Strategic partnering.

Strategic partnerships are on the increase as companies band together to capitalize on global opportunities or solidify customer-supplier ties. But do these relationships yield their potential? CEOs debate the merits and pitfalls of the strategic alliance.

Competition is driving many competitors together. This is not as paradoxical as it might seem. Alliances have become a necessity as the rapidity of change and so many new technologies have altered the competitive landscape both within industries and across national borders. Simply put, fewer companies have the resources or nimbleness to remain completely self-sufficient. Many also have come to terms with the fact that concentrating exclusively on domestic markets is no longer an option if one is to grow. As a result, many corporations such as Ford, GE, Toyota, Motorola, Philips N.V., Allied Signal, and Time Warner have formed alliances with global partners to build distribution, reduce costs, or tap emerging markets.

Traditional partnerships in the form of joint ventures, shared marketing arrangements, licensing agreements, and technology exchange are not new. The strategic partnership is the pooling of "crown jewel" resources such as proprietary information or core competencies such as distribution capability to attain goals that are fundamental to each partner. In his recent book, "The Connected Corporation," management theorist Jordan Lewis claims the returns from such alliances exceed traditional intercompany links. Chrysler parts suppliers reportedly saved the carmaker $500 million last year alone due to shared information that led to design and production changes. Lewis argues that partnering is often the best way to get closest to the customer, which is every company's ultimate goal. For example, Avon Products and Reader's Digest have well-established direct distribution channels with consumers. The two currently are exploring synergies for marketing a number of different products - not all of which would originate with the partners themselves - through one another's distribution systems.

Long practiced in Japan, customer-supplier alliances increasingly are becoming the norm in the U.S. and Europe. But so are alliances among competitors. Though it seems illogical, partnerships between rivals can bring together complementary skills and a shared competitive advantage. Hence, Nissan and Ford cooperated to build a minivan. Coca-Cola and Schweppes cooperated for joint softdrink bottling in Europe. Philips cooperated with Sony in consumer electronics. Sometimes rivals are the only source for needed inputs.

Lewis and other observers worry that in the actual managing of these partnerships, American executives tend to be shortsighted and at times parochial in understanding the larger strategic value at issue. Many CEOs, he says, describe their relationships with customers or suppliers as alliances, but upon closer inspection, it is business as usual: Customers did not respect margins and dropped suppliers without notice for others offering lower bids. Supplier relationships were still adversarial, and information needed to improve both partners' long-term performance was not shared.

The other pitfall is knowing how much is, shareable in transnational relationships. Companies sometimes lose critical technology and market knowledge to an alliance partner who suddenly becomes a direct competitor. This was the case during the early 1980s between America's Bell & Howell and Japan's Canon. Schwinn had a joint manufacturing agreement with bicycle makers in China and Japan. Now these sources are the largest producers of bicycles in the world. Are U.S. executives giving away proprietary technology to non-U.S. partners to broaden their global presence? According to a survey of Fortune 500 companies by the American Society for Industrial Security, U.S. companies lose $50 billion annually - about one-half the nation's trade deficit - by forfeiting technology to foreign competitors.

In the following roundtable, held in partnership with Ernst & Young LLP, more than 90 percent of participants say they are engaged in a strategic partnership, and 83 percent are satisfied with the arrangement. Most say that even when successful, at best only 80 percent of the potential value is achieved. Most rank the need for speed - in product development, distribution, and competitive positioning - as a major driver to partner. Participants overwhelmingly cite lack of shared vision as a principal reason relationships fail to attain full potential value.

TIES THAT BIND

Terrence R. Ozan (Ernst & Young LLP): It's important first to define what we mean by "strategic partnership": It is an umbrella term that applies to anything from a loose alliance with a supplier or customer to a formal joint venture. It could refer to outsourcing partners or to a more formal licensing agreement.

