
Arrows represent direction of flow and relative
intensity of information exchanges
World Pool of Knowledge
Research
Development
Partners
Future Markets
Marketing
Production
Sales
Distribution
Customers
20
Partnerships/Alliances
21
Common Kinds of Alliances
  • State-to-State
  • Defensive
  • (e.g., Peloponnesian League)
  • Offensive
  • (e.g., Axis Powers of WW II)
  • Economic
  • (e.g., Hanseatic League)

22
Common Kinds of Alliances
  • State-to-State
  • Defensive
  • (e.g., Peloponnesian League)
  • Offensive
  • (e.g., Axis Powers of WW II)
  • Economic
  • (e.g., Hanseatic League)
  • State-to-Corp
  • Service Delivery
  • (e.g. Iqaluit Airport as a Public Private
    Partnership)
  • Financial Assistance (e.g., Technology
    Partnerships Canada)
  • First Mover Relationship
  • (e.g., government as an early adopter CDN
    Innovation Commercialization Program)

23
Common Kinds of Alliances
  • Communities
  • Public-Private Partnerships
  • (e.g., waste management)
  • City Twinning
  • (e.g., create/share cultural, social, economic
    ties)
  • Innovation Clusters
  • (e.g., wireless sensor cluster for Ottawa)

24
Common Kinds of Alliances (2)
  • Communities
  • Public-Private Partnerships
  • (e.g., waste management)
  • City Twinning
  • (e.g., create/share cultural, social, economic
    ties)
  • Innovation Clusters
  • (e.g., wireless sensor cluster for Ottawa)
  • Corp-to-Corp
  • Defensive
  • (e.g., protect a market)
  • Offensive
  • (e.g., create/grow a market)
  • Access/Economic
  • (e.g., know-how, intellectual property, channels)

25
Business Partnerships The Options
  • Mergers

Strategic
  • Acquisitions
  • Joint Ventures
  • Strategic Alliances

Value to Business Future
  • Value-added Resellers
  • Original Equipment Manufacturers
  • Distributors
  • Agents
  • Suppliers

Tactical
Strategic
Tactical
Value to Marketing Sales
26
Business Partnership Options Complexity of
Relationships vrs Convergence of the Whole
Mergers
Acquisitions
Joint Ventures
Complexity
Strategic Alliances
Channel Partners
Suppliers
Convergence
27
Identifying Partners What Firms Look For
  • Complementary skills
  • e.g., resources skills needed
  • Organisational Complementarity
  • e.g., group size
  • Complementary strategies
  • e.g., willing to share in a growing market
  • Willingness to co-operate
  • e.g., management staff commitment
  • Willingness to share plans problems
  • e.g., trust, belief commitment to shared
    goals

28
Choosing Partners Where to Look
Customers
Competition
Suppliers
Choosing Partners
Government
Universities
29
Cross Border Issues for Alliances
  • Ease approach to establishing business
  • Protection of Intellectual Property
  • Tax Treatment
  • Technological infrastructure
  • Market size sophistication of demand
  • Attitude towards alliances
  • Availability of suitable partners

30
Assessing a Partnership/Alliance
Decide on link in the value chain
Select a Potential Partner
Begin Over
No
Assess Partner
Negotiate Agreement
Define Type of Alliance
Build/Support New Alliance
Build Trust Commitment
Assess Performance
Terminate Relationship
Continue/Enhance Relationship
Terminate Relationship
Terminate Relationship
Terminate Relationship
Terminate Relationship
Assess Meeting Strategic Objectives
Assess Meeting Strategic Objectives
No
Yes
No
Yes
No
31
Watch Out for Dirty Tricks
  • Deliberate deception
  • Stalling
  • Escalating authority
  • Good guy versus bad guy
  • You are wealthy we are poor
  • Old friends/unsavoury political connections

32
Understanding Strategic Alliances
33
What Drives the Need for Strategic Alliances?
  • Companies seek global alliances because of
    pervasive, unremitting mutually reinforcing
    effects of
  • Globalization of business
  • Increasing complexity of technology
  • Speed of technical change
  • These often combine to make the risk too high to
    create value-add without partners

34
What Drives Need for Strategic Alliances? (2)
  • Uncertain changing policy environments
  • Desire to reduce risk
  • Means to add value
  • Expand capabilities capacity
  • Access to know-how intellectual property

35
Strategic Alliances in Overview
  • Improve strategic advantage increase market
    share
  • Offensive defensive strategies
  • Support planned growth
  • Develop first-mover advantage
  • Strategic alliances should be driven by Business
    needs

OBJECTIVE
USES
GUIDING PRINCIPLE
36
What Firms Seek in a Strategic Alliance
  • Technologies
  • Products
  • Channels
  • Services
  • Know-How
  • Financing

37
Strategic Alliance Entry Points
  • Research
  • Development
  • Manufacturing
  • Distribution

38
Strategic Alliance A General Definition
  • A Strategic Alliance is a formal mutually
    agreed collaboration in which partners pool,
    exchange integrate specific resources with a
    view to achieving mutual gain while remaining
    separate entities

