Strategic alliances for sustainable value creation

Many product and service organizations depend on outside vendors and partners to carry out their product and service delivery activity, and communications service providers (CSPs) are no exception. In this article Tech Mahindra’s Abhishek Ghosh looks at how CSPs can partner to create value.

The decision to carry out service delivery activity can be influenced by main factors including financial resources and geographic or product-related circumstances. But the decision to form an alliance completely depends on an organisation’s strategic directive. At their core these strategic alliances are trading partnerships that enhance the effectiveness of participating firms by providing mutual beneficial access of technology skills or products.

We often see that giant companies like AT&T, Phillips and Starbucks can’t achieve leadership, either nationally or globally, without forming alliances with domestic and multinational companies that complement and leverage their capabilities and resources.

Strategic alliances for common goals

Strategic alliances allow organisations to work towards common or correlating goals where they have decided to share resources to undertake a specific, mutually beneficial project. It is less involved and less permanent than a joint venture, in which two companies typically pool resources to support a specific business goal while maintaining the individual organisation’s autonomy.

Within the IT engagement portfolio of a major global telecom organization, the company has set up various strategic alliances with trusted partners who help it to achieve its goals by challenging and shaping its IT demand, planning with rigour and control, confidently forecasting, mobilizing and delivering predictable quality-assured outcomes.

As per Kotler and Keller’s analysis of marketing management, many strategic partnerships take the form of marketing alliances. Even many of CSPs’ critical strategic alliances initially formed to support operations but turned into marketing alliances as they matured. They fall into four major categories:

1. Product and Service alliances: One company licences another to produce its product or two companies jointly market their complementary products or a new product.

We see this trend very popular among technology companies and banks, whom market products such as technology enabled services or multi-bank credit cards respectively. For example, we recently saw two major UK telcos join hands in a bid to speed up network rollout and keep pace with BT’s coverage expansion plans. Although they remain ‘ferocious competitors’, they have agreed to set up a single national grid providing 2G, 3G and eventually 4G services to 98% of the UK’s population. Similarly, two major UK telcos recently agreed a long-term deal which will see one continue to provide the network for the other provider for MVNO alliances.

2. Promotional alliances: Where one company agrees to carry promotion of another company’s product or services.

Major British telco players’ marketing activities have been strategized and executed by campaign management partners; such strategic alliances work to promote market prominence for both companies. They mainly focus on rebuilding their market position through digitization.

3. Logistics alliances: One company offers logistical services for another company’s product.

A major European telco’s logistics have been managed by a supplier for provisioning of the ordered devices from various channels such as online portal, voice, stores etc. For efficient supplier alliance, this telco won the Level 3 Carbon Trust standard for supply chain award in 2018. This award is given to the firm for its approach on the program designed to meet the needs of every single supplier , the demands of innovation, and a commitment to ethical treatment of suppliers.

4. Pricing collaborations: For customers, most major telcos form alliance with multiple hardware suppliers like Apple, Samsung, etc., to offer latest devices in affordable contracts.

Similarly we see multiple telco alliances forming for affordable roaming plans for international destinations. For example, most of the UK’s major telcos announced that their pay monthly and business customers would be able to use their UK plans abroad in forty-seven European destinations with no extra cost. And this alliance further extends to some non-EU countries like Iceland, Monaco and Switzerland where their UK customers would be able to take their UK plans.

Tackling complexity

In recent years, many major telcos have adopted major transformation programs geared towards their alliances, to address the issues around complex and fragmented systems and increasingly compromised customer experiences. The strategic alliances aim to address issues related to several parts of the business including consumer, business, sales and service, operations, and human resources.

Companies need to think creatively, to find partners who can complement their strengths and offset their weaknesses. In the end, well-managed alliances allow companies to obtain greater sales impact at lower cost.