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1 ≥ 3 proposition. The onlyway to attain such gain is through co-creative sharing. Alliances arebuilt on the fundamental premise that sharing of risks and resourceswill expand the possibilities and rewards available to all.Copyright: The Warren Company 2002 40 I - INTRODUCTIONAlliance ArchitectureUnfortunately, in a world where certain resources may have beenscarce, hording of resources has been a common practice, based onthe belief that hording will control resources and maximize returns.One must distinguish between expendable resources that disappearupon sale or consumption (such as oil, food, minerals, etc) andexpandable resources that multiply the more they are used (such ascreativity, cooperation, and teamwork).Expendable resources are depleted and decrease upon usage.Expandable resources regenerate and increase when used.For example, software is an expandable resource. Using it daily doesnot diminish its size or impact. To the contrary, using softwarecreates more value every time it is used. Therefore it expands. It isbest used when shared, transferred and transmitted. Using thisresource brings it to life.Unlike expendables, which adhere to the universal price laws ofsupply and demand, expandables are not limited by supply, anddemand does not increase their price, but does increase their value.We must be able to distinguish between expendables andexpandables when negotiating alliances. To treat each with the sameprinciples limits possibilities of expanding the realm of the alliance.This type of thinking is often reflected in contracts for intellectualproperty, where negotiators tussle for months and even years overownership rights, when, if sharing of intellectual property rightsoccurred, both sides would create more new ideas and command abetter mutual competitive advantage.The economic Laws of Expendables run counter to the Laws ofExpandables, but both are true and both mutually exist in our world.The problem is usually that we don’t acknowledge the latter.Copyright: The Warren Company 2002 41 I - INTRODUCTIONAlliance ArchitectureAccessing the expansive possibility of sharing begins with themutual belief that “the more you give, the more you’re going to get.”When both partners hold this belief, it manifests. The general rulefor the Law of Expandables is Sharing Expands, Hording ContractsRoy Rogers, commenting on his long marriage to Dale Evans,remarked that a great marriage is not a 50-50 arrangement. Bothpartners have to give at least 100%. Rogers said both Dale and hewere always willing to go beyond: giving 120%. The Law ofExpandables creates its own “regenerative energy,” this is what wecall “synergy.”Ask yourself the question: “What kind of relationship will emerge ifsharing is not a fundamental value?”Copyright: The Warren Company 2002 42 I - INTRODUCTIONAlliance ArchitectureConflict Transcendence Whenever disagreement arises (and it will, for wherever there is change, heir will be disagreement and conflict), great alliance practitioners are careful to focus on ideas and issues, steering clear of ego entrapment games, such as “who's right or wrong,” or “what's good or bad” that will rapidly descend into the pits of defensive self-righteousness and difficult conflict. Conflict is the inevitable by-product of all change, and any proposition of new ideas will generate some amount of conflict. The objective is to prevent the conflict from degenerating into blind fear and inflexible rigidity. As one champion in our focus groups articulated it: “Without conflict there will probably be no buy-in. I just have to be careful I do not take conflict personally as an attack on myself. Conflict is just a tool to get people talking and debating an issue from one side or another. It promotes the kind of understanding necessary to be successful in this business.” Alliances exist in a world of constant flux, and therefore need frequent and continual adjustment. If those responsible for the alliance use win- lose negotiating techniques, always angling for self-interested advantage, then each side will lose synergy potential. But worse, this approach will then generate conflict, which will soon become unmanageable as trust and commitment rapidly evaporate in an enflamed atmosphere of fear and protection. The alliance spirit has an internal compass that points to synergy in lieu of conflict. This does not mean disagreements and breakdowns do not occur. But rather that these circumstances are opportunities for improvement, situations for turning breakdowns into breakthrough, conditions for shifting to higher orders of thinking. Disagreement does not naturally gravitate to conflict, but becomes a transcendent experience to turn the passion of argument into the passion of creation. Instead of taking “positions” on issues – a certain sign that conflict is brewing – the effective leader seeks to find mutual interest, joint advantage, shared vision, common values, and combined strength to stake out a new future and a shift in thinking.Copyright: The Warren Company 2002 43 I - INTRODUCTIONAlliance Architecture Conflict Transcendence (continued) The alliance champion will not be a great compromiser between the diverse elements, however, unless every other avenue has been explored. A compromise is usually seen as a poor second choice, the forsaking of a dream. Forging a new unity from seemingly diverse values and thinking will be the champion ’s first choice. This unity becomes a new order of interaction, better than the original, thereby creating a super-ordinate culture for the alliance. Negotiating styles that are overly legalistic, win-lose, or adversarial in any way will be highly detrimental to the