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Collaborating to compete.

Strategic technology alliances are crucial in global business today, but not all CEOs grasp the obstacles to a successful linkup. CE gathered leaders of the most common forms of partnership--R&D consortia; small, innovative firms teamed with technology giants; and cross-border partnerships among rivals--to explore how to use STAs for maximum competitive advantage.

Since the early 1980s, strategic alliances have become bolder and more numerous, representing a major change in the way CEOs view their businesses. Going it alone is too expensive today. Nor can any single company, no matter how big or profitable, excel in each link of the value chain of its business. There are some things--distribution, innovation, fabrication, market access--that a rival can do as well or better. Why not collaborate but still compete?

Most cooperative marketing linkups and joint ventures tend to be tactical and short term. A strategic alliance is a longer-lived partnership with a supplier, customer, competitor, university, or a combination of the four that directly supports one's strategic, long-term objective. An Ernst & Young study of the electronics industry in 1992 revealed that 85 percent of companies are involved in one or more such alliances. In fact, of the 455 companies surveyed, some 900 alliances were in effect. More than two-thirds of electronics CEOs expect to increase marketing, technology licensing, joint-product development, and distribution alliances over the next five years. Two-thirds of CEOs say alliances are extremely or highly important to their strategic plans. Some 40 percent have an alliance with a direct competitor.

Some linkups yield dramatic results. Novell, a small Utah company producing network software, has used the technique so successfully that it captured 65 percent of the network operating system business. Even Microsoft was forced to sit up and take notice. Many alliances, such as AT&T's much-heralded partnership with Italy's Olivetti, do not live up to expectations and are disbanded. A McKinsey study showed that two-thirds of cross-border alliances run into serious managerial or financial problems within the first two years. Many overcome their troubles. More than half ultimately are judged successful by their partners, but a third are judged failures. In three out of four cases of failure, one partner eventually acquired the other.

The discussion that follows focuses less on how to form an alliance--indeed, many firms have already done so--than on specific ways external ties can be leveraged to improve performance and attain strategic objectives. We also asked the group to examine why alliances often fail to meet partners' expectations. More than three-fourths agreed that selection of the right partner is fundamental. Senior management commitment and clear communications between partners are also critical to success. Overly optimistic expectations, poor communications, and lack of shared benefits are among the reasons for alliance disintegration.

Leading the discussion is Craig Fields, president and CEO of Microelectronics and Computer Technology Corporation, the Austin, TX-based granddaddy of technology alliances. The organization got underway in 1983 as an R&D consortium with 22 leading computer and electronics firms as founding shareholders. MCC was initially sponsored by Fields when he headed the Defense and Advanced Research Projects Agency (DARPA). Before leaving DARPA, Fields was instrumental in the formation of Sematech, the consortium of computer chip makers.

Doug Kahn, president and CEO of Easel in Burlington, MA, describes the tumultuous negotiations that preceded the software maker's linkup with IBM. Apple Computer, here represented by President Michael Spindler, is a pioneer in competitor/collaborator partnerships with IBM, Sony, and Toshiba, among others.

Two preliminary findings emerge. Alliances will become more critical over the next five years. Moreover, the alliance must find a champion within the middle ranks of a partnered organization.

In a straw poll, we asked the 17 participants how essential partnerships would be to the fulfillment of their long-term objectives (with one being unimportant and 10 critical). The average response was a solid nine.


Craig I. Fields (MCC): Before talking about private sector consortia, let me give you some background on MCC, a consortium of computer and semiconductor companies founded in 1983. MCC has 79 members, including Eastman Kodak, Honeywell, Lockheed, 3M, Martin Marietta, Northern Telecom, Rockwell, and Westinghouse. It is a holding company for about 35 other consortia. When MCC was founded, we established an internal intelligence service to monitor what goes on abroad, giving us a working knowledge of markets in the Far East and Europe.

The driving force behind MCC was to share the costs and risks of developing technology and then to differentiate that technology. Therefore, a solid business model outlining the process of technology commercialization is key. That's obvious, but it's usually lacking.

