How to Form a Business Coalition

How to Form a Business Coalition

Imagine David and Goliath calling a truce on the battlefield after God calls the parties together. David puts down his slingshot. Goliath stops glowering. The two agree to put détente before aggression to achieve peace in the valley. That’s exactly the way a coalition works–though no larger-than-life Biblical heroes are required to solidify such a union. Businesses regularly stop waging war on each other when a common enemy, need or concern becomes larger than the issues that divide them. Forming a business coalition is noble, complex work and worth the effort you’ll put forth. It’s not easy. But the benefits can be stunning.

1. Understand the ground rules for forming a business coalition: you must set specific goals, include specific players and determine the specific rules under which the alliance is to be organized and operated. Specificity is at the heart of the effort. Begin the formation of your alliance by stressing an observation made by noted author Peter Drucker: “… the best collaborators are also the most intense and successful competitors.”

2. Hold an initial meeting with consortium principles. Ask all participants to be forthright about doubts and concerns, as there may never be a better time to articulate reservations, doubts and concerns about the viability of the proposed partnership. Prepare an agenda. Hold the meeting at a neutral venue that’s eminently private. Ask principles to sign a non-disclosure form, so whether the coalition comes to fruition or not, business discussed within the confines of the exploratory session won’t be broadcast outside the venue.

3. Employ a neutral party to mediate all meetings related to the formation of the business alliance so if stalemates occur, there’s a calm voice of reason at the helm of the ship. Mediation has become a huge growth industry. Hire the best business mediator you can get — ask for recommendations from industry professionals. Split the cost of the mediator between the participating firms. It’s worth the higher fee if you can find a mediator specializing in your specific industry.

4. Draw up a working agreement between all partners. Determine the number of people each business will regularly provide to the body of the whole as representatives with the power to negotiate and make decisions on behalf of the firm they represent. Set ground rules for information sharing and plan to adjust these as parties grow more comfortable with each other and their collaborative roles.

5. Adopt the jargon of today’s business coalition: Begin referring to business partners as “complementors” rather than competitors. Become familiar with the concept of co-competitors, a phrase used frequently in the world of information and communication technology alliances. Aim for a solid future working relationship like the one Nypro, a plastic molder, struck with former competitor Johnson amp; Johnson that grew so successful, computer systems at both businesses are now linked.

6. Be patient as participants learn to work within the alliance’s new framework, rules and personalities. Refrain from expanding projects under the group’s purview until the coalition forms a solid bond – one that’s strong enough to sustain such complex issues as product collaborations, marketing innovations and knowledge sharing that can help bolster the balance of competition and collaboration. Importantly, monitor interpersonal dynamics between coalescing parties to identify problems before they grow too big to fix.

7. Keep business dealings close, but respect the individuality of the firms entering into your coalition. This balance will benefit and strengthen the alliance. Be on the lookout for breaches of trust that can plague coalitions and cause them to fail. It doesn’t take much for a David to retrieve that slingshot or for a literal Goliath to re-launch his campaign to create mayhem, so nurture your alliance so it becomes a shining example of how to make friends of enemies in today’s cut-throat business environment.

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