Idea in Brief
A recent study by McKinsey & Company found that only half of all joint ventures yield returns above the cost of capital. That’s a problem, given that partnerships and alliances are a central part of almost any company’s business model.
An alliance usually gets defined from the start by service level agreements about what each side will contribute, not by what each side hopes to gain. The agreements focus on operational metrics rather than on strategic objectives.
The balanced scorecard management system can help companies switch their alliance management focus from contributions and operations to strategy and commitment.
Solvay Pharmaceuticals and Quintiles used the balanced scorecard tool kit to manage their alliance and together reduced the total cycle time in clinical studies by 40%.
Corporate alliances are a 50/50 bet—at least according to a recent study by McKinsey & Company, which found that only half of all joint ventures yield returns to each partner above the cost of capital. That’s worrying, given that partnerships and alliances are central to many companies’ business models. Originally used to outsource noncore parts of supply chains, alliances today are expected to generate a competitive advantage. So it is necessary to dramatically improve their odds of success.