Before joining, I ask each of our prospective members: "How will you use the relationship?" Rarely do I receive a straight answer. I hear about how high technology costs a lot of money, and about competition, transfer, and market issues.

The next questions I ask are: "What is your vision? What are your products? Who are your competitors? Who are your customers? What is your business plan? What is your technology plan? What do you want us to do with your technology plan? Why are you succeeding or failing?"

One important key to success is agility: A company must have internal, delivery, management, and technical systems that get high-quality products to market rapidly and inexpensively.

J.P. Donlon (CE): Does MCC direct one member to help another to become more agile?

Fields: The network we're developing will help all our members to do that. However, some of our members do run faster than others, and that's part of the game. A consortium like ours shouldn't be viewed as anti-competitive.

Another factor that can make the difference between success and failure is market strategy. This sounds obvious, but consider: Anyone who took the position several years ago that no one would buy laptops, palmtops, or notebook computers, or open systems and workstations, is probably less well-off today.

Meanwhile, most people think consortia are involved only in research and development. At MCC, however, we also play a role in defining and resolving other matters critical to our members' success, for example, the issue of specifications--ground rules for computer communication.

We also enable member companies to join together to build on a common infrastructure. We do this in two ways: One is enterprise integration, in which a set of companies jointly funds the development of a computer network to link customers and suppliers, and to speed the process of turning out new products and getting them to market. Integration also provides extra agility in switching from one supplier to another.

The second example of infrastructure building involves strengthening the supplier base by determining common qualification procedures. It is also important to make equity investments in small-company suppliers. That's one of the reasons we formed MCC Ventures in September.

Another non-R&D project is market testing, which is meant to expand, enlarge, and find markets for products. In terms of countries right now, we're looking at Japan. Industrywise, we're looking at the health-care arena. One goal is for our companies to share costs and expertise in given areas.


Arnold Pollard (ACT Biomedical): Was extending MCC's charter beyond R&D startling and perhaps revolutionary to some of your members? How did you manage that process?

Fields: Yes, it was. We managed by spending a great deal of time on airplanes, flying back and forth to meetings. |Laughter.~

Although our board can decide things by majority vote, in most cases I view it as a failure if we don't have a unanimous decision. This summer, before we started MCC Ventures, we held two special board meetings, and I made 24 separate visits to various members of our board around the country to ensure adequate communications.

Roy Serpa (Instamelt Systems): How do you manage the competing interests of MCC's various members?

Fields: Competing interests change with some frequency. For example, in some corporate cultures, a vice president lasts an average of 24 months.

Another detail: All members get absolutely fair, equal access to our technology. We have achieved a perfect record in that there has been no disclosure of proprietary information from one of our members to another.

But there is no denying that the constant change in competing interests can alter the direction and, perhaps, dynamics of the alliance.

John S. Stow (Encompass): The important thing in any partnership is a long-term commitment to make the alliance work. My two parent companies are AMR and CSX--both transportation firms and not directly competitive. The key to the partnership is a common vision.

In addition, the cultures had to meld. We also needed to hook up with the right sponsor to make it happen. AMR is losing a lot of money these days, and CSX isn't doing that well, but nonetheless, there's a commitment to the venture.

Michael D. Pickett (Merisel): Is there a difference between ventures formed for positive, aggressive reasons and those formed for defensive reasons?

Fields: There are horizontal consortia--competitors with contemporary common interests who agree to do something together--and vertical consortia, suppliers and customers who work together. There is also a form you might call random consortia--for example, a health-care firm works with a financial-services company because they have a common interest in a certain type of technology.

Derek J. Schafer (British Technology Group USA): Do you see any legal problems as you move from technology to business concerns?

Fields: I'm not an attorney and will resist practicing without a license. |Chuckles.~ But to date we haven't had problems. We have an excellent general counsel at MCC who also has an MBA, and a Ph.D. in electrical engineering. We have a separate antitrust counsel in Washington, and everything we do is reviewed by the general counsel for all of our member companies.

Besides legal problems, there's also the question of funding. Government funding, in particular, can be very important.