There's no question that strategic partnerships are growing in number at an annual rate of 20 percent to 30 percent. One study indicated that in a given two-year period, 25 percent of all companies tried to form some type of strategic partnership. And American companies seem to be moving more aggressively in this area. Why do we want to get into strategic partnerships? It is often a need for speed: in product development, distribution, and opening new markets. International market penetration and cost reduction are often other reasons.

While some of these alliances are successful, many are not, and we can learn from those mistakes. For example, a large U.S. company joint ventured with a Far Eastern manufacturer. The U.S. company's primary objective was to reduce its costs with a low-wage work force. The Far Eastern company aimed to grow by exporting to the U.S. The U.S. company then sent its people over lock, stock, and barrel to the Far East and provided all the training on technology and process and product design. Eventually, the venture failed. Why? While the U.S. company provided the production know-how, it ceded production management to the Far Eastern company, which wasn't able to handle the sophisticated production environment. And the U.S. company failed to coordinate its sales and marketing departments with the venture, so the product wasn't pushed. The result was the double whammy of a lower-quality, higher-cost product, with little sales or marketing support.

Another lesson can be defined as technology or competitive "bleed-through." One example of this is Schwinn, a U.S. bicycle manufacturer, which entered into manufacturing agreements with Chinese companies. Ultimately, that company lost the business to the Chinese by transferring all its technology without a quid pro quo.

The question becomes: How do you create strategic partnerships while preventing your competitors from chipping away at your core competency?

Arnold B. Pollard (CE): My question is, how do you handle a strategic partnership? I'm a director of a company that had an unsuccessful joint venture, and the common complaint was, "Things didn't go exactly as we planned." [Laughter.] But rather than making the same mistake twice, I'd like to know what went wrong the first time.

James R. Leva (General Public Utilities): Partnerships don't work without the right people; they only work if you prepare the people involved. You must recognize that two different cultures are coming together, and you must give both sides a relevant goal.

Marvin L. Mann (Lexmark International): You have to be sure you have the capability your partner needs, that your partner has the capability you need, and that there's a shared interest. And you must know in advance when the shared interests conflict. You need to know what the partner is after, particularly with one, say, in a foreign market. And if you get involved, and it looks like it's not working, you'd better be able to get out fast. Don't throw good money after bad.

Bruce L. Crockett (Comsat): Flexibility is key. In the places we have been successful, we've either had to change partners, buy our partners out, bring in new leadership, or go through the normal changes you'd expect in any other business venture. The fact that it has happened to be outside the U.S. isn't really germane.

What has been important is the extent to which local nationals ran our foreign subsidiaries. They were effective leaders. We brought the capital, the insight, the plan - but the local leaders made all the difference.

Jodie K. Glore (Rockwell Automation): It's very important to ask yourself, "Why are we doing this? What do we want this to become? And are these two sides in concert?" It's OK to have a partnership that lasts only three to six months. It's not necessarily a failure if it's over in a year.

SUCCESS GUIDELINES

Jeanette S. Wagner (Estee Lauder International): We have company guidelines that define the purpose of a partnership. They ask, "What are we trying to do? What do we want to control?" You want to be sure you control the things you're good at.

Second, you can delegate, but you can't abdicate. You need maximum motivation and minimum expectation to look realistically at the potential problems and rewards. Think of it as preparing for divorce when you're still in love: If you fall out of love, the divorce can proceed with a minimum of fuss.

William Shaw (Volt Information Sciences): You must look not only at the company you're partnering with, but at the individuals within the company. The partnership may work very well when Sam is there, but as soon as Sam is gone, the conditions change. You need to know in advance how long your partner will be in his position, and who will take his place if there is a change.

David L. Kolb (Mohawk Industries): Yes, you really need to do a risk and reward analysis on the front end and to evaluate what might go wrong before it actually does. And if it does go wrong, what's the impact?

Philip A. Laskawy (Ernst & Young LLP): Some companies - out of frustration or the inability to accomplish something - think the panacea is to form a partnership without thinking through all its ramifications. Is it the right partner? What are the negatives? And so forth.

Wagner: Not only that, but you must ask yourself what the partner is getting out of it. Because if it's not a two-way street, it's not a good partnership.

