The Business of Shared Value
A livable, integrated alliance development strategy is key to business positioning. With thoughtful engagement, the coordination and advancement of your organization’s alliance strategy at national and global levels should factor the development of stakeholder engagement goals and plans to advance business and corporate citizenship priorities.
Many organizations overlook the linkage between strategy planning and alliance development. This situation is further compounded due the absence of two key components: a comprehensive alliance strategy and a process to evaluate collaboration opportunities.
Whether an alliance succeeds or fails is often due to the ability to align objectives, the sharing of similar values and relevant stakeholders, effective governance processes, and whether or not the agreement is mutually beneficial. This article is intended to serve as a mini guide for evaluating partnering opportunities to create shared value and business impacts.
- A business alliance is an on-going, formal business relationship between two or more independent organizations to achieve common goals.
- Strategic alliances are formed to achieve growth, deliver strategic intent, protect against external threats, and/or achieve diversification.
- Operational alliances are formed to improve resource efficiency, increase asset utilization, enhance core competencies, and/or close performance gaps.
Alliance Strategy Factors
The business of establishing and maintaining mutually beneficial collaborations in an operating environment laden with image-damaging threats can be daunting. However, the value of maintaining the right alliances to strategically advance your business’ reputation and the need to ensure connectivity to your organization’s operating strategy has never been more apparent.
To frame the steps for establishing collaborations linked to strategic priorities, you may want to consider a phased approach.
Phase I: Choosing Partners to Enhance Values and Maximize Impacts
Business partnerships encompass alliances with suppliers, customers, channel intermediaries (such as agents or resellers), or vendors of complementary offerings. They are intended to aid both organizations in achieving set goals and amplifying their outcomes. Creating shared value and supporting business impacts requires a focus on efforts where there is more opportunity to:
- Enhance brand equity and leverage brand power. Whether your brand is well-established with its customers or it lacks awareness and reputational strength, aligning your organization with another business that maintains a strong brand position can enhance your brand equity. Adopting a portfolio approach to alliances ensures those partnerships are managed in a way that protects and/or enhances brand integrity.
- Mitigate against significant business risk. Operational alliances can help businesses limit risk by maximizing cost savings, increasing flexibility, and minimizing production time. Collaborations on key business strategies further amplify impact and decrease costs.
- Deliver ROI or ROC unobtainable from in-house approaches. Strategic alliances are non-local collaborations with one or more third parties aimed at fulfilling common goals. Utilizing multi-party resources scales the initiative and provides opportunities for capacity building to achieve current organizational goals, enabling both businesses to maximize ROI and receive a Return on Collaboration (ROC).
- Leverage organization’s non-financial assets. Aligning with another business to achieve strategic priorities allows you to incorporate skills, processes, equipment, and resources that you may be lacking into your efforts. Sharing assets can also help maximize ROI and increase efficiency for both organizations.
- Contribute value through brand association and customer intimacy. Alliances enhance your business’ ability to operationalize your brand promise by increasing the value you can offer through brand association. Considering you share similar stakeholders, you can further enhance brand intimacy with consumer knowledge your partner organization offers.
- Create multi-touch points to manage complexity and deliver synergy. Aligning with strategic, business, and operational partners allows you to engage stakeholders at each step in the sales and relationship management cycle to meet their complex needs and demands, while offering synergy between your diverse organizational offerings.
Another key selection factor for alliance establishment is advocacy effectiveness, which is the ability to engage and mobilize
- Allies should strengthen bonds, commitment, and reliance.
- Neutral parties should build support and create advocates.
- Opponents will help you improve dialog, understanding, and trust, as well as seek a common ground and similar goals.
These elements are fundamental to effective partnership development and represent the “Why” in the alliance-building process. The “What” part of the process is equally compelling and speaks to the selection criteria of partners. This starts with the recognition of the strategic importance of common goals and includes the following assessment factors:
- Status and influence of partner
- Resources, knowledge base, and competencies of partner
- Inclination towards partnership (trust, need, flexibility)
- Risk and benefit analysis of partnership
If the business’ priorities align with your brand statement, and mission, and they meet the requirements for the “What” part of the process, typically the shared value benefits will outweigh the risks of collaboration.
Phase II: Leverage Partnership Synergies to Enhance “Reward” and Reduce “Risk”
Once the type of alliance is determined, focus should be given to how to best leverage partnership synergies. Ensure your organization:
- Builds the business case for opportunities beyond the low-hanging fruit
- Factors the vulnerabilities for each brand
- Creates the framework for sustainability-based collaborations
- Explores sustainability opportunities that can’t be achieved independently
Phase III: Evaluate Alliances for Continued Investment
The alliance planning cycle is, in essence, an ongoing assessment of strategy alignment and resource allocation. Consider the following chart as a guide for this planning process.
As you continue this process and evaluate your current alliances, also consider:
- What functions are needed to complete the circle?
- Who sets alliance strategy?
- How are existing alliances monitored?
- Is there a policy for line managers to follow?
- How are criteria set for alliances?
- How are performance standards set and monitored?
- Who decides to end or initiate alliances?
In addition, you can use the below matrix to help you manage your current alliances. Alliances that fall in the question zone can be treated as divestment or growth opportunities depending on your evaluation of the potential to increase their impact.
Existing alliances should be evaluated in terms of strategic fit and delivery of goals. As expectations become more challenging to meet, divestment becomes more likely a solution.
When evaluating potential partnerships, use challenge criteria that is easy to define and likely to be universal. For the proposed model, I have identified stakeholder satisfaction, brand enhancement, and threat mitigation as separate value criteria, though they may have overlap.
Collaboration Portfolio Matrix Evaluation Criteria
- Margin Improvement. Direct or indirect increase in sales volume or profitability, or a reduction in cost.
- Stakeholder Satisfaction. Scale of positive (or reduced negative) impact with key stakeholders.
- Strategic Fit. Alignment with company strategic direction, imperatives, and policy.
- Brand Enhancement. Alignment with and reinforcement of brand identity.
- Threat Elimination/Mitigation. Action to avoid fines, taxes, and tariffs, or restrictive legislation.
- Cost: Discreet and quantifiable budget for completion of the project.
- Time: Time needed to complete the project.
- Complexity: Number of players involved, degree of coordination required – can we deliver the plan?
- Design Strength: Likelihood that the project, as designed, will achieve the desired outcomes.
- External Vulnerabilities: Uncertainties beyond the control of the implementing party that could affect the outcome of the project.
Keep in mind that the more exciting collaboration opportunities may come mostly from the low-hanging fruit and question zone boxes. The discussion should be: How well can the collaborative approach create synergy by enhancing value or reducing the implementation challenge compared with the do-it-alone approach?
Shared Value and Collective Impact
Collective Impact is a framework deeply entrenched in complex social problems. It is an innovative and structured approach to making collaboration work across government, business, philanthropy, non-profit organizations, and citizens to achieve significant and lasting social change.
If your alliance does not offer shared value, there is no point of a collaboration between organizations. Following the strategies and methodologies described, you can evaluate potential and current business partnerships to determine ROI and ROC:
- Adopt a portfolio approach for alliances.
- Evaluate existing alliances against strategic intent and priorities.
- Apply selection criteria.
- Determine approach.
- Determine key engagement activities and resources.
- Establish impact measures.
Developing strategic alliances that compliment your organization’s mission, values, and priorities will inevitably enhance your reach, increase brand power, and mitigate risks without overextending your business’ individual resources.
About the Author
Roi Ewell is the Principal of Ewell and Associates, a consulting firm specializing in organizational strategy, reputation, and culture.