Strategic alliances: the silver bullet to recover and thrive in the new normal
Part 1: Four characteristics that make strategic alliances irresistible
The past 18 months have been unprecedented in many ways. The resilience of companies has been tested, while the pace of technological disruption and digitisation have accelerated. For example, Deloitte’s survey of insurance companies found that 79% of respondents believe the pandemic uncovered shortcomings in their company’s digital capabilities and transformation plans.
At the same time and in particular in financial services, digital customer engagement has been turbocharged with increasing digital adoption across products and demographic segments. Not surprisingly, many companies are looking to accelerate digital transformation to keep pace with changing customer preferences and to manage increased cost pressures through technology-enabled solutions. But how can they do this?
In interviews we conducted with Swiss-based financial services M&A and Corporate Strategy executives, a strong consensus emerged that strategic alliances, like joint ventures, will play an important role in accessing those capabilities. This view is supported by our recently published CFO survey. Almost half (46%) of the CFOs surveyed in Switzerland are thinking of pursuing strategic alliances with corporate peers and ecosystem start-ups.
In our two part series on ‘Strategic alliances: the silver bullet to recover and thrive in the new normal?’ our goal is to explore in part one how today’s business context influences the attractiveness of strategic alliances and in part two introduce our five success factors to harvest value from strategic alliances.
Part 1 - Four characteristics that make strategic alliances irresistible
Almost half of Swiss CFOs are thinking to pursue strategic alliances. Financial services executives we interviewed are similarly enthusiastic. But why and should you be as well?
Among the M&A and Corporate Strategy executives of Swiss-based financial services companies we talked to for this article, a strong consensus emerged that strategic alliances will gain in importance as an element of corporate strategy.
The executives highlighted that in a context of rapid digitisation, including the increasing importance of marketplaces, platforms and ecosystems in the distribution of products, strategic alliances can offer a fast and sometimes less risky access to assets and intellectual property compared to ‘build’ or ‘buy’ strategies.
In this first part of our series on ‘Strategic alliances: the silver bullet to recover and thrive in the new normal?’ we explore how in today's business context, strategic alliances (‘to partner’) have grown in attractiveness at the expense of organic growth (‘to build') and traditional M&A (‘to buy’). We find four characteristics that stand-out:
- Strategic alliances often provide fast and sometimes less risky access to assets and intellectual property, particularly in areas that fall outside an organisation's core competencies;
- In sub-sectors with high valuations, strategic alliances can be a way for acquirers to access capabilities and growth platforms without having to overpay for targets by allowing sellers to participate in future value creation;
- Strategic alliances allow to go beyond a simple supplier relationship with existing providers, to develop services or solutions in partnership. This is particularly important in areas where customer experience is key for success; and
- Strategic alliances lend themselves naturally to achieving the scale needed to create a viable marketplace or ecosystem.
These four characteristics will help Corporate Strategy and M&A departments better understand for which strategic ambitions strategic alliances offer an advantage over organic growth or traditional M&A.
The four characteristics
The Strategic Alliance Life Cycle: key phases and activities