When Sematech was just getting started, it sought $100 million of government funds. I was taken aback, because the industry spent about $5 billion on R&D: Why did it need another $100 million? The fact is, government participation is necessary.

Donlon: Another problem area involves potential technology leaks, particularly when alliance partners are competitors. Some consortia train scientists to protect information. Does MCC have access to its companies' top technologists?

Fields: Yes. I have access not only to the top technology people at our participating companies, but also to the top managerial, production, and marketing talent.

But there's another, purely logistical, problem. One of the managerial lessons learned in the last 10 years is that it's unrealistic to believe that large groups of technologists are going to converge in one place to work together. Travel takes time. As a result, about 85 percent of MCC's staff are permanent employees, and 15 percent are visiting scientists from our member companies.


Kymus Ginwala (Northern Research and Engineering): Needless to say, collaboration is also a popular approach in Japan. Yet Japanese companies remain very competitive with each other. When a Japanese company looks at the world market, it can say: "I know I can collaborate with so-and-so, let me go and do this."

Michael H. Spindler (Apple Computer): I think there's less of an ego involved in Japanese companies: That makes it easier to collaborate in terms of technology, capital requirements, common infrastructure, and supply-based management.

Ginwala: Luck, too, sometimes plays a part. For instance, the Japanese government was dead set against Toyota and Nissan going into the auto market, because, it told them, "You're going to have your heads beaten in by Detroit."

Spindler: That's right. Toyota's initial American effort in 1957 beached like a dying whale. The guy who ran Toyota was on his knees, desperate to increase American distribution. First time around, he sold 250 trucks. But then the Korean War started, and the American Army needed trucks. An order came in for 2,500, and the guy's in business.


R. Douglas Kahn (Easel): Getting away from the strategies of consortia, I'd like to examine the pros and cons of alliances between companies with different capabilities and agendas.

My company, Easel, had some exciting technology--computer software--but we were just too small to be noticed in our marketplace. If we wanted to be a major player, we needed a public endorsement for our products and technology. IBM was a logical candidate.

Things move so fast in the marketplace that small companies don't have time to do everything themselves. We were making progress, but it was happening too slowly. I felt if we didn't exploit the opportunity faster, someone else would develop technology comparable to or better than ours. He'd have greater resources, he'd team with others, and suddenly he would own our market. We worked too long and too hard to give up.

So I went to IBM with a list of benefits of a prospective strategic alliance. You can't put together an alliance unless both companies believe it has fundamental value.

At the time, IBM was aggressively promoting the PS2, a powerful personal computer. But the development resources personnel within IBM's customer companies were trained to write codes for large mainframe computers. Suddenly, IBM tried to push the PS2 on them. But the customer companies didn't get any tools for the PS2 to start building applications to take advantage of the machine's power.

I told IBM: "Your customers are going to be driving around in second gear unless you give them tools to take advantage of the extra power in that machine. If you give them the tools and help them to tap the power, they will purchase more hardware."

We produce those tools, so it made sense for us to work together. We forged a joint marketing/development/equity relationship. IBM purchased a 10 percent equity in our business and a site license for our technology. All told, the fees over five years amounted to close to $15 million. Very significant for a company my size.

The easy part of this deal was defining why it would yield strategic value to both companies. The hard part was implementing the alliance. It's simple for two corporate groups to get together and arrange a meeting of the minds at a high level. But it's difficult to translate that meeting into action.

One of the big advantages of dealing with IBM was its ombudsman--someone who talked to the software community on a regular basis about IBM's initiatives, its products, and technologies it would be interested in. This ombudsman served as an initial sponsor. He told us where within IBM our technology would work, he communicated certain concepts to IBM management, and he acted as our contact point until we found a sponsor within the organization.


Serpa: For 10 years I tried to build relationships with major chemical companies, in the U.S. and Europe. And I had difficulty finding the right person to talk to about investigating an alliance. At least IBM has someone you can start with.

Kahn: Yes, and that worked well. I had someone who aggressively pitched my story within the organization. He eventually found me a sponsor who took responsibility for the relationship from that point.

