Thanks to the dot.com crash, it is easy to be cynical about alliances. Professor Ben Gomes-Casseres admits: "Yes, things went to an extreme with alliances, as in every aspect of business.  People were forming 20 alliances to put the logos on their website so they could raise venture capital.

Also we saw a lot of alliances struck which simply couldn't work - remember Microsoft and AOL or Microsoft and Sun over Java?"

He accepts that the crash means far fewer new alliances are being formed, but says that this reflects lack of business confidence, not the failure of the alliance model.

"Alliances are an attacking, entrepreneurial way of staking out new ground. So, naturally, we don't see so many today."

"Companies like Cisco and others are consciously building a portfolio of alliances."

Gomes-Casseres reckons that the last ten years has seen a step change in how companies handle and manage alliances: "They have gone from being a peripheral tool to a centrepiece of corporate strategy.

Companies like Cisco and others are consciously building a portfolio of alliances - in much the same way that an investor builds an investment portfolio.  And the alliance portfolio fills the same role - spreading risk and maximising opportunity."

At the same time, the art of alliances is being gradually turned into something approaching a business science.  "People are coming up with new and more precise ways of measuring alliance success.  Companies like Eli Lilly are establishing whole departments dedicated to building alliances."

The new professionalism shows itself in the way alliance managers are communicating and discussing the best way forward and the subject is becoming an academic discipline in its own right.  In the same way that some individuals become emotionally literate, so some companies are becoming alliance literate.

He reckons the main secret to success is to move away from seeing an alliance as an end in itself, to seeing it as something which serves well thought-out strategic goals: "Too few companies follow the approach adopted by Corning.

"That very late 90s notion of co-opetition has been discredited."

It decided to concentrate on its core glass-making skills, but to attack big vertical markets by forming alliances in areas like optical fibre, TV screens, etc.  There was a clear strategic rationale behind its alliance programme.  This has to be in place if alliances are to work."

In his view, what is called for is 'a strategy of alliances' rather than a 'strategic alliance':  "Often alliances were struck because of a chance meeting between chief executives. I think those days are over."

So what lessons have been learnt from the dot.com crash?

Gomes-Casseres says: "That very late 90s notion of co-opetition has been discredited. We now know that you can't go out and form an alliance with a company and then go out in the market and kill your partner.

That does not work.  Conflicts of interest make alliances unworkable.  Conflict needs to be understood and fenced against. Look at Fuji Xerox.  It worked for 40 years because Xerox felt free to give the joint-venture everything it knew as there were clearly defined markets where Fuji Xerox could sell."

Gomes-Casseres argues that alliance strategy can make or break even the largest multi-nationals, using the example of IBM: "In the 1970s, IBM was an integrated global company and, like many dominant companies with strong internal controls, it did not see why it need ally itself to anyone.  IBM actually pulled out of India rather than be forced into a joint venture by the government."

This changed disastrously in the 1980s, when IBM allied itself with Microsoft and Intel to launch the IBM PC: "The product and the platform succeeded because of the alliance. Yet, because of the way the alliance had been struck, it left Microsoft and Intel holding the intellectual property rights and IBM lost out badly to Compaq."

"By the mid 1990s, under John Akers, IBM still had not got the alliance message, and was even considering breaking itself up. Yet today IBM is successful in part because of its alliances in components, in services and also with software vendors."

"Alliance strategy can make or break even the largest multi-nationals."

No wonder Gomes-Casseres believes the future belongs to those companies which have the culture, the organisation and the strategy to build global alliances.

Mastering Alliance Strategy, co-authored by James Bamford, Benjamin Gomes-Casseres and Michael Robinson was published in December 2002 by Jossey Bass-Wiley.  Readers should also look at Gomes-Casseres website at Alliancestrategy.com

It is extraordinary to learn that alliances created $72bn in shareholder value over two years for a sample of 15 large companies.  And sobering to learn that alliances cost $43bn for another 15!  It is now common to see alliances account for twenty to fifty percent of corporate value - whether measured in terms of revenues, assets, income or market capitalisation.

Mastering Alliance Strategy is full of such gems. Many books and gurus on alliances peddle little more than a simplistic set of marriage guidance rules. This book goes a lot, lot further.

For starters, it brings together a wide range of empirical studies. Its dozen authors have measured the impact of alliances on the profitability of hundreds of companies.

