Business Alliance - collaboration can be a great asset or a major liability

Firstly, we should define what is meant by "collaboration", when used in reference to a business alliance.

We use the term collaboration as a category for many types of contract-based business structures or relationships where two or more people or organisations work together in an intersection of common goals.

A collaborative relationship tends to be ongoing, risk-sharing, and symbiotic in its nature.

If you will, it is a clustered, rather than linear, type of relationship.

In management terms, it differs from an enterprise which is vertically and horizontally integrated*, or runs all its business functions in-house.

A collaborator could be a partner, joint venturer, strategic ally, shareholder, licensee, franchisee, distributor, agent or investor. All of these may be involved in the sale, purchase, licensing and growth of a business.

For a collaboration to be successful, it is important to seek experienced and qualified legal advice and consultation. Many collaborations fail because the parties involved have not fully understood how stakeholder interests are to be looked after and managed in the alliance.

It is also important to define how external allies and business alliance partners are to be treated. This may involve a wide range of financial or business model arrangements, eg buy-sell, licensor-licensee, rent-lease, rent to own, fee for service, payment on achievement of milestones, and/or other related arrangements.

A business collaboration can be a great asset or a major liability. The outcome depends on the quality of work done in the establishment, operation, adaptation or re-invention stages of the collaboration.

Properly structured collaborations (i.e. with appropriate written contracts, other documents and management systems) can encourage regular monitoring, review and self-examination of behaviours and communications. One aim is to have a roadmap for maintaining healthy working relationships and rewards for team members. Another is to maintain collaborative problem solving approaches which help avoid value destroying habits or behaviours.

If you are considering forming a business alliance or collaboration, and need to seek professional advice, justweb™ uses and recommends the services of:

Dilanchian Lawyers & Consultants
The University Centre, 210 Clarence Street
Sydney NSW 2000 Australia
Tel (02) 9269 0229
Email Noric Dilanchian
Web www.dilanchian.com.au

* Vertically integrated companies are united through a hierarchy with a common owner. Usually each member of the hierarchy produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration which occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm, e.g. a car manufacturer merging with another car manufacturer. In this case both the companies are in the same stage of production and also in the same industry.

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