Alliances are becoming an increasingly popular way for entrepreneurial firms to accelerate growth. However, firms should approach the possibility of forming an alliance strategically and carefully. A failed alliance can cause a firm to lose money and can be very time-consuming and frustrating to exit. Alliances are often compared to marriages and other close relationships: easy to get into but very hard to get out of—at least gracefully. Next, we discuss three key steps to establishing and executing a successful alliance. The biggest obstacle to making an alliance work is that the corporate cultures of organizations often vary in substantially important ways. As a result, the first thing firms should determine when deciding how to manage an alliance is how decisions are made. A startup may rely on a process through which it makes decisions quickly while a large-company partner may route decisions through several committees prior to making a decision. Unless the partners know what to expect, frustrations can result because of these different decision-making processes. Each alliance partner should also appoint an internal “champion” who has direct responsibility for the alliance’s health and progress. “A bunch of people helping out when they can” does not cut it. An alliance should have a boss inside each involved organization, just as employees have bosses. The individuals expected to make an alliance work for all parties should also meet face to face. It is normally easier for people to trust one another and work together across distances if they have met at least one time and have had an opportunity to get to know one another as individuals......

Discussion Questions:

1. In what ways is it easy for a firm’s founder to get caught up in the potential advantages of participating in alliances without remaining as focused on the potential disadvantages?
2. Think about the partnership arrangements with which you have been involved, even if your experience is only working with other students in team settings in classes. What are some of the challenges in making alliances work that we failed to mention in this feature?
3. Do some Internet research and find an example of an alliance between a small firm and a large firm that seems to be working well. Briefly describe the nature of the alliance and explain its success.

4. The “You Be the VC 7.1” feature in Chapter 7 focuses on Monarch Tractor, a startup that is building fully electric, driver optional tractors that can lower the cost of farming by eliminating the need for expensive diesel fuel and reducing labor costs by allowing a single operator to manage three to five tractors at the same time rather than driving just one. Brainstorm three to five likely alliance partners for Monarch. Explain how each partner can help Monarch either increase its revenue or decrease its costs.