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The Sharing Model of Alliances: Creating Value through Economies of Scale

Posted By John M. DeWitt, Wednesday, March 13, 2019

I arrived in sunny Fort Lauderdale for my first ASAP Global Alliance Summit and dove headfirst into my first session—a three-hour workshop with Dave Luvison, CSAP, PhD, and Ard-Pieter de Man, CSAP, PhD, on building collaborative business models. Both Dave and Ard-Pieter are academics: Dave is a professor and executive in residence at the Sellinger School of Business at Loyola University Maryland; Ard-Pieter is professor of knowledge networks and innovation at Vrije Universiteit Amsterdam.

Ard-Pieter started off the presentation talking about the three models of that he believes form the core of most alliances: sharing, specialization, and allocation models. I’ll focus on the sharing model in this article.

The sharing model creates value through economies of scale, in a horizontal combination between two organizations that share similar resources and capabilities. In other words, they might ordinarily be competitors. The goal of such an alliance is to increase the scale of one or more of the organizations involved, through a predetermined split of resources, costs, and revenue. As a result, the organizations are often thoroughly integrated. Additionally, the value creation potential of the alliance is very easy to predict, given that existing operations are combined.

Ard-Pieter cited the example of the Delta and Air France/KLM alliance. Here, the airlines share customers along North Atlantic routes, an area where they would normally compete for customers. They all sell tickets “color blind”—meaning the actual airline doesn’t matter—and send the customer on the airline that offers the desired flight, regardless of which airline the customer originally approached. This increases the number of destinations available to the customer, obviously making the airline more attractive to said customer.

This type of alliance forces the executives of the organizations involved to not only collaborate among themselves, but to do so regularly and frequently. Such involvement is necessary, again, given that many aspects of each organization are joining forces. Going back to the Delta and Air France/KLM example for a moment, 12 working groups from each company interact every single day, forcing the CEOs to interact regularly too.

About halfway through the session, Ard-Pieter and Dave initiated a breakout session. They asked the attendees to apply what they had learned to any alliances that they may have worked on in the past, i.e., identify which of Ard-Pieter and Dave’s models fit their chosen alliance best. I joined one of the tables to listen to their responses.

One interesting detail I noticed: participants found it very difficult to fit their alliances wholly to one model. Essentially, they would start to mix and match characteristics from each model to best fit their alliance. So while Ard-Pieter and Dave managed to boil alliances down into three basic models, in practice these models are not cut and dried. The two presenters commented that the hybridization of alliance models is not only acceptable, but sometimes encouraged to meet the needs of a specific partnering problem or business strategy.

Stay tuned for more insights from Dave and Ard-Pieter’s session—and read more of the ASAP Media team’s live, on-site coverage of the 2019 ASAP Global Alliance Summit on the ASAP Blog and in Strategic Alliance publications. John M. DeWitt is copy editor and staff writer for ASAP Media and an undergraduate at Catawba College majoring in biology. 

Tags:  alliance models  Alliances  allocation  economies of scale  sharing  specialization 

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The Modeling and Management of Alliances: Workshop Takes Deep Dive into Three Models for Collaborative Business

Posted By Noel B. Richards, Tuesday, March 12, 2019

A preconference workshop delving into three different alliance models caught the attention of over a dozen pre-conference attendees at the 2019 ASAP Global Alliance Summit in Fort Lauderdale, Florida. Co-facilitators Ard-Pieter de Man, CSAP, PhD, Vrije Universiteit Amsterdam, and Dave Luvison, CSAP, PhD, Loyola University Maryland, instructed on the horizontal “sharing” model, the diagonal “specialization” model, and the vertical “allocation” model in the session “Building Your Collaborative Business Model.”

The two discussed how the sharing model is an alliance focused on sharing customers and information in order to generate more revenue for each partner, typically with a 50-50 split of this revenue. The specialization model is more about leveraging certain strengths or unique skills of each partner so that each can gain something they did not have before, resulting in the ability to increase revenue with new or improved products. Lastly, the allocation model works to reduce risk by delegating tasks that are a weakness for one company to a partner that expresses excellence in that specific area.

Once the co-facilitators established a baseline understanding of these alliance models, best management practices for each model and the hybridizations between them became apparent. “The bigger question is how you should manage these models, as not every model should be managed the same way,” Luvison pointed out.

The workshop co-facilitators also instructed on how to determine which specific framework is right for your alliance, based on the goals and purpose. The specific models are incredibly fluidconstantly moving, changing, and molding to specific needs, they said. Luvison and De Man then brought up the three things that need management across the boardincentives, relationships, and accountability. Additionally, they shared the idea that 70 percent to 80 percent of the problem in alliances is convincing people internal to the company rather than the partner.

After examining various methods of managing each type of alliance model, they encouraged the audience to split into groups and discuss best management practices. Though these practices may differ across alliance types, all group participants agreed upon the importance of consistent, fluid, and open communication among partner.

Also central to the discussion: as models adjust and change over the lifespan of the alliance, it is critically important that the alliance ensure that the partners are aligned and “on the same page.” Recognizing the scope and scale of each partnership and communicating about the alliance with the appropriate groups of people, notably the C-suite, is also fundamental to success. If one partner sees the alliance following a sharing model while the other recognizes it more as an allocation model, problems will arise. Ensuring and maintaining a mutual understanding of what model the alliance takes is vitally important.

“You’re half the battle. Getting your own organization on board with the alliance is quite important, so do this first, then get the partner on board,” said Luvison.

Once there is a clear mutual understanding of the model the alliance is founded upon, partners must turn inward and ensure consistency understanding within the company. This helps empower teams to deal with issues as they arise, they concluded. Though there are additional complexities in managing each model an alliance assumes, if self-awareness and open communication is pursued, the alliance and the companies involved will benefit across the board.

Noel B. Richards is a staff writer for ASAP Media. Stay tuned for more of the ASAP Media team’s comprehensive on-site coverage of 2019 ASAP Global Alliance Summit sessions on this blog, and in the weekly, monthly, and quarterly Strategic Alliance publications. 

Tags:  alliance  alliance model  allocation model  Ard-Pieter de Man  Dave Luvison  Loyola University Maryland  partner  sharing model  specialization  Vrije Universiteit Amsterdam 

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