Unfortunately, the sponsors changed, and that led to a problem. We went through five sponsors in the first 18 months of the relationship. When that happens, everything gets dropped, strategic goals disappear, and the people who become responsible don't know why the deal was negotiated. They evaluate things from a narrow, operational perspective: "What's happening to my organization today? Is this costing me money or making me money?"

Despite the sponsor turnover, IBM demonstrated a willingness to look out for the little guy--us. IBM executives knew that a company like mine didn't have unlimited resources. Yet their evaluation process would take some time. So they began to purchase products and services in order to build a comfortable relationship. We found them saying, "Gee, we'd be interested in such-and-such a product, why don't we buy a few thousand?" While they were saying that, they were probably thinking: "Let's not shoot the goose that lays the golden egg through our process of evaluation."

Meanwhile, a month later, they're buying more. And six months into this, we're saying, "We don't think we want to close this deal." |Laughter.~

Besides financial help, however, I believe active participation on the part of senior management is essential to a successful strategic alliance. I didn't spend as much time in this relationship as I should have at the beginning. And I know some problems stemmed from that.

In our case, negotiations started at the lower level and worked their way up. However, at a certain point, I wanted to meet the decision maker. I asked, "Who signs the contract?" I wouldn't go any further until I met with the president of the company.

That meeting was supposed to last 30 minutes. It turned into two hours, because someone who hadn't heard the idea got excited about it and took a personal stake in it.

A few months later, we hit a snag in the relationship because of a vendor. The president of the division became impatient and said to his managers: "Either get this thing done, or move on." I called him at home and we talked until midnight. The result? His renewed enthusiasm for the alliance. Hands-on involvement and personal communication were the keys to the deal.


John R. Nasi (Transportation Manufacturing Operations): Meanwhile, had you gotten to the president of the division the first time, the door may have been shut on you anyway. Sometimes before a deal can be completed, a partner has to start at the bottom and work its way up, taking things on a step-by-step, level-by-level basis.

Your experience with IBM, Doug, couldn't have been more frustrating than our effort to crack the market in Japan and China. Whatever your preferences, you cannot start at the top in those countries. You have to start somewhere else and finally, when negotiations reach an impasse, demand, "I have to talk to the top guy." I don't know if there's a shortcut to that.

Kahn: The bottom line: There is no right formula. Of course, the problem with dealing with middle managers is they often don't have a strategic vision of the big picture. That makes it easier for them to derail the relationship.

To avoid this situation, I hold a quarterly "status" meeting with the senior executive responsible for our relationship. We can bring others into this evaluation session if we wish--and we generally do. I want to find out where they think we stand vs. where we think we stand. Based on that comparison, we explore what can be done.

When good rapport exists among parties in an alliance, problems are dealt with rather than left to fester. If you keep identifying new opportunities to work together, the relationship builds. When left in the hands of middle management, however, new opportunities often don't work their way into the relationship.

Serpa: I understand your point. But I've seen many cases where middle management had a greater vision than senior executives or even the CEO himself. So often, the success of a long-term relationship rests in the hands of the people at the lower levels. If they don't carry the ball--and hopefully kick it ahead--nothing comes of partnership discussions.

Denis R. Brown (Concurrent Computer): I agree. I believe most of the bright ideas come from people lower in the organizational pyramid than the CEO. In many successful partnerships, the top guy provides strategic direction and long-term goals, and acts as the traffic director for the ideas and personalities moving along the road.

Spindler: But if it's a megadeal crucial to your company, you have to start at the top. If the deal is too big, it can be disastrous to go into the lower structure first. You need to find someone with a common vision.

Apple has worked with IBM, too. My experience with IBM's president was that I called him on the phone, and we talked. Within days, we brought more people into the process, and all of a sudden 60 of us were sitting around trying to structure things, practically sleeping in sleeping bags for a week. Everything happened so fast. We didn't work six months, burning billions of dollars in the planning stages.

But making a project work may depend on front-line staffers.

