<< Return to Research published Jul 26, 2007 | updated Aug 9, 2008

Aegis Analytic Strategic Partnerships

Introduction

Strategic alliances provide partners the opportunity to increase market exposure, generate new market opportunities, leverage resources to develop new offerings and enter new markets. Aegis Analytical Corporation entered into two separate strategic alliances in 2002, one with Honeywell POMS and another with Rockwell Automation. Aegis has not realized the expected results from these alliances after more than a year and must re-evaluate its alliance strategy while also taking into account the severe market downturn that is affecting the entire industry.

Recommendation

Aegis should conduct a review of its strategic alliances to address three key issues: 1. Do the partnerships create value in the eyes of the target market?, 2. How can Aegis influence their partners’ dedication to the success of the alliance?, 3. How can a persistent ongoing relationship be created between the firms while they are engaged in the alliance? Appendix A presents an assessment Aegis’ strategic alliances key success factors and should be used as a guideline in reviewing the partnerships and developing a plan for corrective action.

Aegis should not undergo this activity in seclusion, but should invite its alliance partners to participate in the review. If the alliances are determined to create value in the eyes of the customer, Aegis and its partners should evaluate changes to the alliance that would align the objectives and relative value for each firm as this is the most significant gap in generating value from the existing relationships. These issues were identified as significant issues among the key factors of successful strategic alliances. Aegis should invest the additional time and cost to identify and correct the problems with these alliances due to the well-aligned capabilities of both strategic partners.

Analysis

Industry Characteristics and Key Success Factors

Aegis provides process manufacturing software and consulting services targeted for pharmaceutical and biotechnology manufacturers. The demand for Aegis’ Discoverant product was not only driven by the target market’s desire to reduce costs but also the need to maintain the most stringent quality goals under pressure from the FDA and consumer watch groups. The sales cycle for a product like Discoverant is long and involves much iteration, making the sales team’s effectiveness and knowledge of the sales cycle another key success factor.

Core Capabilities

Successful alliances significantly enhance the value of each partner’s offering through complementary capabilities. Aegis core capabilities center around creating analytic software that is easy to use and aggregates data from multiple independent data sources with no manual intervention. Aegis’ alliance partners, Honeywell POMS and Rockwell Automation, display core capabilities in offering and selling manufacturing execution systems designed to enhance the flow of business information across the enterprise for their customers. The capabilities of Aegis and its partners are closely aligned and their offerings attempt to address the same general problem for customers: effective integration of information and data across the enterprise to enhance business intelligence. Aegis has established alliance partners with complementary capabilities making the objectives of each alliance partner the next critical issue.

Alliance Objectives

Aegis’ primary objective in entering strategic alliances with Rockwell and Honeywell was to enhance Aegis’ visibility and credibility and enhance the sales of Discoverant. Rockwell and Honeywell had similar objectives in that they both sought to add value to their existing portfolios through offering a complementary product that enhanced the value of their primary products. Aegis’ objectives are significantly different than its alliance partners, largely due to the relative strength and market positions of the firms. Aegis is a largely unknown, small-firm with a specialized product offering while their alliance partners are large firms with a broad portfolio of offerings.

Relative Value of Alliance

The potential value of Aegis’ alliances is much greater for Aegis than for its alliance partners. The difference in relative value generates a significant difference in the relative importance of the alliance to each firm. Aegis is highly reliant on the success of its alliances, as the firm has invested its very limited resources in developing and supporting the partnerships. As a start-up, Aegis also has little room for failures if the firm is to survive. Alternatively, Aegis’ alliance partners have significant resources as they are part of large, established corporations.

Aegis is relying on its strategic partners to create push demand for its product and build market credibility through association. Aegis partners, while recognizing the value Discoverant adds to their offering, do not benefit significantly through the ability to offer additional components with very little market recognition. The difference in relative value to the alliance partners may be significantly affecting the results of the alliance and might be inhibiting either firm from capturing value from the alliance.

Capturing Value of Alliance

Neither Aegis nor its alliance partners have captured value from these strategic alliances. With neither partners benefiting from the alliances, the primary issue becomes whether these alliances truly generate value.

Buyer behavior must be the focus in developing strategic alliances. While an alliance may appear to generate added-value for both partners on paper, the customer’s perception of the alliance and a positive impact on buying decisions is the only thing that will generate tangible value from a strategic alliance. It is unclear whether the lack of alignment in relative importance or the lack of actual value in the eyes of the customer is the root cause of these unsuccessful alliances.

Summary

In addressing the key factors of successful strategic alliances, we have validated positive attributes of Aegis’ existing partnerships and identified potential problems. Aegis has forged relationships with partners whose capabilities and offerings align well with its own while and the objectives of each firm in engaging in the alliance are different but sound. The relative potential value and capturing value generated by the alliance appear to be potential problems that are inhibiting the success of the alliances. While the impact of the market downturn should not be ignored, Aegis should focus on the specific factors of the relationship and implement corrective action as the initial step. If Aegis’ alliance partners are not willing to actively participate in a review of the key success factors, Aegis should move to terminate the partnerships and re-focus on its independent sales efforts.

Bryan A. Harmsen
MGMT4290 - Business Strategy
Aegis Analytic Corporation
Thursday, July 26th, 2007

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