1. Chapter 11 Managing Strategic Alliances

2. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 2 Purpose and Overview Purpose –To understand various interorganizational relationships Non-coercive Strategic

3. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 3 Purpose and Overview Overview –Alliances in Health Care –Types and Forms of Alliances –What Are Alliances Meant to Do? –The Alliance Process: A Multistage Analysis –Frameworks for Analyzing Alliance Problems

4. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 4 Alliances in Health Care High failure rates Must balance rewards and returns with prospective risks

5. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 5 Alliances in Health Care Pros –New way of doing business –Allows for complexity and interdependence while maintaining autonomy –Transcends existing organizational inertia –Successful in other sectors Cons –Distracts organizations from basic goal –Exaggerated benefits –Can lead to collusion –Process problems and cost-intensive –Ineffective committee governance –Ineffective for markets with limited research and development needs

6. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 6 Types and Forms of Alliances Ownership versus Control –Alliances vary in regard to Ownership Control Size Governance Nature of participation

7. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 7 Types and Forms of Alliances Number of Members –Larger alliances are harder to govern –Larger alliances tend to be more powerful

8. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 8 Types and Forms of Alliances Governance Structure –Members are equal and autonomous –Organization commitment and diverse representation

9. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 9 Types and Forms of Alliances Mandated versus Voluntary Participation –Mandated forms of organization can be superficial and short-lived

10. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 10 Types and Forms of Alliances What are the intentions of alliances? –Strategic intentions may vary –Alliance is not a good predictor of what alliance can achieve

11. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 11 What Are Alliances Meant to Do? Pooling vs.Trading Alliances –Pooling alliances –Trading alliances

12. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 12 What Are Alliances Meant to Do? Cost Reduction vs. Revenue Enhancement –Differences in how success is gauged and how alliance is organized

13. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 13 What Are Alliances Meant to Do? Quality, Innovation, and Learning –Revenue enhancement or cost reduction Link with financial performance difficult to discern –Many organizations underestimate involvement to realize benefits Personnel flow between partners can accelerate learning and innovation

14. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 14 What Are Alliances Meant to Do? Power Enhancement –Alliances motivated by organization's desire to gain influence Uncertainty Reduction –Highlights one organization's attempts to reduce its own uncertainty Risk Sharing –Emphasizes uncertainty for all partners

15. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 15 What Are Alliances Meant to Do? Intentions are not mutually exclusive Understanding strategic intent can be critical success factor

16. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 16 What Are Alliances Meant to Do? Keys to Success: –Understand your motivation –Express this to alliance partner –Elicit and listen carefully to partners’ expression of strategic intentions –Examine compatibility of all intentions

17. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 17 What Are Alliances Meant to Do? Physician-Hospital Trading Alliances –Aimed at reduction of uncertainty –Serves many purposes: Revenue enhancement Quality improvement Cost containment

18. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 18 The Alliance Process: A Multistage Analysis The Life Cycle Model

19. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 19 Frameworks for Analyzing Alliance Problems Locating the Problem –Alliance problems: Environmental Strategy Structure Behavioral

20. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 20 Frameworks for Analyzing Alliance Problems Separating the root from the symptom –Categories of deeper problems: Parochial self-interest Misunderstanding and lack of trust Different assessments Low tolerance for ambiguity

21. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 21 Frameworks for Analyzing Alliance Problems Treating Alliance Problems –Categories of deeper problems –Participation –Facilitation –Negotiation –Cooptation –Coercion

22. Copyright © 2006 by Thomson Delmar Learning. ALL RIGHTS RESERVED. 22 Frameworks for Analyzing Alliance Problems Know Thy Partner –Partner can be useful in addressing problems The Cooperative Partner The Quasi-Cooperative Partner The Indifferent Partner The Competitive Partner The Vengeful Partner