1.1 alliances create and capture value.docx

 alliances create and capture value. - Well, let\'s take a look at the different ways by which a strategic alliance can create value. - I think what is most striking and what people generally think of, - and also what constitutes the major part of alliances, is that alliances help t...

 alliances create and capture value. - Well, let\'s take a look at the different ways by which a strategic alliance can create value. - I think what is most striking and what people generally think of, - and also what constitutes the major part of alliances, is that alliances help to create and build new businesses. - So collaboration is a great way of creating something, of building something, of developing something that is novel. - One of my favourite examples of this is a collaboration between Google and NASA. - They created a joint venture back in 2005. - And with the help of Google technology and with the help of NASA technology, they have done a very interactive mapping of the surface of Mars. - So you have a governmental organisation, you have a commercial companies doing entirely different things, - but by joining forces, they can actually build a new business at the benefits of both partners. - This type of alliance work is particularly useful when risks are high. - So it\'s a great way of spreading risk across different innovation partners instead of burying all the risk in-house. - It\'s fantastic if your skill set is incomplete. - So you want to do something, but you just lack the knowledge, the knowhow or the resources for how to get there. - And of course, it can be absolutely crucial in situation with speed is essential. - So when there is a race to the market, or when technology development happens so fast, - so that neither company reasonably can stay ahead of the development curve. - A second great way of using alliances to create value is when you want to access new markets. - I would say that Starbucks is really sort of the master of this. - Across different countries. Starbucks has created alliances as a way to get into new geographical markets. - They have it in India. They have it in Scandinavia, they have it in Germany. - They have it in many different places. - And it\'s a good way for an American company to get into markets where for which they lack the sort of the local knowhow, the local skills. - Um, and to reach also new market segments. - So this type of alliance is extremely useful because it can help or enable a company to remain focussed on the core, the core competence, - the core product, the core technology, yet use alliance partners to reach many new customers and in many diverse settings. - A third great way of using alliances to create value is when you use them to access - skills and get access to learning opportunities that you would not have otherwise. - Back in 2009, when electrical cars or e-vehicles were not common in the streets. - Swedish car manufacturer Volvo engaged in a strategic alliance with one of the largest energy providers in Sweden, - a state owned company called Vattenfall, Volvo and Vattenfall. - They engaged in the strategic partnerships to see what could we do to develop the next generation of E-vehicles. - So two very unlikely partners, I don\'t think, ever before a company like Volvo, - a car manufacturer, had engaged in an alliance with a state owned energy provider. - But both companies foresaw a future where E-vehicles would be on the streets. - And to get that future into motion and to develop the learning necessary to get there. - They engaged in an alliance where, of course, each partner contributed with very different skill sets, with very different understandings. - So this kind of strategic partnerships where you engage in a collaborative and great arrangement to access skills and learning, - is extremely useful when partners have complementary resources, complementary skills or complementary knowledge. - By adding them together, one plus one can definitely equal three. - A fourth very good way of creating alliances is if you want to gain scale. - See, you\'re a small, but you want to increase the scale of your business. - Here. Visa is a good example. I think there is no company that visa has not yet and engaged in a credit card alliance with. - You can have it with cryptocurrencies or you can have it with the Asia Alliance Bank. - So a good way of visa to to come into new markets, - to reach new customers and to increase the scale of their business is extremely useful if you want to - consolidate overlapping businesses is extremely useful if you want to reduce costs of operations. - And of course, it\'s extremely useful if you want to increase your market dominance. - So you increase your position in a market. Creating strategic alliances to accomplish. - This can be both cost efficient, effective, and highly beneficial. - It\'s also very useful in situations where acquisition prices are high. - So normally or in other situations, you might consider that if you want to increase your market position, - you would buy related companies in your market. But if acquisition prices are high, - you might instead want to look into the opportunity of forming a strategic alliance with them and getting the same benefits, but at the lower cost. - Supplier relationships is also a well-known source of creating collaborative advantage through alliance. - Here is an example of Volvo again, - a Swedish company where I have done quite a lot of research where Volvo construction equipment so that the developer of all these big yellow machines, - they have a strategic networks of supplier partners across the world that each contribute a specific component into the machine once it\'s done, - and to help suppliers improve their operations, to help suppliers cut costs and to help suppliers contribute more to research and development. - Companies like Volvo work very proactively engaging with their suppliers in a strategic, collaborative way. - This, of course, is very useful if you want to increase supplier quality. - So you have a good supplier, but you want that supplier to be even better. - Instead of looking elsewhere to a new collaborative supplier, - you engage with the one that you already have to see if you can improve the supplier\'s performance. - It\'s very useful if you want