It brings together the best research from some of the brightest academics.  But, unlike many compilations of academic research, the book speaks with one voice.  The book covers four main areas - alliance design, alliance management, using a constellation of alliances and building an internal alliance capability.

What are the main lessons to emerge?  The first is that alliances must be embedded in a company's strategy.  Too few companies have really thought through the raison d'étre behind their alliances. 

It also suggests that alliance designers must think beyond their day-to-day functional tasks. Lawyers must understand business objectives, competitors must also think like collaborators, risk must be defined broadly, negotiating teams must do more than bargain for the last dime.

An alliance will never take care of itself - the partners must continually adjust as things change.  The initial deal is merely an opportunity - it simply declares the ground rules for the growth of the relationship.

The book suggests that the success of external alliances often depends on having a supportive internal infrastructure. A firm that truly values its alliance capability will share best practices among its business units and develop special expertise. There are many interesting models. In a chapter by David Ernst, the book defines six types of alliance - each calling for a different approach.

Firstly, alliances can build new businesses - First Data Corporation formed a series of joint ventures with banks to perform credit card processing. Alliances can be a powerful tool to build a new business when risks are high, skills are incomplete, or speed is essential.

Secondly, alliances can access new markets. Think about the coffee chain Starbucks, which has moved into countries through alliances, moved into airlines with United Airlines and hotels with Marriott, and allied itself with Pepsico.

Starbucks' earnings from alliances reportedly jumped seven-fold between 1999 and 2000.  Done well, alliances can allow a company to remain focused on its core product, whilst reaching many new customers.

Thirdly, alliances can create skills and learning - the building blocks of future competitive advantage.  A number of large food companies, including General Mills and Pillsbury, formed alliances with the then-leading online grocer Webvan to learn how to sell over the Internet.

Fourthly, alliances can gain scale - much like traditional M&A. Think about how British Telecom and AT&T consolidated their international telecoms into a joint venture with more than $5 billion in assets and 35,000 employees.

Fifthly, we have alliances which improve supplier effectiveness. Mercedes has done this in the US by shifting much of the risk, capital investment and effort to long-term suppliers.

Sixthly, and perhaps most significantly, we have alliances to create advantaged networks.

Look at how Microsoft kept its options open with OS/2 joint ventures and alliances with Apple and Unix vendors whilst it was investing in Windows. Microsoft used alliances to hedge its bets and ensure that it would remain a contender.
 
The book suggests that striking an alliance fast is crucial. It quotes a seasoned alliance manager who claims that: "Do it in 3-4 months and you have an 80pc hit rate.  If it takes 6 months that falls to 25pc. Over a year and it has been a nice experience."  Alliances also fail if they don't have a sponsor, probably on the board.  But it is dangerous if the sponsor is the CEO, as this means there are limited checks and balances.

The first 30-180 days are critical.  Millions can be lost as time drifts by.  Consider having a team of launch managers to blitz the key issues.

Why do alliances fail?  Ernst lists seven big failures - unclear objectives, lack of a detailed business plan, decision gridlock, aligning with a weak or competitive partner, unmanaged cultural clash, the failure to learn or to protect core capabilities, and failure to plan for alliance evolution.

Many fail because partners do not set up formal processes to ensure that things are in place.  Valuable information about the partner held by negotiators at the start is often not passed on to the implementers.

The role of the alliance manager is becoming ever more crucial, and the book quotes a chief executive who described the goal of  an alliance manager as "not to create harmony, but to create a sense of dynamic tension.  To be a flying buttress in a cathedral!"

Interestingly, well-managed companies do not tend to do well in alliances, according to Charles Roussel.  He quotes research showing that companies with a high market-to-book value lost $355 billion through their joint ventures and created a negligible $1 billion through their licensing agreements. Low market-to-book value companies created $102 billion through joint ventures and $438 billion through licensing.

This suggests that well-managed firms are often centralised, hierarchical and bureaucratic, characteristics that can hinder alliance success. Second, poorly managed firms benefit disproportionately from association with better run companies.  The real winners are those companies which are systematically putting together alliance capability, Cisco, IBM, BP Amoco, Corning, Millenium and Eli Lilly.

The next stage is the growth of constellations where rival alliances fight each other. This is the norm in the airline industry, where the number of alliances rose to 120 by the late 1990s.  The book argues that companies need to be able to manage not just one, but a constellation of alliances.