I did not realize how important allies were until 2008, when the worldwide financial crisis appeared. The market collapsed and the orders for finger-jointed panels fell sharply. Then I got a call from my biggest business partner in Scandinavia and he offered me an alliance in the crisis. We sat down, formed an alliance and decided to help each other as much as possible to overcome the crisis. We did it by increasing mutual turnover and adjusted our production to his needs on the market. We both made it through the financial crisis without a scratch. We remained allies till today and also in corona-crisis we are working closely and successfully.
We are living in challenging times and it will be interesting to look back in a few years and see who will be the winner and who will be the loser of the Corona-crisis. Definitely it is much easier to pass the difficult times with right business partners and trustworthy allies.
My opinion is that allies are upgraded business partners. A business partner will abandon you in the time of crisis much sooner as an ally. True allies stay together in good and bad times.
What are the three keys to put together a great business alliance these days? What are the three things business leaders should think of when trying to form an alliance? If you never done this before it can be a problem to know how to start.
The first step is to look for the INDUSTRY OVERLAP. It means that the industry is in the same world as we but with a different focus and is not our direct competitor! Forming alliances can be done very successfully in wood business.
Two entities combined create far more value for the customer as only one individual. The question is – can we be everything to everybody as the best? Probably not. We must monitor ourselves and see where we really are the best in the world and what are we passionate about. For the rest we should find allies.
I am just in the middle of forming a new alliance. I supply my customers with high quality finger-jointed and glued by width solid panels. But I started to get more and more inquiries for solid 3-layer panels, which I don’t produce. I searched the market, found a nice production of such panels and started to sell his products to my customers. Lately we started to discuss how to create an alliance. The idea is that I offer his panels to my customers and he will offer my panels to his customers. We plan to form a long term relationship by selling each other’s products. We sure will both increase our sales and gain financial profit.
The second step is to make clear and immediate FINANCIAL OVERLAP. Here we usually talk about money, but it doesn’t always mean dollar for dollar. There can also be some other values implemented in the alliance that increase the value of our entity towards the customers.
But remember – you must always be able to measure the benefits of the alliance. Both parties must know what they invested into the alliance and what they received.
First alliance I formed was with my supplier of finger-jointed panels. It is over 20 years old. He is great at production and I contribute my share in sales know-how, purchasing and financing all the material. We are both aware that together we create a highly successful alliance, where we both gain financial benefits, security and progress. We went through hard times in 2008 and together we are facing also the new Corona-crisis. We stay together, trust and help each other and for now our business in corona-time is increasing.
All financial benefits are measurable, we discuss about them often so that none of us feels deprived. I am proud to say that we just made a verbal agreement, that we continue with our alliance for another ten years.
First two steps are in a way logical and are not so hard to understand or to perform. But the third step is the hardest one. People think of this step, but they don’t necessarily follow it through. They are not aware of the third step – COMMITING RESOURCES to the relationship and sustain with that over overtime.
But why is this the hardest point? Common mistake between the two companies who want to form an alliance is that at the beginning there is a lot of talk. It sounds really cool to form an alliance while drinking beer and eat a nice steak at the restaurant. But such conversation can be forgotten just minutes after we leave the meeting.
We start to have doubts very fast. We simply put it off the priority list and forget about it. Suddenly this great idea of alliance doesn’t look so good anymore. Did it ever happen to you??? It did to me. Several times. Especially if there was a beer or two too many.
It is very important to immediately commit to the alliance and set up a person who will be responsible for developing it. It is a good idea to put it also on the paper. You have to treat alliance partner like you would a paying client.
If you think of your alliance partner as a paying partner and commit to him as to a paying partner, you will much easier dedicate yourself to the alliance. This must be done on both sides because it can be very frustrating if only we commit to the alliance and invest into it but the other side remains passive.
Not every great business partner is an ally, but every ally is a great business partner.
