Driving high-performance alliances
pharmaceutical alliance management as a model for best practices
Business alliances are critical to any industry. One company has new and exciting ideas, and its partner, marketing muscle. But unless an alliance is carefully tended day to day, any number of preventable problems—poor coordination, bad communication, culture clashes—can undermine an otherwise promising partnership. The stakes are especially high for high-cost, high-risk pharmaceutical collaborations, where product success is far from given, and every activity must conform to strict regulation. Alliance partners must work together flawlessly to achieve their mutual goals. But try as they may, a whopping half of pharmaceutical collaborations fail—not because the science falls short, but because poor alliance management leads to missteps, missed deadlines, lack of trust, and ultimately, collapse of the relationship itself (Cortada & Fraser, 2006).
Project management is fast becoming a key strategy to help pharmaceutical partnerships thrive. This paper will explore project-management best practices—with a focus on safeguarding the alliance relationship—that are helping the life sciences industry negotiate complex collaborations that span continents and comprise hundreds of stakeholders. These principles can be applied to any industry that needs to ensure healthy and successful alliances.
Better Partnering in the Pharmaceutical World and Beyond
Collaboration and the Bottom Line
Alliances in the life sciences industry are growing by leaps and bounds. In its most recent study on biopartnering, based on a 2004 survey, the IBM Institute for Business Value found that the market value of pharmaceutical alliances worldwide is trending sharply upward. In only three years, from 2000 to 2002 inclusive, money poured into global alliances grew by 75 percent, to $US19B (Cortada & Fraser, 2006), following a similar pattern since the late 1980s.
This is no accident. As big pharmaceutical companies lose patent protection on their blockbuster products, they are looking for ways to quickly replenish their pipelines—happily timed just as biotechnology firms are creating innovative therapies that treat previously untreatable diseases. As discovering new medicines becomes vastly more complex and expensive, especially after the “easier” diseases (the low-hanging fruit) are tackled successfully, partnering becomes the inevitable next step in the evolution of drug development. By joining forces, companies offer complementary strengths to their partners, whether research acumen, distribution channels, regulatory expertise, manufacturing facilities, or marketing prowess. In fact, by 2003, nearly a third of new pharmaceutical products were developed through alliances (Hess & Evangelista, 2003).
But despite the criticality of partnerships to the life sciences industry, half of them flounder due to poor stewardship, the IBM survey revealed. Its conclusion was that “better alliance management practices could salvage 85 percent of the value now lost to failed partnerships – a potential sum of US$2.7 billion” (Cortada & Fraser, 2006, p 3).
What’s the Problem?
Collaborations can be fraught with difficulties, often due to “softer” elements that alliance partners may not take into account as they discuss science, markets, and business. Take cultural differences: The staid, process-heavy pharmaceutical company can frustrate the nimble little biotech, which can seem undisciplined and unpredictable to its pharma partner. This scenario can sow the seeds of mutual mistrust, especially when the stakes are huge for the tiny biotech, whose entire existence could turn on the success of the one product it has nurtured, which it is now commercializing with its deep-pocketed partner. Throw poorly orchestrated communications—often across time zones and languages—ill-defined roles and dissimilar processes into the mix, and tensions rise, suspicions turn to out-and-out hostility, and the partnership is suddenly on the brink. Such dynamics are not exclusive to the pharmaceutical world: They can apply to any collaboration in any industry.
Alliance Management Versus Project Management
The proliferation of partnerships in the life science gave birth to a new function: “alliance management.” Alliance managers generally deal with higher-level activities, such as initiating and maintaining alliance relationships at the executive level, rather than day-to-day management (Exhibit 1). Does a company need both alliance management and project management groups in order to conduct successful collaborations? That depends on the company and on the alliance.
Smaller companies often don’t have the resources for separate functions. Biotech startups, for example, generally have limited money in the bank, and their staffs are stretched thin, juggling multiple responsibilities. A big company probably can afford to create an alliance-management function. But even large firms are finding that it doesn’t always make sense to staff every alliance project with an alliance manager, since all partnerships do not require the same degree of attention. One global pharmaceutical giant with both alliance management and project management functions had 70 ongoing collaborations as of early 2007, but only 14 of them—presumably those that were more complex and strategically vital to the company—were staffed with alliance managers, leaving the rest to be conducted by the project management team.
Exhibit 1 – The Alliance Management/Project Management Continuum
Project Management May Be All You Need
More important than money and manpower is professional skill. Project-management expertise could be adequate but not stellar when partnerships played only a minor role in pharmaceutical business. But now that the industry depends on collaborations for its very viability, mere adequacy is no longer sufficient. This author believes that the emergence of the separate alliance-management function may have been borne out of deficiencies in project-management skill, “band-aiding” the problem instead of fixing it.
Before sinking resources and energy into creating a separate infrastructure to manage your alliances, first assess the strength of your project management. An effective project-management team may be all you need. Excellence in alliance management depends on a set of skills, regardless of title or department name. When it comes down to it, an alliance manager is a highly skilled project manager who can focus at the strategic as well as the tactical level.
The Effective Project Manager
The same skills apply to alliance management as to any project: accountability to project success, exceptionally strong interpersonal skills, being viewed as unbiased and trustworthy, a keen eye for detail, and disciplined adherence to process. However, managing an alliance relationship tests these skills at the next level. Earning the trust of Company B is particularly tricky when you work for Company A. You have to relinquish corporate allegiance to play an impartial role—and even act as spokesperson for your alliance partner, as is often necessary over the course of a project. That might not be popular at “home.” It takes a unique individual, someone with confidence and courage, to risk being seen by some in one’s own company as a “traitor” of sorts. Techniques for building trust among all alliance partners are discussed below, but sometimes the hostility is too great for the in-house project manager to dispel. In these cases, it’s prudent to consider engaging an external, third-party project manager, who is, by definition, nonpartisan and can act as a bridge between the parties.
