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Coupling to compete Featured

9:42am EDT July 22, 2002

They’re not quite mergers, but they can put your business in a close working relationship with another company, especially when both are doing business with a third party.

They can be lucrative for both partners. Or they can sour quickly.

Call them alliances or strategic partnerships or strategic alliances or even strategic alliance partnerships, but they’re designed to be symbiotic, allowing two or more companies to work together so that both can benefit in ways they may not be able to alone.

Chud Fuellgraf sums up what he looks for in an alliance this way: “I’m looking for something where one and one equal three.”

He should know. Fuellgraf, president of Fuellgraf Electric, a 130-employee, full-service electrical contractor based in Butler, thinks he’s found that kind of bargain in a relationship with LLI Technologies and Construction Inc., a Pittsburgh consulting engineering and construction company.

Fuellgraf and LLI had worked on many of the same projects, so when it came time to form a strategic alliance partnership, both parties were able to see what the other would bring to the table. LLI had amassed expertise in designing telecommunications networks, which it is leveraging in its new alliance with Fuellgraf to complete advanced communications projects for which speed to market is critical. In effect, a it’s relationship in which the partners can land more work and do it better as a team than either could independently.

While their forms vary, alliances require a few defining characteristics. Most essential are trust and communication between the partners and the capabilities of both parties benefiting from the union.

Scott Craven, CEO of Off the Page, an e-business consulting and implementation firm, has alliances with five partners. What distinguishes alliances from other casual business relationships, he says, is cooperative marketing efforts, cost sharing and exchange of market intelligence and research — things you might shy away from in a more casual relationship with a vendor or client.

And while your alliance partner might be in a business that’s related to yours, says Craven, you don’t want to find yourself competing for the same business. Instead, you want partners which can offer you something you don’t already have, and which need what you have to offer.

Staying in touch

LLI and Fuellgraf decided that, although modern communications technology gives both the ability to stay in touch electronically, they needed a common location. So the alliance took office space for its employees next to LLI’s headquarters on Penn Avenue.

“In the relationship between the partners in the fledgling stage, it’s supercritical that people are able to communicate,” says Michael Mason, president of LLI.

Both parties have a weekly coordination meeting, supplemented by distance communication via telephone and e-mail.

Even if you can’t be in the same location, staying in touch is essential.

“Ongoing communication is absolutely necessary,” says John Macy, vice president of General Management Technologies, which is among Off the Page’s partners.

Tell your employees — and keep the information flowing. The idea of a strategic alliance and what it means may be harder to grasp than the idea of a merger or acquisition, so employees will have lots of questions. LLI and Fuellgraf held a series of meetings to let their workers know what the alliance meant for them.

In the Fuellgraf–LLI venture, LLI transferred a dozen employees to Fuellgraf and some LLI employees transferred became Fuellgraf personnel. Those kinds of changes can raise concerns, so they have to be carefully and fully explained.

And, as Fuellgraf points out, the relationship will raise questions on a day-to-day basis about procedural issues, so the partners must establish an ongoing process of explaining what needs to be done in a given circumstance in which the other partner might be involved. Whereas one vendor had been used in the past, for instance, the alliance might make it practical to use another to reduce costs or eliminate overlap.

Doing your homework

Alliances can break down quickly if the partners aren’t compatible, so due diligence is recommended. You’d better have sound business reasons to join forces, and the two cultures have to be compatible.

When Off the Page was looking for a consulting firm to partner with, it investigated several before settling on General Management Technologies. Craven says a deciding factor for Off the Page was that General Management Technologies’ process for evaluating potential alliances was nearly identical to its own, indicating that the companies shared common business philosophies.

However, striking a relationship with a partner that does something related to what you do but doesn’t interfere with your business can be tricky. Craven says technology companies sometimes strike alliances with other technology firms simply because it seems like a good idea, only to find that the relationship doesn’t make sense. A good strategy allows you to collectively offer something to your clients that has value but doesn’t require a huge investment or the building of an organization from scratch.

General Management Technologies, for instance, can help a client form a strategy, then bring along Off the Page to handle the client’s e-business needs. Off the Page can tap General Management Technologies’ strategic consulting talent to make sure the e-business solution is compatible with the client’s overall goals.

“We believe that having end-to-end capability is important in the e-business strategy arena,” says Macy. “It’s a cost-effective way to ramp up a technology and bring those skills to our clients.”

Last but not least, owners of all kinds of firms agree that a concrete, everything-in-writing commitment to work together is an absolute necessity. LLI and Fuellgraf put teeth in their alliance by agreeing on a joint business plan and engaging in a long-range planning process. In the case of General Management Technologies and Off The Page, the partners say the level of business activity that each generates for the other is the indicator of whether each is committed.

Says General Management Technologies’ Macy: “One of the ways I look for commitment in these kinds of relationships is, ‘Are we getting leads and prospects and vice versa?’”

How to reach: LLI/Fuellgraf, (412) 338-0700; General Management Technologies, (412) 279-3501; Off the Page, (412) 654-3335

Ray Marano (rmarano@sbnnet.com) is associate editor of SBN magazine.