Strategic Alliances: Utilizing Creativity and Collaboration During of COVID-19

Only 27% of CEOs were ‘very confident’ in the possibility of revenue growth for 2020, according to PwC's 23rd Annual Global Survey. Pre-COVID, CEOs were worried about issues of growth, technology regulations, upskilling, and climate change. In response, nearly half of all executives planned to form a new strategic alliance or joint venture to stimulate corporate growth and/or profitability. However, no one predicted the rise of COVID, bringing with it drastic human and economic impacts. In America alone, nearly 40 million people have filed for unemployment since mid-March. Whether it be issues of climate change, technological regulation, or the effects of COVID, one thing remains true: the need for strategic alliances in the face of uncertainty. 

What Is a Strategic Alliance? 

In early 2018, Amazon, Berkshire Hathaway, and JPMorgan Chase, who employ more than one million U.S. workers, teamed up to cut health-care costs and improve services for their U.S. employees. The deal formed between these three set a precedent. While small businesses may not have the capabilities or resources that these three major organizations do, they are able to leverage the same strategies that these corporations employ. As the Amazon-Berkshire Hathaway-JPMorgan Chase partnership shows us, in the face of rising uncertainty, collaboration is essential to both survival and success. 

Strategic alliances are agreements between independent organizations to share resources, knowledge, or other assets. Key to their success is autonomy, whereby partners are able to coordinate actions to pursue mutually beneficial goals while remaining separate entities. Alliances allow companies to gain experience in a market without the requirement of a substantial investment. Further, unlike mergers or acquisitions, control is not lost by either of the operating entities, making an alliance easier and faster to execute–essential in the time of COVID.  

Strategic Alliances: What’s the Point 

Central to a successful strategic alliance is a clear understanding of the overarching goal of the collaboration. 

A Means of Survival, Plain and Simple

In a time where small businesses across the world are struggling to keep their doors open, strategic alliances have proven to be an essential survival technique. 

Take Utah-based outdoor gear and apparel company, Cotopaxi, for example. Both of the company’s brick and mortar locations have been forced to shut down in light of stay-at-home orders, and their online retail and wholesale demand has also taken a heavy hit. With resources tied up in inventory and few options to liquidate it, Cotopaxi CEO Davis Smith, who has since been coined “one of the best adapters to COVID-19,” reached out to another Utah company, Uncharted Supply Co. Uncharted sells preparedness products, and in the face of increasing economic and social uncertainty, demand for their products has increased exponentially. With their extra staff and manufacturing capacity , Cotopaxi has begun to dedicate its resources to help Uncharted to fulfill their orders. The partnership has put both of these Utah-based, sustainably focused retailers in a better position to get through the challenge of COVID together. 

Through their partnership, Uncharted has quickly gained access to critical infrastructure and means of production, and Cotopaxi has been able to create new streams of revenue, as well as stave off staff reductions. 

Gain Access to New Customers/Markets 

Strategic alliances are called ‘strategic’ for a reason. The best of these partnerships provide avenues for quick and easy access to new customers and/or markets. 

Many struggling businesses have begun to creatively partner with less-affected ones. Across the country, restaurants have begun to sell prepared meals in local grocery stores to make up for their lack of in-house business. This provides restaurants with access to a new market, and the potential to tap many new customers. If found to be profitable, in a post-COVID world, grocery stores could continue to function as an essential distribution channel for local eateries. Who wouldn’t enjoy the convenience of picking up their favorite spaghetti carbonara, or general tso’s chicken while shopping for their everyday basics like milk and bread?

In hopes of surviving, struggling businesses have also partnered with one another. Portland-based home decor and design business, City Home, recently partnered with a local florist to offer a surprise bouquet to a select number of customers. City Home customers are given an incentive to purchase, and the local florist is provided with a new marketing channel to attract consumers who already have an interest in home decor and are likely to purchase a bouquet of flowers to decorate a room.

What to Remember When Considering and Entering a Strategic Alliance 

In addition to understanding the fundamental goal of a strategic alliance, consultants at Rem and Company have compiled a list of considerations for  small business owners as they  evaluate  and enter into strategic alliances: 

• Have a clear understanding of your competitive advantage. These advantages could relate to distribution channels, capital equipment, staff, customer base, location, brand, etc. Being able to articulate your unique strengths will allow you to attract an equally strong partner. 

• Do your due diligence! Understand your potential partner’s mission, culture, capabilities, financial position, and brand equity to determine complementary fits. 

• Incorporate written, but simple agreements that specify joint goals and objectives, roles and responsibilities, measurements of success, and a plan for on-going communication. Periodically re-evaluate these arrangements, and over-communicate to ensure mutual success. 

• Things take time to gel and produce results, but it’s also important to establish a clear exit strategy for ending the alliance if it’s not working out, hasn’t met its objectives, or has simply run its course.

Some small business owners perceive strategic alliances as a threat to their sense of individualism. However, if COVID has shown us anything, it’s that few companies can afford to assume that things will return to “normal.” What worked in the past may not work in the future, and adapting accordingly is essential. Forming alliances may be the necessary action small businesses must take to gain access to new markets/customers and ensure their survival. 

As a social impact initiative, Rem and Company also offers free consulting services and resources to small businesses and nonprofits impacted by COVID-19. Our pro-bono consulting teams provide small businesses with the opportunity to identify and prioritize issues facing their business, propose innovative strategies, and facilitate execution. If you are a small business or nonprofit in need of assistance, learn more about how we can help.