In Praise Of Business Alliances

Probably the biggest problem facing corporate executives these days is how to manage amid the rampant uncertainties of the New Economy. With the business environment changing at a dizzying rate, companies are being forced to decide where to target their limited resources, even as they must rely on untested strategies.

Little wonder that companies are looking to make alliances with a wide variety of partners as a way of reducing risk, obtaining access to key technology, and broadening their customer base. The conventional corporate structure is a binary model--either you are inside the corporate walls or outside of them. Alliances, by contrast, are a gray area, where the partners share some goals but not others. Such a model is better suited to the New Economy. As a result, the average large company now has more than 30 alliances, up from none a decade ago, says Anderson Consulting.

Indeed, alliances, used judiciously, represent a good way to combine the best aspects of U.S.-style. capitalism--with its emphasis on all-out competition--with the more cooperative mentality of the keiretsu in Japan and the chaebol of South Korea. In high-uncertainty industries such as technology, media, and pharmaceuticals, alliances have helped facilitate far faster innovation than companies could manage by themselves. And with many businesses trying to crack multiple foreign markets at once, they are relying on alliances with local partners to smooth the way.

But it's possible to go too far down the cooperative route. Companies shouldn't use alliances as a substitute for taking risks themselves or as a way of divvying up the market and eliminating competition. In the end, it is vision and willingness to innovate that will drive an economy forward, not the ability to make alliances.