Peter L. Venetis (Atlantic Bank): But partnerships and alliances today often comprise more than two companies. We must expand our definition. Frequently, they're four- or five-dimensional, and that presents a different set of potential problems. Another thing is that companies often feel compelled to rush into something because their competitors are doing it. This creates marriages of convenience. You have to learn to say no.

GO TEAM

Wolfgang R. Schmitt (Rubbermaid): You need to look at strategic partnerships as you would any other business transaction. It's all about creating value. Sometimes we get so wrapped up in the newness and sexiness of it that we lose sight of the fundamentals, and that is: Whoever offers the best total value, wins. We can define value as simply a bundle of attributes: quality, price, service, timeliness, and innovation. Knowing how to put that bundle together depends on your customer.

Our approach to partnerships has evolved over time. Now partnership negotiations might start out with the top officers, but early on we bring in a multi-functional team - those people who have to manage the alliance and live with it.

We also ask our potential partners to bring in the same type of team, so these two teams can come together to build this hybrid company. We ask them how they plan to leverage and harness technology to simplify the company, to communicate with the parent companies, and to drive value. Then we ask how tension will be resolved. How do you stop tension - which is good - from becoming stress - which is bad? In short, we ask these two teams at least seven depths of "whys": "Why is that so? And why is that the right thing to do?" And so forth. Hopefully, the parents will hand off responsibility to the new team, give it a lot of authority, and hold it accountable for what it said it would deliver.

Wagner: And reward it when it does.

Schmitt: And reward it. Yes, there are consequences, both good and bad.

Joseph A. Stewart (Queen of the Valley Hospital): What happens when the partnership fails? In health care, we often are pushed into structural alliances or partnerships because of cost imperatives. The marketplace demands that we cut costs, which brings providers together. Unfortunately, it may very well be the wrong alliance, because uniting providers does not necessarily cut costs; sometimes it just affects quality.

Schmitt: To be honest, the experiences we've had where the partnership didn't work made us feel like failures when we were dissolving them. But now we know more about those markets and more about what to do next time. Even those instances had value. So the dissolution doesn't have to be a bad experience, as long as it's small: If it doesn't work, give another one a try, and learn from the first one.

John J. Sickler (TFX Equities): How many partnerships have been rejected after the disciplined approach you describe?

Schmitt: Unfortunately, some of our people have never met a strategic alliance they didn't love.

Stewart: It's easy to become enamored with the potential.

Wagner: I think the reason people fall in love with joint ventures is that someone is basing their bonus opportunity on servicing the venture. From my point of view, the reward should come after the successful execution of the joint venture.

ETHICAL DILEMMA 

Lewis M. Ireland (APAN): You must be sure that the person and company you're dealing with have the same consummate ethical background and psychology you have. And chemistry is vital when you are dealing with someone one-on-one. Why get involved with a scam artist, investing weeks of research, if the guy really hasn't the depth in the area he says he has?

Crockett: We have almost a dozen ventures in Latin America, but none in Mexico. However, shortly after the peso devaluation, someone said, "Congratulations, Comsat's a genius. You weren't in Mexico." But it was not for lack of trying. One reason we have trouble doing ventures in some countries relates to ethics. There are just some countries in which you can't do business. Draw your own conclusions about the fact that we don't have a partner in Mexico.

R. Quintus Anderson (The Aarque Cos.): We've had a troubling experience. One of our companies - not a large company - has an innovative product. Two years ago, a large and prestigious German company proposed a joint venture, and we bit. Now I'm convinced their motivation was to keep us out of the market because we had something they didn't. Of course, they don't say so, but it's always something: "This isn't quite what the European market wants," or "We must redesign this part of it."

SMALLER AND SMARTER?

John K. Castle (Castle Harlan): I'm not particularly fond of joint ventures or strategic alliances. But the successful ones are those that emerge from corporate goals and are an offshoot of basic corporate strategy. You look at the world and say, "Here is a portion of the world we need to penetrate, and here are the reasons why." Then you ask, "How do I fill that hole?" and you pick your partner, and so forth.

