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Alliances should be viewed as business entities that create value in tangible and intangible ways, and while revenue certainly matters, it is an outcome and cannot alone give you the depth of view needed to measure the full value of an alliance. It is like trying to gauge the performance of a car by only checking the speed. The speedometer can tell you how fast you’re going, but not where you’re going or whether you’re running out of fuel. Companies that manage successful alliances tend to measure performance in multiple dimensions. “There are two primary components: direct impact, such as mutual, meaningful, and measurable bottom-line revenue increase, and indirect benefit via association, branding, and mindshare. There is also a somewhat intangible third component where we choose to invest in architectural engineering, co-marketing, or joint sales—if our experience tells us it will create uplift elsewhere in our business ecosystem,” said Steve Mattos, senior alliance manager at Intel Corporation.

So Which Metrics Matter? Research done by Phoenix Consulting Group in 2009, in collaboration with IBM, ASAP, and Customer Impact, gives some insight into which metrics matter. This study examined best practices over 104 high-tech alliances and separated performing and non-performing alliances for comparison. There were distinct differences in what the high-performing alliances measured versus those that fell short of their objectives. Revenue was an important metric and almost universally tracked. In the study, 87 percent of all alliances measured revenue, followed by other aspects of revenue production: new customer wins, major account wins, and revenue growth rate—all of which are relevant and revealing metrics. What separated performers—alliances that achieved between 110 and 130-plus percent of their objectives— from non-performers (less than 90 percent of objectives) was measurement in the strategic quadrant. Performers measured the strategic intent of the alliance—most pointedly market share (26 percent more frequently than non-performers) and rate of technology adoption (18 percent more frequently).

Measuring Strategic Intent Most alliances are formed with the intent to create incremental revenue. This can take many forms. New revenue streams are created by targeting new markets, developing new products, creating joint solutions that Quarter 3, 2011

attract a new set of customers, or introducing a technical innovation that delivers competitive advantage in the traditional customer base. The strategic questions behind revenue production are “where?” and “how?” According to Philip Sack, CA-AM and tech industry veteran of more than two decades, “measuring the strategic intent of an alliance requires that you agree on the value you wish to create, and then identify the drivers of production required to create this value.”

…it makes sense that high performers are measuring technology adoption, market share, and market share growth. Performers Measure Technology Adoption Performers were also found to be more inventive than non-performers: 73 percent of the performers introduced new joint offers as a response to economic adversity and consequently measured the rate of technology adoption. Customer buying changes tend to occur during periods of economic stress, and successful alliances adjust and adapt to those conditions by offering innovations that address the new state of customer requirements. One of the major trends in recent years is the innovations around the convergence of cloud, mobile, local, social, and payment technologies. It has been called the “Consumerization of IT,” and it is affecting all industries. Consider that: – 50 percent of Americans who own a smart phone have purchased something with it, according to a 2011 Leo Burnett & Arc Worldwide report. – 14 percent of all Americans have accessed a health application through a smart phone, according to IDC. – India is piloting an initiative that will transform the telephone network into a financial institution through mobile payments. In this fast-paced environment of innovation, it makes sense that high performers are measuring technology adoption, market share, and market share growth. They are picking partners to enable them to keep pace and grow faster to guard against being marginalized in these developing markets. 27

Profile for ASAP

Strategic Alliance Magazine  

Non ASAP Member Limited Edition, Q3, 2011

Strategic Alliance Magazine  

Non ASAP Member Limited Edition, Q3, 2011

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