Learning is top priority, and major challenge, for more alliances

Citation

Palmer, D. (2001), "Learning is top priority, and major challenge, for more alliances", Strategy & Leadership, Vol. 29 No. 3. https://doi.org/10.1108/sl.2001.26129cab.001

Learning is top priority, and major challenge, for more alliances

Learning is top priority, and major challenge, for more alliances

Dominic Palmer

To the casual observer, an alliance between companies as different as Daimler Chrysler and SMH may seem a bit pointless. Daimler Chrysler makes cars, after all, whereas SMH makes Swatch watches – certainly a very successful product, but not one obviously linked to share or earnings in the automotive marketplace.

In fact, Daimler Chrysler wasn't after growth so much as smarts, some extra insights for injecting its design approach with a hipper, edgier style. An alliance with SMH offered a way to enhance its design capabilities without the risk, cost, or time involved in building in-house skills or making an external acquisition.

Likewise, when launching a food-and-fuel venture, BP Amoco wanted to understand more about the grocery business and formed an alliance with Safeway. When Ford wanted to learn more about designing cars online, it teamed up with Microsoft. In all these alliances, the objective wasn't profits, at least not immediately. It was learning.

In an economy that rewards those who quickly master new technologies, markets, and business models, alliances for learning are proliferating. Recent surveys by Accenture suggest that in four of ten alliances, learning is already a critical goal. Executives expected this figure to exceed 50 percent within the next three years. For nearly one company in six, learning is now central to more than 80 percent of the alliances in its portfolio.

Alliance learning is the process of finding, interpreting, transferring, and retaining knowledge in a way that improves the performance of the companies involved. A pharmaceutical company, for example, may want to tap the latest advances in genomics. Its biotech partner may want to advance its ability to manage clinical trials. So, these partners structure their alliance to meet two goals: bring a new drug compound to market, and participate in the other's specialty.

How are these alliances doing? Some companies are doing quite well indeed, while others have stumbled. In fact, while more than half of the companies surveyed by Accenture considered their alliances generally successful, less than 40 percent believed they were effective at learning through their alliances.

Those that perceived themselves to be "alliance learners" also perceived rewards. More than three-quarters of this group expected to see 15 percent or more of their market value coming from alliances by 2005. Companies that had not prioritized learning as an alliance goal realized less market value from alliances than those that had.

Interestingly, these learners have been forming alliances for the same length of time as companies that could be termed, by their own report, "non-learners." Yet the alliance learners felt more skilled at alliance management overall. They were more successful at linking alliances to corporate strategy, found it easier to tailor management practices to individual alliances, and strove to uncover and reconcile cultural differences before forming an alliance.

Alliances present complex challenges to organizational learning. The learning environment spans separate organizations, and participants have incomplete control. Today's "e-business" alliances may face even steeper challenges, as they tend to have more partners, more agendas, more complex business goals, and much shorter deadlines – all factors that can impede learning.

Outdated thinking may be another factor. We found that many companies perceive alliances in win-lose terms. They focus on protecting their own know-how, to the exclusion of creating and obtaining new knowledge. Alliance winners know how to strike a balance.

In general, we found the companies that manage to learn through their alliances followed four key practices.

Alliance learners manage cultural fit

Exchanging knowledge and skills is easier when partners address cultural compatibility directly. A total of 64 percent of the learners in our survey performed detailed cultural diagnostics – everything from interviews and exploratory working teams to in-depth surveys – before entering alliances. Only 34 percent of alliance non-learners did the same.

Diversity, however, has its place. Compatibility is especially key in e-commerce alliances, where partners are increasingly likely to come from unrelated industries – computers and broadcasting, automobiles and computers – and must learn to work together quickly. So, most learners not only screen for compatible partners, they also learn how to manage their differences.

Sometimes these situations can stretch existing skills dramatically, as in Microsoft's alliance with NBC to create an online news service. Other times, companies are placing future bets, allying to learn about and establish positions in markets far removed from their existing business, such as Starbucks' deal with the urban delivery business, Kozmo.com

Alliance learners make learning a top priority

Some organizations push their alliance managers to set learning as a primary goal. Top performers pursue this goal while recognizing that learning is seldom the principal economic driver behind an alliance. These corporations create broad learning strategies, with two or three general but still identifiable targets, such as "learn to create online customer profiles," or "learn how our partners move so quickly."

Again, the winners strike a balance – between useless generality and immobilizing specificity. Learning goals should set the tone while leaving room for individual initiative and the opportunity to adapt. Good alliance learners are clear about ends, but flexible about the means.

Each participant in an alliance might have two or three such learning targets. In one computer industry joint venture, for example, a corporate parent articulated three learning goals:

1. 1.

   Learn how to make wireless Internet access affordable to the mass market.

2. 2.

   Learn how to make us more entrepreneurial.

3. 3.

   Learn how to manage alliances better than anyone else.

Because these goals were articulated at the beginning, they remained stable over time. This ensured that learning was not forgotten in the rush to secure short-term economic benefits. It forced the company to define what it wanted to learn and to link that to its corporate strategy. Finally, it established a platform for building more specific operating practices.

Alliance learners track their progress

Learners tend to use performance milestones to track learning progress and keep attention focused on learning goals. Learning is less tangible than other alliance goals, so milestones let management make adjustments as circumstances change. It is also a complex goal that can easily be forgotten by managers focused exclusively on quantifiable results.

Alliance learners use a balanced set of measures that link key outcomes, like revenue growth or share price, to underlying causes, like customer satisfaction or cost cutting. These scorecards enmesh learning with a company's other goals – making it easier for managers to value and understand.

Alliance learners put their top people in charge

Successful alliance learning depends on people who are deeply and personally interested in the fate of the corporate parent and who are thus motivated to link learning from the alliance back to the parent. Companies often require full-time managers for learning alliances, because part-timers tend to neglect learning goals in favor of easier and more measurable goals.

Learning winners also promote staff continuity on their alliances, assigning staff for 18 to 36 months, instead of the six to 12 months for most alliance assignments. They know that learning takes longer to realize than other alliance goals and requires a high level of commitment. Individuals who leave too soon to learn rarely contribute to broader organizational learning. Winners strike a delicate balance between the individual autonomy, incentives, and continuity needed to learn, while maintaining strong links between those working in the alliance and the corporate parent.

As the business environment grows more complex, companies will need to learn even more effectively. Increasingly, the fastest, most productive way to master a new technology, market, or business model is to find someone else who already knows it, and learn from them. That requires not only dedication, but also well-honed management skills. In the new economy, these skills will separate alliance winners from losers.