How do you build an alliance balanced scorecard?

Alliance Best Practice (ABP) has been looking actively at the area of alliance metrics recently.  From our research with Chief Alliance Officers (CAOs) a number of things seem clear:

1. Most organisations are actively reassessing their partnership choices because of reduced or static resources brought about by the recession.
2. When they are assessing their relationships all the CAOs we have spoken to suggest that they use both QUANTITATIVE and QUALITATIVE measures.  Quantitative would include such things as: revenue, leads, training, cost reductions, etc.  Qualitative measures would include such things as: trust, business alignment, senior executive support, speed of decision making, effectiveness of governance models.
3. When questioned nine out of ten CAOs said that in making the decision whether to invest or divest resources from relationships they based their decision on qualitative measures.

It’s worth reading point three again just to be sure you have it right!  Yes, that’s correct.  At a time when financial ‘bottom line’ pressures are harsher than ever, key investment decisions are being heavily influenced by how well the partner organisation ‘gets on’ with the host company.

The problem that leaves most alliance professionals is ‘How do you build an alliance balanced scorecard that reflects both qualitative and quantitative measures?’

ABP has observed a serendipitous similarity in the measures and the categories that organisations use to construct such balanced scorecards:

1. Commercial – No matter what other factors are measured the scorecard has to have real life relavence reflected in the ‘net new’ or ‘incremental’ revenue that the relationship generates.  Organisations are increasingly looking to further break down this general category into things like: leads, speed to market, deals secured, partner personnel trained, etc.
2. Technical – There is an increased awareness and understanding that the current business issues are too complicated and  pervasive to be solved by one organisation alone.  Consequently, the inter operability of differing technical platforms, software, hardware and middleware has become increasingly important as a factor in consumers’ decisions.  Partners now need to work in a seamless ‘ecosystem’ of interoperability which delivers value to the consumer when and where he wants it (usually as a pay as you go service from the internet).  Elements of this interoperability include: valuation of assets on both / all sides, product / service fit with partners offerings, identified mutual technical standards in the relationship, etc.
3. Governance – Consumers understand that high tech partners have to collaborate to deliver value but they also understand that the way the partners collaborate is fast becoming an element of competitive advantage.  This was highlighted when the CIO of Air France said to one of ABP’s clients “We notice when you guys ‘drop the ball‘”.  In other words when the fabric of the relationship breaks down in some way the result is necessarily reduced service levels or similar bad outcomes for the customer.  Companies in our opinion are now increasingly turning their attention to the governance aspects of their relationshhips to ensure that simple, robust workable governance models drive the efficiency of the relationship.  In this case factors like: identified mutual needs in the relationship, process for team problem solving, shared control, and partner accountability.
4. Marketing – The whole area of how collaborating companies take their proffered solutions to market quickly, consistently and effectively has always been a major headache for alliance professionals.  Factors such as: partner market position, host market position, market fit of proposed solution/s, go to market (GTM) commercial model, and joint targeting of key enterprise customers need to be considered.
5. Strategic – If the collaboration is to be sustainable then a wide range of strategic considerations need to be addressed such as: new business value propositions generated,  shared objectives, relationship scope, risk and risk sharing, suitable exit strategies, strategic business and technical alignment, other relationships with same / other partner/s and common vision.
6. Cultural – There is no doubt that organisations have ‘corporate cultures’ and that some cultures are easier to deal with than others.  The problem very often is in translating the trite phrase corporate culture into something meaningful that can be measured.  Organisations that have paid attention to this largely ignored area have seen huge value in the speed and efficiency increases in their alliance relationships.  These companies have paid specific attention to: business to business trust, collaborative corporate mindset, collaboration skills, the appointment and suitable training of dedicated alliance / relationship managers, developing an internal, alliance ‘centre of excellence’, developing senior executive support and the partner’s decision making process.
7. Operational – Finally and inevitably the question of efficient execution needs to addressed.  Even though everything else is in place and working well if simple processes are not in place ‘where the rubber meets the road’ then the relationship will fail.  Alliance executives recognise this and thus measure such things as: the existence r otherwise of a defined alliance process, the speed of progress so far to that process, the existence and active management of a joint business plan, internal and external communication programmes, the existence of an MOUP or relationship charter, change management, business to business operational alignment in the field, and internal alignment within ones own organisation.

Of course the entire issue of constructing meaningful alliance performance ‘dashboards’ for senior executive review is further compounded by the fact that not only do you need to look at CSFs but also you need to consider causes and effects.  For example, do you consider revenue growth to be a cause or effect?  By that we mean does it lead to success or is it the result of other factors which have enabled it?  Or similarly the question of business to business trust.  Is this a cause or effect?

Finally the question of leading and lagging indictors is an important one to take into consideration when considering the application of your alliance balanced scorecard.

Alliance Best Practice (www.alliancebestpractice.com) helps organisations execute proven alliance best practices to improve their partnering programmes.  If you would like more information on alliance balanced scorecards or a personal consultation, feell free to contact us on info@alliancebestpractice.com

Mike Nevin – Managing Director, Alliance Best Practice – +44 16 75 44 24 90