Glore: Now we're seeing more customer-focused, smaller-length strategic imperatives. We are getting smarter on things we are doing, the time we're doing them in, and how we negotiate with a company in a brief period of time without contractual hold-ups.

James Byrnes (Thompkins County Trust): These types of partnerships are especially crucial for smaller companies, which may have a strategic priority but can't build the know-how that quickly. Small businesses have to come up with the services their customers need or they will be driven out of business. And these days, the services customers need rely on something high-tech or high-knowledge. So they often have to partner.

Blaine R. Hess (Thomas J. Lipton): My first piece of advice to anyone who wants to enter into an alliance is: Don't do it. Be selfish; keep all the profit for yourself; keep all the control and be a dictator. But you probably want to survive, so my next piece of advice is to be aware that partnering is very hard work, and it takes preparation and team building.

Third, you'd better be sure the two parties are equal. When you look at the ledger, you have to say, "What am I bringing to the party? What do they bring? Is it close?" If not, you must balance the scales, either by getting or giving a bigger slice of the pie, adding more managers. Otherwise, you should get the divorce papers ready, because you're going to need them quickly.

Mackey J. McDonald (VF.Corp.): This also holds true in customer-supplier relationships. A partnership simply will not work unless it is important to the bottomline results of everyone involved. In the apparel industry, companies have reacted differently to shrinking margins and the tough retail climate. Some have tried to integrate vertically, some have tried to manufacture and retail fabrics and apparel. Our approach has been somewhat different. We have decided to focus on our core competencies. We sold our manufacturing and yarn operations and formed close relationships with retailers in which we manage the inventory of our products at retail. So we've basically developed a partnership with retailers that we've never had previously.

This has been manifested especially with our data sharing in information systems. One of the primary ingredients is the willingness to share information on an at-once basis. This requires a deep trust between the partners.

In addition, we measure our performance not by how much we ship to the retailer, but by how the retailer performs with our product. If the retailer is hitting its objectives, then we reward our people.

TWO WINNERS, TWO LOSERS?

Allen J. Keesler Jr. (Florida Power): It seems to me that the strategic partnerships that work are those in which a firm commitment has been made upfront that it's important, and the partner has as much to win or lose as you do.

J.P. Donlon (CE): Isn't that commitment always made at the beginning?

Keesler: Not always. I know people who have swallowed some bitter pills when they have signed five-year commitments with big companies. You spend millions investing in a plant because you thought you had a five-year strategic alliance, and suddenly the big guy tells you all the vendors are going to give up 4 percent. Then what do you do? You just have to be really careful.

Robert L. Smialek (Insilco): I agree. We've had a successful, 10-year joint venture with Mitsubishi Aluminum. But each party needs the other equally, and that need has continued over time. They needed our access to the U.S. market; we needed their technology.

Sam Cassetta (Smartphone Communications): The larger the corporation, the more difficult it is to establish a relationship and follow it through. The hunger for success has to be there, but it's not the same for the mega-corporations. The ever-shifting management teams make it difficult to sustain a relationship, because new teams bring new strategies. So if you maintain the same teams and strategy, the partnership will last longer.

Donlon: How do you deal with asymmetrical relationships, in which one company is much more powerful than the other?

Ozan: Nowadays you see many asymmetrical partnerships, particularly in the electronics industry, where a small software company and a large electronics company have partnered in a joint venture to develop a new product. Why doesn't the electronics company swallow up the software company as soon as it gets all the technology? The larger company went to the smaller company because it was quicker, more innovative, and nimbler. A takeover would nullify that advantage. Also, the technology changes so fast that in a year, the larger company might need a different type of technology.

Donlon: So in the age of rapid change, is the long-term partnership an anomaly?

Crockett: Change has become the constant. Just as you wouldn't give a second thought to reorganizing a division to better serve your customers, the same mentality applies to strategic partners. If one remains constant too long, something is probably wrong.

