Strategic Financial Alliances
Service relationships—with vendors, consultants, and law and accounting firms—have been mentioned as a hidden part of a company’s intellectual capital. Partnerships and alliances can be even more important. To the extent that a company can effectively muster the energies and the brainpower of a powerful strategic partner, it can speed its product development, reduce the cost of manufacturing, and rapidly penetrate its target markets—all enormous competitive advantages. Major companies such as IBM enter hundreds of such relationships. These relationships are intellectual capital of a most important type—mutual understanding of capabilities and costs and trusted working relationships.
From the viewpoint of the real options solution, strategic alliances only create value when they enable plans. It is possible they will be formed because of personal relationships and a vague sense that working together can help both parties, as when two top executives meet on the golf course. But value will not be created until an option is framed. In time, when that option is exercised, the strategic capital represented by the alliance is translated into economic capital.
Cisco, which produces networking devices (the king of routers) and software, owns only two of the 38 plants that assemble its products. It connects component manufacturers, assemblers, logistics providers, systems integrators, and its own employees and customers in what is known as a b-web (business web). The arrangement leverages the strategic capital of the participants and appears to provide exceptional value. Nortel has embraced the same approach.