In most cases, I ask myself, "Who has the most interest in making the partnership work?" Usually, it's not me, but somebody lower in the organization, in software, in hardware, in systems engineering. Someone who is closer to the deal--more responsible for it.


Kahn: Providing adequate motivation for those most closely involved with a deal can be tricky. It's not an easy thing to get your hands around. In our relationship with IBM, we came to the conclusion its salespeople didn't have enough incentive to promote our technology. Our contacts at corporate said we shouldn't worry. But we were skeptical. When corporate comes up with a brilliant new idea, sometimes the field doesn't embrace it and say, "How quickly can I grab this new technology and sing its praises in the marketplace?"

We couldn't poll the IBM sales organization, but we sure as hell could evaluate its compensation plan to find out whether its people would be paid more if they promoted our product.

The initial program was so damned cumbersome that even though the sales organization would have gotten paid, the paperwork was so unwieldy that most of the salespeople probably wouldn't have bothered to make the effort. So there really wasn't the motivation there that some of the corporate people initially thought would exist.

In the end, we restructured the relationship to bring the sales organization into our corner. But you can bet that a lack of support at the grassroots level will grow into a cancer that destroys the relationship.

Spindler: That can happen.


Kahn: A comment for those of you who are involved with smaller companies: I can't stress enough the importance of using discretion with regard to disclosures about the status of the prospective alliance.

Instead of telling the board about the possibilities of an alliance with IBM, for example, I played it safe and waited until we waded through the legal process and could define the business relationship more completely.

Another comment about legal matters: At smaller companies, executives are comfortable overriding their legal people. But larger companies absolutely won't do it. That surprised me. The legal folks at Easel are advisors. I want their input, but I make the decision. They try to protect themselves, me, and my company, but I make the final call. Lawyers can keep you out of some wonderful opportunities because they are so nervous about the potential downside. I think you have to take some risks and move forward.

Alan Weinberger (The ASCII Group): Yes, but you must have lawyers early on because if you don't, you can spend a lot of time and effort untangling antitrust problems. Any major company has to be concerned with antitrust.

Kahn: Aside from lawyers, negotiators--particularly those with larger companies--can present a problem. They think their job is to get the best deal they can for their company. One result: Smaller companies may wind up getting the short end of the stick.

But smaller companies rarely pull out of a deal, partly because they have already committed themselves publicly.

In our case, right up to the end, I wasn't sure if I wanted to do a deal with IBM. I said, "Until we negotiate the business terms, it's open season."

Things eventually came to a head. A professional negotiator at IBM told me, "The deal has to be done by Tuesday, or we're walking away. We're going to deal with your competitor." I knew we didn't even have a competitor in this area. Nobody had technology like ours. It was a damned irritating situation, because I was dealing with people who had a different agenda.

Finally, I called the president of the division and said: "I will not work with this individual anymore. We would like to do business with you, but only if we can structure a relationship that will be mutually beneficial. If not, this deal isn't of interest to us."

Serpa: Too many of our companies fail in partnerships because they are working with the old model of negotiation: "I want to win as much as I can, or I bring in my hired gun." Under this model, the person who will manage the relationship never does the negotiating. The hired gun is the tough guy who gets what his people want. And that mind-set holds us back from making alliances.

Kahn: The people at IBM must have realized that, because when we threatened to bolt, there was an immediate organizational change, and we began working with senior-level people.


Serpa: Enough about alliances that don't work. Let's talk about successful models that bring together suppliers, vendors, and competitors. MCC falls into this category, but there are others.

About five years ago in the plastics industry, talk circulated about a potential partnering between vendors and the automotive industry. That took one step back early this year but one step forward in September.

Here's the step backward: A few months ago, GM management told vendors it would open all contracts in return for substantial reductions in the price of their products. But here's the step forward: GE and Ford recently announced a $10 million investment over five years to fund a new project to develop a special family of polymers for exterior body parts.

This is critical to a plastics supplier, because the major companies are reducing the number of vendors they work with. The ones that survive will have to come out with top-quality, leading-edge products.