MYTHS AND MISHAPS

Donlon: What is the single greatest myth or misunderstanding about strategic partnerships, and would you change how you manage these partnerships going forward?

Keesler: The single greatest myth is that they're easy to do. I would spend more time choosing a partner to make sure we both not only have a lot to win, but a lot to lose.

Shaw: I would see that the partnership is managed properly and consistently. I would carefully pick my partners. And I would have a strong team of legal people to make sure the conditions were exactly as I wanted them, and vice versa.

Byrnes: I would make sure the CEO was visible throughout the project.

Frederic L. Contino (Anchor Hocking Plastics): One of our challenges is realizing when a relationship can move into an alliance from just a relationship. Going forward, I would make sure I knew when I was crossing over the line from a straight relationship into an alliance. At that point, I would put it in writing.

Kolb: The myth is that strategic partnerships are right and necessary for everyone. It's simply a business strategy that can move the company ahead. I've learned that it's just as important to understand your partner's business rationale as it is to understand your own.

Leva: I think it's important to look at these partnerships not as the "in" thing, but whether they make good business sense for the company, and whether they should be done at all.

Douglas E. Olesen (Battelle Memorial Institute): The greatest myth is that you can share strategy up front and make these things work. To keep the strategy fresh, you must keep working at it.

Cassetta: I think we've debunked the myth here that success is automatic. I'd like now to go back and closely examine our exit strategies and make sure they're intact and current.

Sickler: The myth is that we can ignore strategic partnerships as a real consideration and ignore the change that's taking place in business today. For the health-care field, it's not possible to be all things to all people, and we can only get there by alliances. On the other hand, there are many partnerships that would make for strange bedfellows.

Jerrell W. Shelton (Thomson Business Information): The biggest myth is that we understand strategic alliances. We have to spend a good deal of time understanding the available alternatives in any specific situation. Going forward, I'd like to form deeper relationships with partners, especially my customers.

Crockett: There's a big difference between forming a partnership by reaching out to your customers and doing business with foreigners. But I wish I had understood all of this sooner and been more aggressive and competitive in becoming global. The business is out there from a global standpoint; it's a matter of going after it.

Hess: One other myth is that you have to win more than your partner to be a winner. If you're a good partner, you will win more overall.

RELATED ARTICLE: A Who's Who Of Roundtable Participants

R. Quintus Anderson is chairman of The Aarque Cos., a $500 million management and investment group in Jamestown, NY, that provides management services for privately held businesses, principally in the steel-processing industry.

James Byrnes is president and CEO of Thompkins County Trust, an Ithaca, NY-based independent bank with assets of $1 billion.

Sam Cassetta is chairman and chief executive of Smartphone Communications, a Stamford, CT-based, privately held provider of online services.

John K. Castle is chairman and CEO of Castle Harlan, a New York-based merchant bank with $27 billion in assets under management.

Frederic L. Contino is president of Anchor Hocking Plastics and Plastics Inc., divisions of St. Paul, MN-based Newell, a $1 billion plastic consumer-products company.

Bruce L. Crockett is president and CEO of Bethesda, MD-based Comsat, an $827 million provider of communications and entertainment products and services.

Jodie K. Glore is president and chief operating officer of Milwaukee-based Rockwell Automation, a $4 billion manufacturer of motors, motor controllers, and industrial automation equipment under the Allen-Bradley and Reliance Electric brand names.

Blaine R. Hess is president and CEO of Englewood, Cliffs, NJ-based Thomas J. Lipton, a $2 billion food manufacturing unit of $40 billion Unilever.

Ara K. Hovnanian is president of Red Bank, NJ-based Hovnanian Enterprises, an $800 million home-building company.

Lewis M. Ireland is chairman and CEO of Owing Mills, MD-based APAN, a $1.7 billion import/export and barter company.

Allen J. Keesler Jr. is president and CEO of St. Petersburg, FL-based Florida Power, a $1.97 billion electric utility and a subsidiary of $2.8 billion Florida Progress.