overall health of the alliance in an environment of frequent repositioning.Transformational Flexibility A fast moving world causes the strategic driving forces that formed the essence of the alliance to be in a constant state of flux, serving as a major destabilizing factor, like a rogue wave trying to capsize a boat. Thus, alliances are in constant need of transformation. Alliance managers must be monitoring the shifts in the strategic environment regularly, and repositioning their parents and partners to align with these shifts. Because the alliance must transform itself frequently or lose its competitive edge, alliance managers must establish a culture of visioning, breakthroughs, and co-creation as a foundation for their re- negotiations. As one telecom executive said of his alliance in Poland: “No one knows what the future will look like. But if we don’t talk about it, we will end up someplace else.” Flexibility is essential to making alliances work over the long haul, because benefits to each party are seldom equal at any one point in time. Each alliance partner can expect to see benefits unequal for short periods of time, but without flexibility to re-write an agreement, failure is lurking.Copyright: The Warren Company 2002 44 I - INTRODUCTIONAlliance Architecture Transformational Flexibility (continued) For example, in the alliance between British Airways (BA) and USAir, both airlines gained significant new passengers and made commensurate investment. However, the benefits eventually saw BA gaining over a 100% increase in revenues, while struggling USAir gained only 40%. This situation called for a readjustment of the division of profits, which, when it did not occur, created friction and eventual dissolution of the alliance. BA’s later alliance with American Airlines embraced a distribution of revenues based on passengers attributable to the alliance. The legal definition of an alliance is straightforward: Cooperative business entity, formed by two or more separate organizations, for strategic purposes, that allocates: – ownership, – operational responsibility, – financial risks and rewards to each member, while preserving their separate corporate identity/autonomy It always seems to surprise lawyers that if one designs an alliance to this specification, one does not create a successful alliance. What is missing in this definition are those elements of the alliance spirit that bond people and organizations together, and give them the flexibility to make adjustments as the world around them changes. Successful alliance managers proclaim that if you ever have to look at the legal contract, the alliance has failed. Alliances exist not in the contract but in the soul and spirit of those who create and manage them.Copyright: The Warren Company 2002 45 I - INTRODUCTIONAlliance ArchitectureMastery as Alliance Architects Seldom does synergy happen by accident. It manifests because people believe it is possible; it is so often a self-fulfilling prophesy. To so many of us, our work in strategic alliances is not just a business profession, but a mission with its roots solidly set in the \"architecture of cooperation“. Our mission is to transcend divergent points of view, thus co- generating bold new futures where differences become the ever- renewable source of creative energy, the essence of innovation, the dynamism of new possibilities. Ours is a noble endeavor - designing the synergy of compatible differences. Daily we must use honor and integrity to build the trust that is essential to all our alliances. Held within the seed of the architecture of cooperation is the power to let us bring a new insight, a new pathway, a new hope, a new spirit, and a new power to our world. Each day, when we use or invent best practices for alliances, we are contributing to the creation of that higher order of experience and action that makes our workplace a better place to live. Daily we are honing the skills and transmitting the abilities and multiplying the possibilities to spawn a better world around us. As our corporations globalize, we can use these proficiencies in a multitude of applications to engender not just better companies, but better relationships, better teams, better families, and better communities. In the large span of things, step by step, alliance by alliance, we will have created a better world for all of us. The Spirit and Soul of the Alliance can help make that happen.Copyright: The Warren Company 2002 46 I - INTRODUCTIONAlliance ArchitectureAssembling the Right TeamIf the Business Development Process leads to a decision to proceed with the StrategicAlliance Process, assembling the right teams is a critical factor. Senior managementbegins by selecting a champion - an executive who is charged with making the strategicrelationship take shape and become a reality.The champion builds a cross-functional/multidisciplinary core alliance development teamthat will execute the relationship-building process - analyzing needs and potentialpartners and ultimately creating an operational team that will oversee the alliancerelationship over the long-term. As the process proceeds, the core alliance developmentteam grows and draws on the expertise of people from throughout the organization tocreate sub-teams to handle specific tasks.The nature of the core team and sub-teams varies as the organization moves throughthe six phases of the Strategic Alliance Process; the precise makeup of the teamsdepends on the task at hand at any given time, on the nature of the business relationshipbeing considered, and on the organization’s specific structure and needs.The various teams involved in the Strategic Alliance Process are essentially temporary.They are