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Executive Briefings

A Guide to a Successful Strategic Alliance

It looks good on paper.

Many organizations are completing a financial and legal due diligence on their alliance opportunities, but failing to look at either corporate or country cultural issues. As a result, there is an 83% failure rate when two or more companies try to work together.

It won't happen to us. This is the attitude many executives have taken as they enter into strategic relationships. Mergers, joint ventures, acquisitions and alliances are struggling to produce a return on shareholder value, yet these relationships are being initiated at a rate of several hundred a day worldwide. While many executives believe it won't happen to them, statistics indicate that a company only has a 20% chance of success.

It's the simple things. Many of these relationships appear to be a success on paper, but fail to produce results during execution. While legal and financial experts adequately complete their due diligence, the key to success is in the implementation. Many alliance-related stories of the past two years seem to indicate that these relationships are failing due to a culmination of several missed expectations that are culture-based.

One of the mostly highly chronicled mergers of the past year has been the Daimler Chrylser merger. It was believed by all that this "merger of equals" looked good on paper; however, the two sides faced several cultural differences from the very beginning. For example, the Daimler team resented the fact that they were not allowed to smoke in the Chrysler Auburn

Hills headquarters. Due to differing travel policies, the Executives from Chrysler traveled "coach" or "business class" while the secretaries for the Daimler Executives were permitted to travel First Class.

Apparently no one completed a culture compatibility assessment to identify and address these potential differences. While one or two differences may not be determining factors in the success of an alliance, overtime, the culmination of several of these basic differences, exacerbate the issues.

Lessons Learned. While a financial and legal due diligence is critical to initiating and developing a working relationship, it is even more important that a cultural assessment be conducted in order to identify and address those potential pitfalls that are contributing to the 83% failure rate among alliances.

ICA has developed a cultural assessment consisting of nearly 2,500 Key Indicators that identify cultural differences between organizations. "We completed a cultural assessment of an organization with two campuses within site of each other and they had two distinct cultures which often prohibited them from working together," said Scott Romeo, Senior Partner with the Institute for Collaborative Alliances.

-- Scott A. Romeo

Institute for Collaborative Alliances
1749 South Westwood
Mesa, AZ 85210 USA


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Last Updated: January 1, 2005