David L. Kolb is chairman and CEO of Atlanta-based Mohawk Industries, a $1.44 billion manufacturer of carpeting and rugs.

Philip A. Laskawy is chairman of New York-based Ernst & Young LLP, a $2.5 billion audit, tax, and management consulting firm.

James R. Leva is chairman, president, and CEO of Parsippany, NJ-based General Public Utilities, a $3.65 billion public utilities holding company.

Mackey J. McDonald is president and chief operating officer of Wyomissing, PA-based VF Corp., a $5 billion apparel manufacturer.

Marvin L. Mann is chairman and CEO of Greenwich, CT-based Lexmark International, a $1.8 billion provider of network and personal printers, typewriters, keyboards, and information-processing supplies.

Douglas E. Olesen is president and CEO of Bethesda, MD-based Battelle Memorial Institute, a $960 million technology and commercial research organization.

Terrence R. Ozan is vice chairman, management consulting, of Ernst & Young LLP.

Wolfgang R. Schmitt is chairman and CEO of Wooster, OH-based Rubbermaid, a $2.2 billion manufacturer of plastic and rubber products.

William Shaw is chairman, president, and chief executive of New York-based Volt Information Sciences, an $8 billion customized computer information-systems company.

Jerrell W. Shelton is president and CEO of Stamford, CT-based Thomson Business Information, a $700 million unit of Thomson Corp., a $6 billion information and publishing company.

John J. Sickler is president of Plymouth Meeting, PA-based TFX Equities, an $813 million division of Teleflex, a $1 billion provider of automotive, aerospace, and medical products and services.

Robert L. Smialek is president and CEO of Dublin, OH-based Insilco, a $544 million automotive, telecommunications, electronics, and consumer-products company.

Joseph A. Stewart is president and CEO of Napa, CA-based Queen of the Valley Hospital, a private hospital in the St. Joseph Health System.

Peter L. Venetis is president and CEO of New York-based Atlantic Bank, a commercial bank with $1 billion in assets.

Jeanette S. Wagner is president of Estee Lauder International, a division of The Estee Lauder Cos., a $3 billion manufacturer of personal-care products.

RELATED ARTICLE: FROM COMPETITOR TO PARTNER: A LOOK AT ONE COMPUTER INDUSTRY ALLIANCE

Corporations strike strategic alliances when a wily competitor threatens their market share. Allies also hope to save a few bucks in the costly process of making and marketing complex products. A cynic once likened alliances to thieves with hands so deeply stuck in each other's pockets that they couldn't possibly plunder others. Joking aside, partnering is a pervasive phenomenon for serious commercial ventures, and, as with most business ventures, sometimes it works - and sometimes it doesn't.

A prime example of partnering is in the computer industry. Proud titans used to tout proprietary technical solutions, often in an ego-driven slugfest. Now-humbled giants such as IBM and Digital Equipment today push a new slogan: "open-systems computing." Former enemies now compete and cooperate in the same breath. The results vary, depending on whom you talk to.

The stimulus for cooperation was AT&T's and Sun Microsystems' control of the popular Unix operating system - crucial to moving applications off expensive mainframes. In May 1988, Digital, Groupe Bull, Hewlett-Packard, Hitachi, IBM, and a few others forged a consortium called the Open Software Foundation, largely to counteract AT&T and Sun Microsystems.

Cambridge, MA-based OSF's fixation with Unix quickly moved to bigger fish - namely, how to make software on different vendors' computers work together. "Since there is no more controversy about Unix, vendors now compete at a different level," says Peter Shaw, vice president of sales and marketing at the OSF. Promoting unity in computing is similar to the United Nations' goal of world peace. The OSF's track record mirrors the UN's - there have been some successes and some failures, and there are some proponents and some who say the snail'space process is a waste of time.

There are about 400 worldwide members of OSF. Roughly a third are vendors, a third are academic institutions, and the balance are end-user corporations. The OSF has a staff of 200 with an annual budget of $40 million.

