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How firms big and small can benefit from strategic alliances

December 5, 2016 By Andrew Smith

An alliance between two companies isn’t automatically a “win-win,” but managers can take steps to ensure the best outcomes from strategic partnerships.

are-we-right-for-each-otherIn an article published in the fall issue of the MIT Sloan Management Review, the leading outlet for practice-relevant advances in management and technology, a Georgia Institute of Technology professor offers a roadmap for companies looking to team up without taking a wrong turn.

“Too often firms, especially small ones, rush into an alliance haphazardly without asking key questions about which partners make the most sense, how an alliance should be structured, and what is the exit strategy for when an alliance is no longer productive,” said Frank Rothaermel, the Russell and Nancy McDonough Chair of Business and professor of Strategy and Innovation in the Scheller College of Business at Georgia Tech. The article is co-authored with Ha Hoang, a professor of management at ESSEC Business School in France.

Rothaermel has spent years examining thousands of research and development alliances forged between firms in the pharmaceutical, biotechnology and other industries to understand what makes those partnerships work. Time after time, it came down to several key steps.

First and foremost: Picking the right partner. Before rushing to join forces, companies should take a step back and ask, ‘Are we right for each other?’

“Managers shouldn’t assume that the partnership will be beneficial based on a loose understanding of the other firm’s goals and experience,” Rothaermel said.

Potential alliance partners should be evaluated based on whether they contribute strategic value and complement the firm’s existing portfolio of partnerships, Rothaermel wrote in the article.

The authors highlighted partnerships Tesla Motors Inc. forged with automakers Daimler AG and Toyota Motor Corp. to help bring its electric cars to market. While Daimler helped Tesla with a cash investment and engineering expertise, Toyota provided the electric car maker with access to an automobile manufacturing plant. More recently, Tesla added a partnership with Panasonic to their portfolio to build the Gigafactory to produce lithium-ion batteries.

When negotiating the terms of a new partnership, larger companies would be wise not to rush to leverage their size to achieve an unfair deal for the smaller company.

“Negotiators who focus on capturing the lion’s share of the potential value at the expense of their partner run the risk of undermining the alliance and seeing little in actual gains,” the professors wrote.

Other steps are also essential, such as ensuring all partners stay on the same page operationally in a bid to head off potential problems. Another crucial part of the process: knowing when and how to call it quits.

“One executive we interviewed admitted that the lack of an exit plan left his company at a loss for what to do when a larger partner terminated their four-year partnership,” the professors wrote.

And finally, diversify. Just like an investment portfolio, rather than relying on one key partnership, build alliances with multiple firms to lessen the impact if one partner jumps ship.

For a more in-depth look at these strategies, see the full article at MIT Sloan Management Review’s website, http://sloanreview.mit.edu/x/58119.

Filed Under: Contracting Tips Tagged With: diversification, Georgia Tech, innovation, partnering, partnership, small business, strategic alliance, strategic partnerships

Government contracting: When competitors become teammates

October 15, 2015 By Andrew Smith

In the big business of government contracting, it is common for competitors to also be teammates for a period of time. Team arrangements can encourage innovative solutions, promote competition and allow contractors access to corners of the market that might otherwise be closed.

teamingTeam arrangements between contractors also can result in significant profits to each contributing company, as well as increased capability and know-how that can be leveraged by each contractor for future projects. The potential benefits, however, do not come without risk. Absent a carefully thought-out agreement, parties may find themselves in a situation where competitors turn on each other.

Keep reading this article to learn about common pitfalls: http://www.expressnews.com/business/local/article/Guest-Voices-Government-contracting-When-6541435.php

Filed Under: Contracting Tips Tagged With: competition, partnering, teaming

Make your teaming strategy central to your capture process

June 10, 2015 By ei2admin

The questions thrown about the conference rooms and offices of government contractors around the Beltway and across the country are the same: What’s our proposal strategy? Our pricing strategy? What’s our staffing plan?

teamworkThese are the critical questions that small and large contractors should be asking themselves before the solicitation is even issued. Thinking about these questions before the solicitation is issued is the hallmark of effective capture and increases the company’s probability of winning the work.

But there’s one question that receives far too little attention given its complexity and centrality to business strategy for those in the government contracting market:

What’s our teaming strategy?