39
Strategic Alliance Downsides
  • Strategic Alliances are not for every firm
  • They are difficult to manage can easily fail
    due to misunderstandings
  • Partnering too close to the core of a business
    could erode core competitive advantage

40
Tools to Aid in Structuring Managing Strategic
Alliances
41
The Partnership Matrix
PARTNER B CONTRIBUTION
TECHNOLOGY
KNOW-HOW
FINANCING
PRODUCT
SERVICES
CHANNEL
PARTNER A CONTRIBUTION
TECHNOLOGY
PRODUCT
CHANNEL
SERVICES
KNOW-HOW
FINANCING
SHARED MANAGEMENT
42
The Partnership Matrix (2)
PARTNER B CONTRIBUTION
Assumption B - Small venture backed RD firm
TECHNOLOGY
KNOW-HOW
FINANCING
PRODUCT
SERVICES
CHANNEL
PARTNER A CONTRIBUTION
TECHNOLOGY
PRODUCT
CHANNEL
SERVICES
KNOW-HOW
FINANCING
Assumption A - Medium sized RD firm
with global channels transforming into a market
driven company
SHARED MANAGEMENT
43
The Partnership Matrix (3)
PARTNER B CONTRIBUTION
Assumption B - Small venture backed RD firm
TECHNOLOGY
KNOW-HOW
FINANCING
PRODUCT
SERVICES
CHANNEL
PARTNER A CONTRIBUTION
TECHNOLOGY
PRODUCT
CHANNEL
SERVICES
KNOW-HOW
FINANCING
Assumption A - Large firm with diverse
products global channels
SHARED MANAGEMENT
44
The Partnership Matrix (4)
PARTNER B CONTRIBUTION
TECHNOLOGY
KNOW-HOW
FINANCING
PRODUCT
Assumption B - Medium sized firm with product
global channel
SERVICES
CHANNEL
PARTNER A CONTRIBUTION
TECHNOLOGY
PRODUCT
CHANNEL
SERVICES
KNOW-HOW
FINANCING
Assumption A - Large firm with diverse
products global channels
SHARED MANAGEMENT
45
Summary
46
Summary of Lessons Learned
  • Alliances have evolved over a long period of time
  • There are a variety of types of alliance
  • Partnerships may be tactical or strategic
  • There are numerous drivers for strategic
    alliances with value-add as a key component
  • Large firms often develop portfolios of strategic
    alliances whereas SMEs optimally tend to mange
    only a few alliances at a time
  • Strategic partnering is not for every firm

47
Summary of Lessons Learned (2)
  • Managing innovation is a key to fostering
    strategic alliances
  • There are multiple entry points in structuring a
    strategic alliance
  • The Partnership Matrix can assist in
    formulating the value-chain managing alliance
    negotiations ongoing operations
  • Understanding national traits in the conduct of
    business is essential

48
Summary of Lessons Learned (3)
  • Explicit Knowledge is necessary but is not
    sufficient
  • Tacit Knowledge is key to building strategic
    alliances business relationships
  • Negotiation success requires an appropriate
    combination of explicit tacit knowledge
  • Simple cultural business misunderstandings can
    derail a truly valuable business relation

49
A Bit about My Background
50
What Kinds of stories Can I Tell?
  • Career spans a series of experiences as a
  • Scientist
  • Technical Business Manager
  • Entrepreneur
  • Bureaucrat
  • Executive
  • Diplomat
  • Academic
  • Management Advisor

51
A Bit about My Background
  • As a Scientist
  • participated in international expeditions to
    polar regions
  • (e.g., American, Australian, British, French,
    Danish, Norwegian, Russian Swiss participants)
  • As an International Bureaucrat
  • co-ordinated gathering of global climate change
    data from ice cores radar soundings of
    continental ice sheets
  • (e.g., worldwide)

52
A Bit about My Background (2)
  • As an Entrepreneur Business Executive
  • participated in strategic tactical alliances,
    mergers acquisitions, technology transfer
    remote RD
  • (e.g., Australia, China, Hong Kong, Japan, USA,
    Western Europe)
  • As a Diplomat
  • participated in international foreign direct
    investment, strategic alliances technology
    partnerships
  • (i.e., Western Europe - London-based)

53
A Bit about My Background (3)
  • As an International Management Advisor
  • Participate in providing advice, reports
    presentations to business, government,
    universities international institutional
    clients throughout the world
  • (e.g., Australia, Bahamas, Belgium, Brazil,
    China, France, Hong Kong, India, Japan, Pakistan,
    Spain, United Kingdom United States)

54
Why So Much Background You Might Ask?
  • First, to illustrate that international business
    experience can be gained by many routes
  • Second, you can do these things if
  • (i) You have an attitude willingness to adapt
  • (ii) You are adequately prepared with both
    relevant codified tacit knowledge
  • (iii) You know what you want in terms of the
    deal
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