Why partnerships fail

It's common practice today for companies to form alliances or joint ventures. In theory, these partnerships make sense. After all, no company has the scale, skills and reach to do everything - especially if its business depends heavily on information and communications technologies. Not since the early days of General Motors has a company tried to build a totally vertically integrated enterprise.

Companies recognise that they need one another to invent, produce, sell and service their products. That's the theory. The practice is another matter entirely. Most partnerships fail.

Take, for example, Concert Communications, the joint venture between AT&T and British Telecommunications - to provide large customers with global communications services. The venture made sense on paper. Neither AT&T nor BT had a globe-spanning network. Why should they spend capital to compete when they could pool their resources and customers and share in the benefits?

But Concert now loses about $US200 million a quarter and the partners have constantly bickered about how to run the venture. Worst of all, the partners can't figure out how to take the venture apart and divide its assets and customers. Perhaps they were carried away by the possibilities of the alliance, or they neglected to put breakup terms into their agreement. I think the real problem is cultural: a clash between the British and American management styles.

But just when such deals are failing, it's becoming even more important for them to work. Amazon.com, for example, needs Toysrus.com to bulk up its product offerings. And Toysrus.com shouldn't spend money to develop an electronic channel when Amazon already has one that it can use.

Other joint ventures, such as the automobile makers' Covisint, require multiple partners to work together. Their challenge will be to overcome the normal laws of competition in order to cooperate. These ventures can learn from the failures of others.

Sometimes, a partnership fails because one party tries to dominate the relationship, showing a disregard or even disdain for what the other party brings. But more often, both parties just spend too much time musing about the fantasy of possible synergies and too little time figuring out what it really takes to make an alliance or joint venture work.

Forming a business partnership is more problematic than making an acquisition. When you buy a company, it's generally clear who's in charge. When you form an alliance, it's influence, not authority, that's at work.

My point here isn't to discourage you from creating alliances. In the world of technology, you must depend on others. But you must answer some questions about your potential partners in order to create business success rather than waste valuable management time. The following are four questions to consider:

Do our potential partners share our vision of the industry? You and your partners must have a common view and strategy of where business is going. What you build together operationally must support this shared strategy.

Do our potential partners share our values? When a crisis occurs - say, a breakdown in communication with a customer - you want your partners to respond just as you would. Sharing values is just as important as sharing ideas.

Which partner has the best processes? Don't assume that the largest partner is the most advanced in process design. Determine who has the best capability.

How do we harmonise processes across our organisations? Partnerships require processes that work across organisations. For example, one partner's selling processes may need to link with another's service processes. This isn't easy to do. It requires openness and the willingness to standardise processes among the partners.

These questions can be applied to all types of businesses that want to form alliances. They can also help you deal with cross-functional or cross-divisional initiatives within your own company - when it sometimes feels as though you're negotiating a treaty between two countries.

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