Alliances are relationships created between companies to achieve an agreed upon goal. The goal could be to penetrate a country or industry together. It could also be to drive a new product line that was jointly developed. Or, the goal could simply be to complement each other in areas where the other is not as strong.

There are many reasons to develop alliances with other companies. The net result of developing an alliance is to pool resources. This is especially critical if you’re a small company with monetary or geographic limitations. For example, for a small startup company in Silicon Valley, your workforce might be limited to a handful of people and you also might be on a very tight budget. But, your product line might hold great possibilities to be sold in an emerging country, such as Vietnam or Cambodia.

In this example, a company may decide to enter an emerging company by selecting an alliance company that has what they lack. For example, language and geographic presence are obvious reasons to create an alliance. Other reasons could include a large, well-trained work force and rolodex of clients in your prime target area.

Just as importantly, though, is whether the alliance partner can train and support the clients in this geographic region. In fact, this is probably the most important aspect which needs to be addressed up front. While working for Oracle in Asia Pacific, I was tasked to find the build the right alliances in the multiple countries which we served. The upshot of finding strong alliance partners with both training and support expertise is that we spent less time supporting them directly, which translates into less direct costs.

A small company benefits from working with a larger company by leveraging the brand and market reach of the larger company. Using the same example above, Oracle developed alliances with hundreds, if not thousands of small companies, often in the area of systems integration work. The small systems integration company benefitted through association with a brand name like Oracle and the marketing prowess for which Oracle was known.

Strategic alliances are also very important to the success of a small company. Back in early 2000, I was at a hot, but small mobile startup company, called Everypath. At the time we only had 20 employees. Who would want to work with such a puny company? As VP of Biz Dev, I was tasked with signing up strategic partners. Strategic was the key word. Which companies out there would find our technology so compelling that they would build a business practice around our technology.

We proceeded to sign up some of the most prestigious companies, including Accenture, Cap Gemini Ernst and Young, Sun Microsystems, and Hewlett Packard. Not only did these alliances align strategically with us, we also received $20 million in venture capital and financing. This influx of strategic partners was the impetus to drive our company to next level of fund raising to the tune of $100 million. These same alliance partners also worked to drive market awareness and clients for this little 20 person company.

As you can see, alliances can be the catalyst that jumpstarts a company’s market awareness and revenue, if positioned strategically.

Read more articles from David Chan

Read more articles from David Chan