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STRATEGIC ALLIANCES More Value / Fewer Problems

IDENTIFY INVESTIGATE IMPLEMENT INTEGRATE

“THE PATH TO SUCCESSFUL STRATEGIC ALLIANCES”

4200 Montrose, Suite 590 Houston, TX 77006(713) 522-9656 Phone (713) 522-9661 Fax

www.wjmurray-assoc.com

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BENEFITS OF THE W J MURRAY & ASSOCIATES’ PROCESS:• Fewer false starts• Shorter cycle times• Alliances that fit the playbook• An organization to accomplish the alliance• Successful approaches to search for and value potential partners• Proven due diligence techniques• Effective integration techniques• Pitfalls are avoided

LEADING TO: SUCCESSFUL ALLIANCES

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STRATEGIC ALLIANCES THAT WORKMore Value / Fewer Problems

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• Enterprise Strategy *Vision, goals, the path forward• Alternatives *Internal development *Alliance *Acquisition • How Does An Alliance Fit the Playbook?• Costs/Benefits of Alliance • Type of Alliance That Match Costs/Benefits *Horizontal: complimentary, competitors *Vertical: supplier/customer *Joint development *Joint venture• Initial Screening Criteria *Be clear about the purpose• Alliance Process Execution Team (APEX)

• Partner Selection Criteria *Strategic compatibility *Complimentary objectives *Commitment *Cultural fit *Ability to add value over the long term *Past history• Engage the Search Engine• Complete Initial Screening• Gain Consensus on the Short List• Complete Benefits Contributions Matrix

• Company Contact• Shared Business Plan• Structure of Alliance• APEX Team Game Plan• Operating Procedure *Metrics *Make it work provisions• Customer, Competitor Regulatory Reactions• Risk/Reward Sharing Methodology

• Manage Employee Concerns• Harvest the “Low Hanging Plums”• Communication• Staffing• Linking Budgets/Processes• Driving Costs Out of the Systems• Managing the Path Forward - The “Scorecard”

THE PATH TO SUCCESSFUL STRATEGIC ALLIANCES

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IDENTIFY

WHAT TO DO

• Confirm the Enterprise Strategy * The Business * The Vision * The Goals * The Competitors * The Value Proposition * The Critical Success Factors

• Gain Consensus That Partnership Is Better Than Acquisition / Internal Development * Be clear about the purpose of the alliance (functional analysis)

• Select Alliance Process Execution Team (APEX)

• Demonstrate How the Partnership Supports the Critical Success Factors

• Strategic Alliance Versus Joint Venture

• Expectations * Contributions * Benefits

• Initial Screening Criteria

WHO DOES IT

Senior Managers

Senior Managers

Senior Managers

Senior Managers/APEX Team

Senior Managers/APEX Team

Senior Managers/APEX Team

Senior Managers/APEX Team

OUTPUTS

• Enterprise Strategy • Internal Commitment

• Reconfirmation of, and Consensus to Partnership

•Decision on Strategic Alliance or Joint Venture

• Expected Benefits /Costs

• Initial Selection Criteria

• Alliance Process Execution Team

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WHY ALLIANCE RATHER THAN INTERNALLY DEVELOP OR ACQUIRE?

FAVORS ALLIANCE

FAVORSINTERNAL DEVELOPMENT

ACQUISITION

COST ___

TIME AVAILABLEFOR EXECUTION ______________________________________________________

SHORTER LONGER

NATURE OF _________

ACTIVITY COMPLEMENTARY CORE

ALLIANCE EXPERIENCE/ _____________________________________________________EXPERTISE HIGH LOW

LOW HIGH

AMOUNT OF CONTROL ______________________________________________________LOWER HIGHER

IDENTIFY

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CRITERIA WEIGHT

MOSTDESIRABLE

10 7 5 3

LEASTDESIRABLE

1

Market Access Geographic CustomersSales Revenue

Capacity

Profitability

Best-in-ClassIn Specific Strength

Quality ofManagement Team

Value CreationPotential

Reputation

SAMPLE INITIAL SCREENING CRITERIA

IDENTIFY

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WHAT TO DO• Partner Selection Criteria