The not-for-profit OSF structures its funding in three-year intervals. Eight "executive" vendor sponsors pay $1 million a year and sit on the OSF's board of directors. Seven "associate" vendor sponsors pay $200,000 a year; they get a right to sponsor technology initiatives and pay no royalty fees for resulting products. Other organizations pay fees based on their annual revenue, ranging from $5,000 to $25,000 a year. Three-fourths of the annual revenue comes from product licensing and royalties, maintenance fees, consulting, and a research institute. Members work in a vendor-neutral setting to develop standard ways of making interoperable software. Users get early access to information about technology they will deploy - and a say in its development.

"Our success is measured in deployment of technology in multiple vendors' platforms and software," says Shaw. The OSF's most visible win is software called the Distributed Computing Environment. DCE is facilitation software (called "middleware"), much as plumbing, heating, and electrical systems underpin a building. DCE is used to make custom line-of-business applications that are distributed throughout an organization's heterogeneous computing environment.

For example, DCE allows the same application to run on different brands of midrange and mainframe computers. It also provides the transport and security mechanisms that let these applications talk to each other and exchange information, even across different networks.

Critics say the OSF's collaborative development process of standards takes too long. Moreover, corporations that adopt DCE also must train technicians in how to use the new software. Smaller companies often find costs to be prohibitive. The OSF disagrees. "DCE is in every major computer vendor's blueprint and is bundled with most vendors' products today," says Shaw. Users are no longer locked into a single vendor's product strategy. Corporations and government agencies are moving from pilot projects to full deployment, he says. "These are technologies that will have a life in the market measured in decades," says Shaw.

OSF may be one alliance that works as advertised.

- David Buerger

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Do U.S. companies often get stuck with the short end of the stick in international partnerships? According to roundtable participants, the hazards that exist for all strategic partnerships are exacerbated when American companies form alliances with offshore companies.

Disparate cultures and customs, different languages, and work-ethic discrepancies may indeed affect an international alliance negatively, according to Kathryn Rudie Harrigan, a professor at Columbia University Graduate School of Business and an expert on strategic partnerships.

"U.S. companies tend to be naive and unrealistic about international partnerships," she says. "American companies' impatience, ignorance, and the natural desire to be lean make it seem like they didn't get all the potential from a strategic alliance, and that the international partner got more. It's often just a matter of aligning the resources the U.S. company is putting toward the partnership with those of the offshore partner."

There are, of course, examples of successful, long-term international alliances, Harrigan points out: Royal Dutch/Shell Group, and many that have been undertaken by Corning.

"The success of Royal Dutch and Shell can be attributed in large part to their each putting the same operating responsibilities into the joint venture," and creating a separate company that has no parallel capability at either Royal Dutch or Shell Transport & Trading.

Corning, meanwhile, "unlike many other American companies, is willing to admit what it doesn't know, and therefore let the partner make strategic decisions."

So how can American companies better position themselves for success when forming international partnerships? Here's what Harrigan suggests:

* Be clear on exactly what the international partner will contribute in resources and personnel - and match them. "So often, American companies are unwilling to commit the same number of people that its offshore counterpart does. The few people that the company commits become overextended, and they lack a diversity of opinion that's critical to the success of the partnership."

* Write a list of everything that's made the company successful - all its assets and the people behind them. Imagine that another company will have access to all those assets and thoughtfully consider what those assets and that knowledge is worth. "This simple list will make you realize that you need to extract as much out of the deal as possible," Harrigan says. "American companies are fearful of appearing pushy in negotiations. The truth is, we're not pushy enough. You should ask for so much that the partner is driven to laugh at your request."

* Expect and demand access to your partner's inner circle. Expect to use your partner's brand name, preexisting distribution, and servicing network.

* Don't view an international partnership as a single deal, but one in a series of deals with the same partner. "View each as one pearl in a necklace," Harrigan says.

* Bring in the lawyers last. "Many a deal has been killed by a lawyer. Bring in the people on the team first to work out the details."

- Frances Nuelle