Four Questions for Appraising Your Alliances

MIT Sloan Management Review, December 22, 2020

by Theodore Kinni



Over the past four years, many of the United States’ geopolitical alliances have been remade with bewildering speed. It’s no surprise that many of those changes created an uproar — some of these relationships dated back a century or more and seemed sacrosanct, until they weren’t. It also prompted Stephen Walt, the Robert and Renée Belfer Professor of International Relations at Harvard University, to cut through the noise with an article in Foreign Policy titled “How to Tell if You’re in a Good Alliance,” which is instructive for business leaders as well as diplomats.

Walt is a pragmatist, so the first thing he points out is the unspoken assumption behind the uproar: that each of a nation’s existing political alliances is actually worth maintaining. “Surely this is not the case, for all allies are not created equal, and the value of any commitment is likely to wax and wane over time,” he writes. “Wise countries choose their allies carefully and do not treat any of them as sacred and inviolable.”

This is as true in business as it is in international relations. Corporate alliances are a means to an end, and they involve costs and obligations. Accordingly, corporate leaders, like the heads of nations, should never take the value of their partnerships for granted. Toward that end, you can conduct a fast review of the value of your company’s alliances by asking the following four questions, derived from the short list of attributes of a good ally that Walt offers in his article.

Does your partner make a meaningful contribution to the alliance? This is a key question when reviewing a partnership. It’s also one that torpedoed the 2009 alliance between Suzuki Motor Corp. and Volkswagen. Volkswagen wanted to gain greater access to the fast-growing Indian market through Suzuki, and Suzuki wanted access to Volkswagen’s hybrid and diesel technologies. The problem, claimed Suzuki chairman Osamu Suzuki less than two years after the companies bought stakes in each other, was that the technology Suzuki sought wasn’t forthcoming. Suzuki didn’t need the technology that VW was willing to provide, and VW wouldn’t provide access to the technology that it did need. If your partner hasn’t made the contributions it promised, you don’t have a good ally. Read the rest here.