Kellogg World Alumni Magazine, Summer 2002Kellogg School of Management
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  Prof. Edward Zajac
Theory & Practice
Creating an academic framework for strategic alliances
By Prof. Edward J. Zajac

"Theory & Practice" is a new Kellogg World feature that explores various business strategies from the perspectives of both the classroom and the shop floor.

When I came to Kellogg in 1986, I was asked to develop a new MBA elective course. Since my dissertation was on strategic alliances in health care, I proposed a course on alliances, not realizing that no other major business school had such a course. This meant that I had to build the course from the ground up, developing my own analytical frameworks for understanding how to create and manage alliances. I’ve taught the course each year since 1986, and the most recent iteration was oversubscribed, highlighting the growing importance of the subject for management leaders.

In 1995, I offered our first semi-annual Allen Center program on Creating and Managing Strategic Alliances (CMSA), and it too was oversubscribed, this time with senior executives from a range of industries. It’s been gratifying to see that interest in strategic alliances has remained strong, which accentuates the difference between a useful management practice vs. a management fad. Many CMSA participants attend based on positive comments about the program that they have heard from prior participants in their organizations. It means we’re doing something right at Kellogg. Some participants have insightfully brought their current or potential alliance partners to the program. This enables them to acquire a shared vocabulary that helps their communication with each other, along with the intellectual scaffolding that helps them understand the likely promise and pitfalls of alliances.

I have accumulated a wealth of examples and cases to accompany the frameworks we use in our alliance education. For example, most students have not made the distinction that I emphasize in my discussion of pooling vs. trading alliances. While pooling alliances are driven by logics of similarity and integration, trading alliances are driven by logics of complementarity and aggregation. I try to show how these two types of alliances are typically quite different from each other, in terms of their strategic goals (e.g. common vs. compatible goals), their optimal structure (e.g. many vs. few partners), and their managerial challenges (e.g. low coordination vs. high coordination requirements).

It’s this combination that I find most useful for both MBA and executive education on strategic alliances. Practicing managers with lots of alliance examples often don’t have the luxury of thinking about frameworks to connect these examples in a way that maximizes learning, and students with less exposure to real alliances often don’t see the full value of frameworks without examples that bring those frameworks to life. In this way, the connection between my MBA and my executive education teaching about strategic alliances is truly synergistic.

There is also the important synergy between research and teaching in the strategic alliance domain. Alliance research has proliferated over the last 15 years, and we have had important conferences on strategic alliances at
Kellogg, attracting top scholars. I am currently the director of a new Center for Strategic Alliance Research, whose purpose is to ensure that Kellogg remains at the forefront of research in this area.

What will alliances be like in the future? While I’m reluctant to speculate too much, one aspect of the alliance phenomenon has now begun to grow in popularity: alliances within companies. Executives have often told me that that it’s easier to work with outside companies than with their own divisions, and in response, I have proposed creating formal alliances within companies, particularly within large firms whose divisions are only loosely connected, but who need to work jointly. Another version of alliances within companies is as a solution to the problem of an entrepreneurial executive group that feels stifled in a larger, bureaucratic organization. In such situations, rather than forcing executives to leave the firm (and create a potentially dangerous competitor), companies can create internal joint ventures with such groups in which both groups have a stake in the venture’s success.

The use and governance of alliances is limited only by the creativity of their designers, and we haven’t even scratched the surface of the ways in which alliances can help organizations realize their strategic goals.

©2002 Kellogg School of Management, Northwestern University