Creating Profit Through Alliances - business models for collaboration E-book | Page 60

It might be a solution for those cases where one
party has to invest in advance and the other partner
bears fewer risks, or his risks evolve later in the
venture. In such a case the investments can be
shared to equalize the partners‟ risk profiles. Note,
however, that when both parties have invested (one
would have anyway, and the other has chipped in an
early contribution), the situation could turn ugly if
after that first investment somehow the alliance
breaks up: another example of having to foresee this
scenario and devise good resolution mechanisms in
the agreements.”
To return to the six phases used by Philips: the fifth
phase is the ongoing management of the alliance.
Products are developed, production capacity is
arranged, the market introduction is completed and
continued innovation is jointly applied. At the
operational level, the partnership is managed by the
alliance managers from both sides. At a more tactical
level there is a steering committee. Finally, there are
executive sponsors on both sides. “Three levels,
because we have learned that is needed to keep the
alliance alive if one of them is temporarily out-ofoperation, as happens regularly when staff changes
of something else temporarily disrupts the three-tier
connection at one of the levels”.
The Philips alliance team provides support using a
number of tools. There is a separate checklist for
when the alliance is 100 days old, to check whether
the implementation is complete and if the design of
the business collaboration is fully functional. And
there are regular health checks, measuring on softer
issues such as the perceived balance of power in the
alliance. If results deteriorate, action is taken.
The sixth phase is restructuring the alliance. This
could mean dissolving the alliance because its agreed
lifetime is over, circumstances have changed or

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because one partner wants to quit. It can also mean
negotiating a new contract for new investments.
An important motivation for an alliance, and other
than directly financial, can be an intention to alter the
brand positioning. In such cases clear co-branding is
most attractive. For example when Philips and
Swarovski introduced their crystal-inlaid thumb
drives. This was a well-considered aspect: Philips
liked its brand to be associated with with Swarovki‟s
luxury „Lifestyle‟ image, and Swarovki was interested
to attract a younger clientele with products for
successful businesswomen. The products were
marketed as „Active Crystals‟, with clear signature
brands of Philips and Swarowski.
In the case of the Senseo coffeemaker, a totally new
brand was created. The motivation was that the
partners preferred not to have their respective brands
associated with each other‟s markets. Philips
remained an appliance brand, and Douwe Egberts a
leader in coffee. The joint proposition was called
neither Philips not Douwe Egberts, but „Senseo‟. In
the case of the Coolskin alliance with Nivea, the joint
brand was communicated less strongly. Here Philips
was interested in entering the market segment of
electric wet shaving and Nivea was keen to be
associated with personal care for men.
Ivo Rutten concludes: “These alliances have created
completely new product categories and established
our name in it. This has thrown up an entry barrier for
the competitors of Philips and its partners. Not only
would they have to develop a similar product
proposition, but they would have to forge an alliance
with another strong brand as well. Both are difficult,
and the latter more so, especially if a pair of leaders
has already „stolen the show‟. This is how our effort
in creating and managing alliances pays off.”