to speed up development time. - So when Volvo launches a new excavator on the market, that requires every component in that excavator to also have been developed. - Much of that development happens within suppliers. And by proactively managing and working with suppliers to speed up their development time, - you can also speed up the development time of the machine as a whole. - It\'s useful if you want to share costs and risks, so you can push costs down onto your suppliers. - And you can also push part of the risk down to your suppliers. - And in exchange, they get a collaborative partnership. - They get support and they get other things in return, which can be a useful way of creating value both for the supplier and for the focal company. - Finally we have the creation of ecosystems. - So. An alliance is a collaborative agreement between two more firms, but an alliance can also, - or the collaborative idea can also expand beyond the sort of dual relationship and be implemented into an ecosystem as a whole. - It\'s extremely useful or even necessary in situations where firms together, - so the entire ecosystem needs to be in place to be able to create value that no single firm can create alone. - And it\'s almost. Inevitable in situations where innovation requires systemic change, not only technological change. - So when it\'s not enough to come up with new technology, but it\'s the entire system around your products or services that needs to improve. - Here is my favourite example of this the partnership between IBM, Intel and Microsoft back in the days. - So through this strategic partnership, - personal computers or PC starts to be accessible and developed an industry standard that it took many, many, many years to disrupt. - And we see still have the consequences of that on. They won the PC game through this collaboration and after a while others caught on as well. - But it\'s really about thinking about your products and services situated in a larger ecosystem. - So there are many different ways in which you can create more value than what each firm individually contributes to build a business, - to access new markets, to access skills and learning, to gain scale, to improve suppliers, or to create ecosystems around your partnerships. - But how do we know that this value is being created? - Is there any way we can measure the return to collaboration? - Yes, of course they are. I will offer a simple framework for thinking about that measuring return to collaboration. - We can think of return of value in different terms. - At the simplest terms, we think about it as cash or, you know, black numbers on your balance sheet, black numbers on your revenue report. - We can think of value in terms of getting supply or access to new things. - We can think of value in terms of positioning, of getting a better position in a market. - We can think of value in terms of business development. - So alliances create value by developing your business. - And we can think of value in terms of learning. - So something that is more tacit that is difficult to measure and quantify but nevertheless equally important. - So when we say that an alliance create value, we have to acknowledge that value can be many different things, - from cash or revenue to the more tacit aspect of learning. - Of course, we also need to think about value as something that can be created in the short run. - Today, tomorrow. Next week. Next three months. - But we can also think of value. That is something that is being created in the longer run. - And by thinking about value in these two dimensions, - we can identify different KPIs or different ways to evaluate and see if the alliances that we create have really created value. - Of course, in the short run, we can calculate a return on investment on an alliance. - If we want to stretch that out in time, we have to work with more dynamics, - ways of thinking about return on, on investments that will do discounted return on investment flows. - And if we really want to think about it in the long term, - then we need to let go even of discounted return on investment to think of return on investments in a more dynamic way. - In terms of supply. In the short run, we can always calculate the cost savings or cost savings. - What have we gained from engaging in this collaborative partnerships? - We can measure the component performance. - So maybe the supplier delivers the same component at the same cost, but it performs much better than it used to do. - Positioning. Short run market share. How much share do we have in a specific market? - In the long run, positioning is maybe about brand loyalty or keeping your customers close to you, - or finding other ways to engage with them than what you could without your partner in mind. - We can think about growth opportunities in the short run by engaging in an alliance. - We can come into a new market, or we can access a new technology, or we can develop new version of our project. - Short run growth opportunities offered through collaboration. - In the long run, it might not be immediate growth opportunities. - But rather than use strategic options to increase the option range of where you possibly could go to develop new opportunities. - And then, of course, learning the short trend, we can measure intellectual property rights. - We can file a patent. We can see what kind of learning outcomes have we gained from the alliance. - In the long run, the measures of return to collaboration needs to be a bit more dynamic and even maybe a bit more qualitative. - So that has to do with capability development of gaining an understanding, - both tacit and explicit, that you did not have without or before the collaboration. - So there are different ways of measuring return on collaboration, - and there are different ways of creating values through alliances and of using alliances to create values. - But we have to acknowledge that the value that we gain from collaboration is both hands on cash, but can also be more tacit, such as learning. - It manifests in the short run, and it can manifest in the long run, - and by developing KPI key performance indicators that capture these different aspect of value creation. - You have a good framework of understanding if you really manage to create more than two by adding together one plus one.