Keep reading this article at: http://washingtontechnology.com/articles/2015/05/27/insights-skypek-new-teaming-partners.aspx

Filed Under: Contracting Tips Tagged With: partnering, strategy, teaming

5 steps for winning more federal business in 2015

March 12, 2015 By ei2admin

Congress will increase discretionary spending beyond Budget Control Act caps in fiscal year 2016 but below the seven percent requested by President Barack Obama, Bloomberg Government (BGOV) analysts said at a symposium last month.

Also at the event, a panel of corporate executive officers said they see the federal procurement market stabilizing in FY 2016 after sharp declines in FY 2014 and 2015.

The remarks were made at a symposium on the outlook for federal contractors in FY 2016. The Fairfax County, Va., Chamber of Commerce sponsored the event.

Head of BGOV Don Baptiste said contractors are most concerned about the federal budget. “No one believes we will exceed the budget caps by seven percent in the 2016 budget, but we are optimistic on flat budgeting,” he said.

BGOV Senior Budget Analyst Cameron Leuthy agreed that Congress will not approve a seven percent rise in discretionary spending in FY 2016 as requested by President Obama.

“Republicans are unfriendly to tax increases” and “Democrats don’t want to cut entitlements,” he said. “That makes it tough to grow discretionary spending.”

Leuthy said the Ryan-Murray budget deal marginally increased spending. “We think that is most likely this year and next,” he said.

Keep reading this article at: http://about.bgov.com/5-steps-winning-federal-business-2015/

Filed Under: Contracting Tips Tagged With: budget, budget cuts, contracting opportunities, discretionary spending, LPTA, market research, partnering, spending

Want to grow your government contracting business? Be ready for what you wish for!

July 11, 2014 By ei2admin

Federal small business programs are valuable. But they can also inadvertently stunt or even slash the growth of companies that the programs are intended to help.

First, small business owners with big ambitions can capture big wins that pump up their revenue beyond their small business size standards. But without the support of federal small business programs, more than a few can’t win new work to sustain that growth. When the company shrinks again, that slide back into small business status means lost jobs.

Then there’s those that deliberately cap their business growth to hang on to the advantages of small business programs. Their plan is either to hold steady, or get acquired. That holding pattern represents lost opportunity.

But stagnation and backsliding aren’t inevitable. Practical tactics can help in the short term.

Keep reading this article at: http://www.bizjournals.com/washington/blog/fedbiz_daily/2014/06/want-to-grow-your-government-contracting-business.html?page=all

Filed Under: Contracting Tips Tagged With: alliances, competition, competitive advantage, contracting vehicle, opportunities, partnering, proposal preparation, resources, revenue, small business

Two ways to win more federal contracts

November 11, 2010 By ei2admin

Want a piece of the $500 billion the U.S. government spends on goods and services each year? Your chances of winning a federal contract are better if you team up with other small businesses, says a new study.

Compared with so-called “active contractors” overall – “active” being defined as a small business that’s received a government contract within the past 3 years – small-business owners who paired up with other small firms or acted as subcontractors won 50 percent more contracts, according to the American Express OPEN Victory in Procurement report. The survey included 1,500 small-business owners chosen randomly from the Federal Procurement Data System, which logs all federal contracts.

Two-thirds of small-business contractors that have partnered with other small firms to jointly bid on contracts have won more than $1 million in federal contracts to date. A further 38 percent of the same group has won in excess of $10 million.

Small businesses that hitch themselves to a larger contractor also have a higher hit rate than average, says the report. Some three in five small firms (61 percent) that act as subcontractors report winning federal contracts worth more than $1 million to date, compared to 46 percent of “active contractor” small firms. Nearly a third (31 percent) of small companies who have subcontracted have won more than $10 million, compared to 21 percent of all active contractor small firms. 

Firms tend to turn to subcontracting first, usually when revenues from the contract reach $250,000. Partnering typically occurs around the $1 million mark.

The increased revenues garnered from partnering and subcontracting don’t come cheap. Active contractors invest more than $86,000 in cash and staff time pursuing contracts. Firms that go for subcontracting pour some $122,685 annually into their efforts, while partnering with other small firms in pursuit of federal opportunities costs $149,317 on average per year.

— By Courtney Rubin – INC magazine – Nov. 9, 2010

Filed Under: Contracting Tips Tagged With: federal contracting, government contracting, partnering, small business, subcontracting, teaming

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