Strategic Alliance Magazine Q4 2017 - 46

GETTING FIT

Relationship between inefficiency and risk
When an alliance is created, some of the risk held by each
party prior to signing an agreement is converted into three
basic (and manageable) categories: human risk, business
risk, and legal uncertainty. Reducing or increasing alliance
inefficiency changes the risk profile of an alliance.
To illustrate the point, here is an example: It is possible to reduce legal uncertainties by creating layers of
process within the alliance. Extensive educational programs, testing, checklists, and management approvals
can be implemented at each level and in every part of
an alliance. While these processes would certainly reduce risk, they would unnecessarily increase alliance
inefficiencies. On the other extreme, one could hire
smart employees and provide absolutely no training
or guidelines, thus producing a highly efficient but extremely risky alliance environment. As in the story of
LEGAL UNCERTAINTY
Uncertainty associated
with the legal requirements
and obligations from a
governmental, industry, or
company practice perspective
on each or between the
companies involved in the
alliance, including suppliers
and individuals responsible
for implementing the
agreement.

Goldilocks and the Three Bears, the key is to find a ratio
of risk to inefficiency that is "just right."
In many cases, value is squandered by allowing alliances to become more inefficient than they need to be.
Working with someone else is always less efficient than
working alone; however, working with someone else
can be much more effective. The key to keeping an alliance in a value-producing state is to optimize risk and
inefficiency at the places that produce the most value
for an alliance. The graphic to the right depicts the FIT
zone that represents an optimal balance of risk and inefficiency in an alliance.
The best alliance managers locate inefficiencies by
studying the categories of human risk, business risk, and
legal uncertainties associated with the contract. They
focus their constrained resources on the areas that have
the potential to produce-or destroy-the most value.

BUSINESS RISK
Risk associated with the
business obligations, value
expected, and operational
execution of the contractual
terms between the
companies.

HUMAN RISK
Risk responsible for
implementing the
agreement associated with
the relationships between
the companies and the
individuals.

3 Types of Risk
Total risk = (Business Risk + Legal Uncertainty)
46
STRATEGIC ALLIANCE MAGAZINE | Q4 * 2017



Table of Contents for the Digital Edition of Strategic Alliance Magazine Q4 2017

No label
Strategic Alliance Magazine Q4 2017 - No label
Strategic Alliance Magazine Q4 2017 - 2
Strategic Alliance Magazine Q4 2017 - 3
Strategic Alliance Magazine Q4 2017 - 4
Strategic Alliance Magazine Q4 2017 - 5
Strategic Alliance Magazine Q4 2017 - 6
Strategic Alliance Magazine Q4 2017 - 7
Strategic Alliance Magazine Q4 2017 - 8
Strategic Alliance Magazine Q4 2017 - 9
Strategic Alliance Magazine Q4 2017 - 10
Strategic Alliance Magazine Q4 2017 - 11
Strategic Alliance Magazine Q4 2017 - 12
Strategic Alliance Magazine Q4 2017 - 13
Strategic Alliance Magazine Q4 2017 - 14
Strategic Alliance Magazine Q4 2017 - 15
Strategic Alliance Magazine Q4 2017 - 16
Strategic Alliance Magazine Q4 2017 - 17
Strategic Alliance Magazine Q4 2017 - 18
Strategic Alliance Magazine Q4 2017 - 19
Strategic Alliance Magazine Q4 2017 - 20
Strategic Alliance Magazine Q4 2017 - 21
Strategic Alliance Magazine Q4 2017 - 22
Strategic Alliance Magazine Q4 2017 - 23
Strategic Alliance Magazine Q4 2017 - 24
Strategic Alliance Magazine Q4 2017 - 25
Strategic Alliance Magazine Q4 2017 - 26
Strategic Alliance Magazine Q4 2017 - 27
Strategic Alliance Magazine Q4 2017 - 28
Strategic Alliance Magazine Q4 2017 - 29
Strategic Alliance Magazine Q4 2017 - 30
Strategic Alliance Magazine Q4 2017 - 31
Strategic Alliance Magazine Q4 2017 - 32
Strategic Alliance Magazine Q4 2017 - 33
Strategic Alliance Magazine Q4 2017 - 34
Strategic Alliance Magazine Q4 2017 - 35
Strategic Alliance Magazine Q4 2017 - 36
Strategic Alliance Magazine Q4 2017 - 37
Strategic Alliance Magazine Q4 2017 - 38
Strategic Alliance Magazine Q4 2017 - 39
Strategic Alliance Magazine Q4 2017 - 40
Strategic Alliance Magazine Q4 2017 - 41
Strategic Alliance Magazine Q4 2017 - 42
Strategic Alliance Magazine Q4 2017 - 43
Strategic Alliance Magazine Q4 2017 - 44
Strategic Alliance Magazine Q4 2017 - 45
Strategic Alliance Magazine Q4 2017 - 46
Strategic Alliance Magazine Q4 2017 - 47
Strategic Alliance Magazine Q4 2017 - 48
Strategic Alliance Magazine Q4 2017 - 49
Strategic Alliance Magazine Q4 2017 - 50
Strategic Alliance Magazine Q4 2017 - 51
Strategic Alliance Magazine Q4 2017 - 52
https://www.nxtbook.com/allen/stam/23-2
https://www.nxtbook.com/allen/stam/23-1
https://www.nxtbook.com/allen/stam/22-4
https://www.nxtbook.com/allen/stam/22-3
https://www.nxtbook.com/allen/stam/22-2
https://www.nxtbook.com/allen/stam/22-1
https://www.nxtbook.com/allen/stam/21-4
http://www.brightcopy.net/allen/stam/21-3
http://www.brightcopy.net/allen/stam/21-2
http://www.brightcopy.net/allen/stam/21-1
http://www.brightcopy.net/allen/stam/20-4
http://www.brightcopy.net/allen/stam/20-3
http://www.brightcopy.net/allen/stam/20-2
http://www.brightcopy.net/allen/stam/20-1
http://www.brightcopy.net/allen/stam/19-4
http://www.brightcopy.net/allen/stam/19-3
http://www.brightcopy.net/allen/stam/19-2
http://www.brightcopy.net/allen/stam/19-1
http://www.brightcopy.net/allen/stam/18-4
http://www.brightcopy.net/allen/stam/18-3
http://www.brightcopy.net/allen/stam/18-2
http://www.brightcopy.net/allen/stam/18-1
http://www.brightcopy.net/allen/stam/17-4
http://www.brightcopy.net/allen/stam/17-3
http://www.brightcopy.net/allen/stam/17-2
http://www.brightcopy.net/allen/stam/17-1
http://www.brightcopy.net/allen/stam/16-3
http://www.brightcopy.net/allen/stam/16-2
http://www.brightcopy.net/allen/stam/16-1
http://www.brightcopy.net/allen/stam/15-4
http://www.brightcopy.net/allen/stam/15-03
http://www.brightcopy.net/allen/stam/15-02
https://www.nxtbook.com/allen/stam/15-1
https://www.nxtbook.com/allen/stam/14-4
https://www.nxtbook.com/allen/stam/14-3
https://www.nxtbook.com/allen/stam/14-2
https://www.nxtbookmedia.com