There is a large variation in the numbers reported by studies of alliance success and failure. Failure rates of alliances can be anywhere from 20% to 80%, with the best and worst case scenarios being respectively 20% and 80%. The astronomically high alliance failure rate of 80% is hard to believe.
Obviously, businesses won’t put money into something with a 4/5 chance of failing. Ipsen’s chairman and CEO, Marc de Garidel, stressed the significance of alliances in his keynote address to the ASAP Pharma Council in Basel in 2011.
Currently, Ipsen’s affiliations account for almost 40% of the company’s total income. If the actual failure rate was 80%, Ipsen would have no chance of succeeding.
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The 80/20 guideline for alliance failure and success
The results suggest that businesses who use a formalised approach for managing alliances have a higher success rate (up to 80%) than those that don’t. Ad hoc coalitions have a 20% success rate, according to the companies that use them.
That’s the 80/20 rule at work: whereas 80% of hastily thrown together strategic alliances and corporate partnerships fail, 80% of those formed through a more methodical process succeed.
Causes of failed unions
Previous studies have shown that there are many causes of alliance failure.
- Cultures differ in many ways.
- Goals that are incompatible
- The absence of leadership dedication
- Poor system of leadership and administration
- The Alliance’s Weak Leadership
- the market’s potential was overstated
The majority of problems may be avoided with sufficient planning, alliance management, and communication. The success rate of ASAP members is higher than that of non-members, as suggested by the report. Before pursuing coalitions, these businesses have invested in developing the necessary skills and competencies. As a result, they employ a methodical approach to alliance development and maintenance, frequently based on an alliance life cycle.
The survey also indicates that enterprises with an established, experienced alliance management capabilities have a lower failure rate than those that are new to partnerships and, hence, less experienced.
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Causes of effective collaboration
Gaining the degree of expertise in alliance development that more seasoned organisations have will take time and the application of learned lessons. Developing an understanding of how to form and maintain productive partnerships can be sped up by using any of the following strategies:
- Consult with a partnership trainer,
- Teach those who form coalitions,
- Improve your alliances by conducting a health check.
- Get a copy of “The 4-Step Guide to Successful Partner Selection” and use the methods and resources it outlines to find the right business associates.