assembled to perform specific tasks and then dissolved when the tasks arecompleted (with the exception of the operational team, which is created to manage thealliance on an ongoing basis). As a result, executives must ensure that team membersare familiar with the alliance concepts and processes, and have enough time to devote tothe effort. Typically, that means relieving individuals of some of their normal workload sothat they can focus on the alliance process.Copyright: The Warren Company 2002 47 I - INTRODUCTIONAlliance Architecture Roles and Responsibilities Strategy Phase The Strategy Team is, generally, an executive-level group that concerns itself with corporate strategic alliance questions. This team is responsible for appointing a champion for the strategic relationship to be formed, assembling a core alliance development team, and providing input into the overall Enterprise plan. The Strategy Team handles six action steps: 1. Identify the products, services, technology etc.to be considered for a strategic relationship; 2. Tentatively determine which type of alliance strategy relationship is appropriate; 3. Assess organizational readiness; 4. Develop and document a preliminary Alliance Mission, Strategy and Goals (AMSAG) statement; 5. Identify and train champions and the core alliance development team; 6. Reach a team consensus on and gain management approval of the final AMSAG statement and alliance relationship plan. Analysis and Selection Phase This team identifies, screens, and initiates contact with prospective alliance partners. Team members should be individuals who have excellent business skills and an understanding of the corporate strategic plan, who are knowledgeable in the business issues that require an alliance to be formed, and who can evaluate the financial health, technical capabilities, and operational skills of the potential partners. The team essentially establishes the boundaries of the proposed agreement that will be the basis for later Co-Creation and Structuring meetings between the organizations. The Analysis and Selection Team handles 11 action steps: 1. Outline tentative performance goals for the business requirements that require an alliance partner; 2. Establish preliminary requirements and measures; 3. Gather internal and external benchmarking data;Copyright: The Warren Company 2002 48 I - INTRODUCTIONAlliance ArchitectureRoles and Responsibilities (continued) 4. Develop a summary of specific performance objectives, operating requirements and measurement criteria to be used in the alliance process;5. Develop an ideal-partner profile;6. Create an initial list of candidates;7. Establish and communicate the partner-selection procedure;8. Check the references of candidates;9. Conduct interviews with candidates;10. Perform due diligence; and, 11. Pick the provider(s).Value Creating Negotiations Phase This team called the Co-Creation team is a small, focused group, formed at the beginning of the phase works closely with our potential ally to develop a Memorandum of Understanding and Principles that describes the broad goals and nature of the relationship. Because this effort requires excellent communication and business skills, the members need to be experienced professionals. They also should have demonstrated skills in the business issues that have justified pursuing an alliance and have been involved previously in other strategic alliance relationships. The Co-Creation team handles three action steps: 1. Plan the Co-Creation approach; 2. Conduct joint exploration and design of the venture; and, 3. Create a Memorandum of Understanding and Principles.Copyright: The Warren Company 2002 49 I - INTRODUCTIONAlliance Architecture Roles and Responsibilities (continued) Operational Planning Phase In the Operational Planning phase, the partner organizations develop detailed plans for implementing and maintaining the alliance relationship. The core alliance development team creates an operational team, drawing on people with the functional expertise needed to complement our partner's capabilities and strengths. This operational team creates an operational plan describing how the services outlined in the Memorandum of Understanding and Principles will be provided. Members of the Operational Team will remain in place during the launch and ongoing operation of the alliance in order to represent our organization and provide the expertise needed to manage the relationship over time. The Operational Planning team handles two action steps: 1. Create an operational plan; and, 2. Develop an operational launch plan.Alliance Structuring Phase In the Alliance Structuring phase, the legal and organizational frameworks of the upcoming relationship are created - frameworks that allow both parties to share fairly in risks and rewards. Therefore, in this phase the alliance team should include individuals with financial, administrative and legal expertise, as well as people with communication skills and the relationship-building and management experience needed to create a win-win arrangement.The team must also involve senior managers, such as the alliancemanager and the champion, to ensure a focus on strategic goals andcollaboration in developing a contract.The team involved in this phase handles eight action steps:1. Prepare an organizational structure chart;2. Prepare a summary of the governance structure and control mechanisms;3. Agree on performance objectives and operating measures;4. Agree on financial, legal and ownership matters;5. Evaluate all structural elements for balance and a win - win approach;6. Draft the contract;7. Obtain final senior management approvals; and,8. Sign the contract.Copyright: The Warren Company 2002 50