William Sheluck Jr. (Nationar): I'd like to return to the point about the advantages of starting partnership negotiations at the top vs. starting at the bottom.

Currently, we are negotiating with what we call competitors of equal stature. So we are trying to protect our position in the marketplace while dealing with a competitor who is interested in the same thing. In any case, these negotiations started at the top: They involved me and the CEO on the other side.

In a couple of other cases, meanwhile, negotiations didn't go beyond an informal discussion, partly because of a lack of chemistry between me and my counterpart in another organization. Ultimately, I've learned that you make alliances with people--not with companies.

In fact, that raises another issue: I have found it extremely difficult to move support for an alliance down into the organizations of the two companies.


Kahn: The competitive issue is pretty difficult to work through. I remember early on in the relationship, our partner wanted to look at our source code. The source code is like a share in the crown jewels. A lot of people in my company were nervous about that. So we told our partner we wanted him to use people who weren't involved with this technology, and we wanted a commitment that they wouldn't work on its development.

The company said: "Fine, but that means we tell our staff that once they look at your code they are contaminated and will never work on a related project in this exciting area of technology. Therefore, only duds will want to participate, which means you won't get a great evaluation."

You're always working through these kinds of issues.

Another example: An IBM product was in direct competition with one of ours. The IBM group associated with it was so committed to promoting and marketing its product that its members saw it as a war.

If there's a competitive environment between two companies, I think they must create a third organization that takes this combined technology and moves forward with it. I couldn't train my sales force into treating our major competitors as friends one day and enemies the next.

Keith R. Garrity (Fansteel): Do your employees perceive the company as a captive ship of IBM?

Kahn: Deciding to proceed with the deal meant making sure we didn't eliminate all our options. Therefore, although in the year the deal was made, 46 percent of our revenues came from IBM, we formulated a plan to drive that percentage straight down. Now the number is below 15 percent.

We don't want to be captive. We want to capitalize on the good things that result from this relationship, while building independent businesses. We restructured the alliance a year and a half later. That helped us.

The original deal gave IBM the rights to sell a version of our software with an IBM logo. I didn't like the fact that IBM people would be marketing Easel software, despite the greater expertise of my people. But I decided I could turn this to our advantage. We could say to the marketplace, "This software is so good, IBM is also selling it with its logo." But IBM was selling it on a division operating system, so we weren't competing with one another on the market.


Spindler: Moving into the international arena, our experience in Japan revolved around learning how to establish a vendor base in component technologies.

Overall, we went from almost 700 vendors to less than 100, deciding to stick with the best, rather than distribute the risk. We've worked with Sony for eight years on technology for floppy disk drives, and components.

So, most of our experience in Japan involves supply-base management and getting quality specs, cycle times, and flexibility into the system. In this world, being competitive means short product life cycles and product innovation and enhancement. Implementation must be rapid and bolstered by a structure that promotes entrepreneurship.

Pickett: Is it hard for the Japanese to agree on the way output will be handled?

Spindler: No, because they think in concrete terms. When Ampex invented the tape recorder, the Japanese said, "I can make that smaller at half the price." Boom, they did. They are precise. They do a lot of homework up front, and their implementation is super-fast.

Donlon: What does an American CEO have to do to make a cross-border alliance work?

Spindler: I think he has to put himself in the other person's shoes and learn how business gets conducted and deals get structured on foreign turf.

Schafer: American CEOs have to understand the different cultural approaches to doing business. The U.S. is an open corporate culture in which executives are willing to do business in Europe simply because of what the market offers. By contrast, European executives are encumbered by more cultural restraints.

Stow: Success also depends on the type of deal a CEO is trying to make. If he's going to distribute software in Europe, he had better be sure about how he will do so in terms of the mind-set and long-term vision. Incidentally, long-term is defined differently by Americans and Europeans.

Spindler: The time it takes to get going can be another point of conflict. The Japanese, for example, are masterful at quickly determining what they want.

In addition, they have faith in a process all the way through. By contrast, Americans tend to say, "Aw, we don't make money, let's get out of this thing." That's dangerous.