• Engage Search Vehicles * Customer/Supplier

* Business Network * Board Members * Law/Accounting Firms * Banks

• Complete Initial Screen

• Gain Consensus On Short List

• Second Phase Screen Based On Partner Selection Criteria

• Benefits/Contributions Evaluation

• Discuss with Management

• Memorandum of Understanding

WHO DOES ITSenior Managers/APEX Team

Senior Managers/APEX Team

APEX Team

Senior Managers/APEX Team

APEX TEAM

APEX Team

Senior Managers/APEX Team

Senior Managers/APEX Team

OUTPUTS• Criteria for Ranking Candidates

• Consensus on Top Candidates • Advantages/Disadvantages Associated With Prospective Partner

• Alliance Costs * Management Time * Dollars, Other Resources

• Reaffirmation of Purpose /Goals

• Commitment to Continue

INVESTIGATE

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SAMPLE SECOND-PHASE SCREENING CRITERIA

CRITERIA WEIGHT

MostDesirable

10 7 5 3

LeastDesirable

1Size

Technology Synergy

Product Synergy

Competitive Synergy

Market Access

Cost Position

Financial Performance

Patents, Technology

Know-How, Expertise

Sales/Marketing Synergy

Supply Chain Synergy

INVESTIGATE

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SAMPLE SECOND PHASE SCREEN: COMPATIBILITY AND CULTURAL ASSESSMENT

GOAL ROI GROWTH

STRATEGY COST QUALITY INNOVATION

DECISION MAKING PLANFUL CRISIS

COMMAND CONSENSUS

ENVIRONMENTAL/OSHARECORD

GOOD POOR

ORGANIZATION STABLE HIRE/FIRE

TEAM BASED

INDIVIDUAL EXCELLENCE

PRIMARY MISSIONSHAREHOLDER

VALUECUSTOMER

SATISFACTION

INVESTIGATE

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WHAT TO DO

• Complete Negotiations

• Discuss Exit Issues

• Agree on Structure of Alliance * How will the alliance work - define the tasks and business processes

• Sign Alliance Agreement

• Align Operating Procedures/ Metrics (Balanced Scorecard)

• Address Customer/Competitor/ Supplier and Regulatory Concerns

WHO DOES IT

Senior Managers/APEX Team

Senior Managers

APEX Team

Senior Managers/APEX Team

APEX Team

Senior Managers/APEX Team

OUTPUT

• Alliance Agreement

• Alliance Structure

• Metrics for Tracking Performance

• Clarity of Contributions and Benefits

IMPLEMENT

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WHAT TO DO

• Create Shared Business Plan * Link Budgets / Process to Strategic Alliance

• Managing “The Path Forward” *Meeting Schedules * Processes • Internal Communication * Scope of Alliance * Expectations * How It Will Work

• External Communication * Customers * Suppliers * Other Potential Partners • Staffing * People * Rotation Schedule

• Building Trust

WHO DOES IT

Senior Managers/APEX Team

APEX Team

Senior Managers/APEX Team

Senior Managers

APEX Team

Senior Managers/APEX Team

OUTPUT

• Integrated Alliance * Direction * Commitment * Metrics defined * Budgets * Key issues defined * Roles and responsibilities * RESULTS ACHIEVED

INTEGRATE

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SAMPLE ELEMENTS OF BUILDING TRUST

LEADERSHIP SHARED UNIL AT ERAL

COMMUNICATION FREQUE NT OCCASIONAL

HIGH LOW TRUST TRUST

FACE-TO-FACE ARMS LE NGTH

PROBLEM SOLVING ROOT CAUSE SUBJECTIVE , QUALIT AT IVE

TOP MANAGE ME NTVISIBLE SUPPORT

HIGH L OW

RE SOURCE COMMIT ME NT

ADE QUAT E INADE QUAT E

DAT A B ASE D

INTEGRATE