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Related Experiment Videos

Your alliances are too stable.

David Ernst1, James Bamford

  • 1McKinsey & Company, Washington, DC, USA. David_Ernst@mckinsey.com

Harvard Business Review
|June 9, 2005
PubMed
Summary
This summary is machine-generated.

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Most companies have underperforming alliances needing restructuring. Revamping alliances can boost income by $100-300 million annually by implementing a structured process for evaluation and change.

Area of Science:

  • Business Strategy
  • Corporate Governance
  • Alliance Management

Background:

  • A significant majority of major corporate alliances are underperforming and require restructuring.
  • Joint ventures (JVs) that adapt their scope show a much higher success rate (79%) compared to those that remain unchanged (33%).

Purpose of the Study:

  • To highlight the substantial financial opportunities missed by companies failing to restructure underperforming alliances.
  • To provide a structured approach for evaluating and restructuring corporate alliances to unlock greater value.

Main Methods:

  • Regularly scanning major alliances to identify those needing restructuring.
  • Diagnosing alliance performance across dimensions: ownership, financials, strategy, operations, governance, and talent.

Related Experiment Videos

  • Generating and evaluating restructuring options (fix, grow, exit) based on diagnosis.

    • Main Results:

    • Companies can generate an additional $100-300 million in annual income per revamped alliance.
    • A systematic process involving launch, diagnosis, option generation, and execution is key to successful alliance restructuring.
    • Proactive evaluation and intervention are crucial, rather than waiting for a crisis.

    Conclusions:

    • Corporations are missing significant value by not routinely evaluating and restructuring their alliances.
    • A structured, multi-stage approach to alliance restructuring can significantly improve venture performance and financial outcomes.
    • Implementing a clear process with defined roles and accountability is essential for successful alliance overhaul.