Schafer: In Britain or America you can have a handshake on a deal within a week, and then you spend two years trying to make it work.

Robert L. Smialek (Ranco): I'm president and CEO of Ranco, a division of Siebe plc Temperature and Appliance Controls Division. Siebe is a $3.5 billion British corporation, but 85 percent of its business is outside the United Kingdom. Forty-five percent is in the U.S., and the rest is spread throughout continental Europe, Japan, South America, and South Africa.

In our case, the separate cultures that comprise the organization are not at war with one another. In fact, it's relatively easy to get the organizations to work together, because we both gain from the relationship. We join and reap the benefits of any alliance.

We don't rely on local people to lead these deals, but rather to act as interlocutors. In many cases they know the right people to talk to and the important organizational issues to discuss.

Pickett: I think it's important to have local people running local operations. But that shouldn't excuse the CEO from making an effort to understand the culture and the business. Understanding, by the way, means actually traveling to a foreign country. For instance, I spend 25 percent of my time in Europe, although that market represents only 15 percent of my business.


Donlon: On a scale of 1-10 with 10 being most critical, how important will strategic alliances be to your company in the next five to 10 years?

Sheluck: I would say we'd be in the seven to eight category, maybe higher, given a shrinking marketplace and an increasingly competitive environment.

Garrity: I would say at least a nine or 10. I'm chairman and CEO of three companies, a metals firm called Fansteel and two privately held companies, HBD Industries and Peerless-Winsmith. I'm trying to merge the technologies of these companies.

Nasi: Alliances are an absolute 10 for us.

Pollard: There seems to be a geometric curve here moving toward 10.

James R. Holland Jr. (Unity Hunt Resources): From an organizational perspective, that's partly because more key senior managers understand the benefits.

Pollard: I'm chairman of ACT Biomedical. Like other small biotech start-ups with a special technology, my company is not going to make it if it doesn't forge the right kinds of alliances with both equal-size and larger companies.

I've got to go off the scale to answer the question. I rate the importance of alliances as an 11.

Smialek: Perhaps I'll be the exception here when we count up all the numbers.

In my company's case, I would rate the need for alliances a five. We don't see strategic partnerships as critical. If we see a need, we will acquire it.

Richard N. Daniel (Handy & Harman): I'm chairman and CEO of a metals company that started in silver and gold but is now involved in precious metals and alloys, brazing alloys, specialty metals products, including stainless wire, precision tubing, bimetals, and high-speed drill rods.

We're having a devil of a time trying to establish joint-venture opportunities with our technology, especially in Europe. Most of the people in my business don't think in terms of alliances. I don't see much hope for them in midlevel fabricating companies.

Ginwala: Strategic alliances don't specifically affect our company, because we help people make those deals; we are not part of them. In general, however, I'd rank their importance very high. We see a lot of small companies--some of them spin-offs from the defense industry--that possess commercially valuable technology.

Sometimes smaller companies are good with technology, but they haven't the faintest notion what to do with it in the marketplace. It amazes us that more large companies--especially in the information and semiconductor industries--don't seek out these people. Foreign companies head straight for those little firms and make deals with them.

Ronald L. Skates (Data General): I'd say seven-plus. But I think the Japanese model where two large and important companies come together and truly share their "innards" will be the model for alliances of the future. They will be more necessary than traditional vendor/supplier relationships.

Brown: Anyone in the computer industry simply cannot afford not to do some sort of partnering. On our own, as a midsized computer company, we can't afford to distribute our products globally.

Spindler: I won't put a number on the importance of alliances. But whether you're in communications, software, or the media, an alliance gives you a chance to accelerate your dreams.

Here's my advice: Lots of companies would do well to team up with the fittest partner they can. They should exploit the opportunity to grow, and run as fast as they can.
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Title Annotation:CE Roundtable; strategic technology alliances
Publication:Chief Executive (U.S.)
Article Type:Panel Discussion
Date:Nov 1, 1992
Previous Article:The wizard of ConAgra.
Next Article:Strategic alliances: overcoming barriers to success.

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