Reducing Relationship Risks
First and foremost, it’s important to differentiate between project risks and relationship risks. Scientific ventures have inherent unknowns. Likewise, governmental regulatory agencies may impose hurdles that could not be anticipated. These project risks are outside of either company’s control. Largely avoidable, however, are relationship risks: the missteps (usually inadvertent) you make as you work together toward a common goal. To get off of on the right footing, you must be proactive. Identify the full constellation of potential risks. Talk candidly to flesh them out. And (finally) determine how you will prevent them from derailing your partnership. Reducing relationship risks is an activity that starts before the contract is signed and continues throughout the collaboration.
One classic relationship risk is differing decision-making processes. In a big pharmaceutical company, with hundreds or thousands of employees and many of layers of bureaucracy, decision-making usually takes awhile, involving staff across various levels of the organization, even across different facilities, who need to weigh in: scientists, marketing people, manufacturing, regulatory, and legal staff. At a 25-person biotech startup, all pertinent staff, including the CEO, often attend working meetings, so decisions could be made on the spot. To the biotech, waiting days or weeks for an answer may indicate (wrongly) that its giant partner is dragging its feet, or disinterested, or—worse—hiding something.
Building In Safeguards
The project manager’s role is to enable both parties to understand how their companies are different (processes, priorities, goals), then help them understand that different doesn’t always equal “bad.” This should happen in the due diligence phase, before either company signs the deal. Project managers, working alongside their business-development colleagues, can build agreements into the contract to short-circuit anticipated sticking points. For example, who has final authority on which decisions? Are there times when the big company’s CEO should step into the decision-making process, perhaps deviating from corporate policy, to ensure the project stays on schedule? If so, under which circumstances? Facilitate discussion on these points with members from both alliance parties, and codify your decisions in the contract.
At your alliance-team kickoff meeting, revisit your set of relationship risks: which ones the contract addressed, which ones it didn’t, and why. How you structure your communications plan and conflict-resolution process will help mitigate those still “at large.” But relationship risks cannot always be addressed on paper. Parochial disagreement between individuals who never see eye to eye or even try to find common ground can be tremendously disruptive to an otherwise healthy overall team dynamic. These situations require one-on-one intervention. Whether the project manager, a fellow team member, or management identifies process- or personnel-related relationship risk, what’s important is to catch these problems early and remedy them. Alliance management is everyone’s responsibility.
Breaking Down Walls
Building team unity will lay the groundwork for trust that in and of itself can mitigate relationship risks. Never under estimate the power of the face-to-face meeting. It costs money. It takes time. It’s inconvenient. But it’s necessary. Singing around a campfire won’t bring an alliance team together. To create a genuine alliance “micro-culture,” you need to establish channels of communication; trust and confidence in each other’s skills; and an appreciation for each other’s corporate cultures. Make site visits. Get a feel for one another’s daily setting, whether in the lab, on the manufacturing floor, or in the corporate office. Structured exercises that prompt team members to describe their company’s operations, along with their own personal day-to-day roles, help people get a realistic picture of their partners’ “world.” The more team members can relate to each other at multiple levels, in addition to the pragmatic project interactions, the more seamlessly the team will work together.
That said, alignment on the tasks at hand is critically important to success. Does everyone understand and buy into the schedule? Do team members know their roles, and appreciate how their activities are interdependent with those of their alliance brethren? Realizing that project success relies on complete team integration will help cement the relationship. Interdependency is binding.
But before any team activities start, get top management involved. A visible and positive endorsement by partner CEOs will set the tone for everyone going forward. As the partnership progresses, look for opportunities to keep high-level stakeholders front and center to recognize accomplishments and reinforce the importance of strong, collaborative working relationships.
We Are One
For a collaboration to work, you must regard your alliance-partner teammates no differently than you would colleagues at your own company. That’s particularly challenging in the life sciences world, where it generally takes ten years and a billion dollars to bring a product to market, so intellectual property is intensely guarded. That means any outsider, even one’s alliance partner, is the enemy, regardless of how many confidentiality agreements they’ve signed: “They’ll leak company secrets!” “We’ll lose our competitive advantage!” It’s the project manager’s job to try to alleviate these fears. Reputable companies that want to collaborate with firms in the future will not hurry to violate its partner’s trust. It’s a small community.
The Fringe Benefits of Good Project Execution
Do what you say you’ll do. Disciplined execution not only keeps the project on schedule, it also builds trust between team members when they know they can depend on one another. The project manager’s role is to stay on top of every activity and every hand-off, and ensure people do their parts—the essence of good execution.
Speaking of Communication
Communication, and plenty of it, is critical to a healthy partnership. When you think you’re communicating too much, it’s probably the right amount. But it must be communication without a filter (“We can’t tell them that”). True transparency is not an easy task, but if you’ve nurtured trust and team unity, it’s possible.
Alliance communications are particularly complex. Some of the obvious hurdles are time zones and languages. But other difficulties abound. Take terminology, for example. Not medical terminology, or language translation, but in-house acronyms, which run rampant in most corporations, including pharmaceutical firms. One company’s LRR (Legal Regulatory Review) is another company’s RAC (Review And Compliance). Talking in alphabet soup is second nature within a closed environment but can be alienating to an alliance partner. Either define your terms for your partner upfront, or create new ones, if necessary, that are specific to your alliance “micro-culture.”
As well as you’ve sown the seeds for a harmonious relationship, conflicts will inevitably arise. To resolve them effectively, first ensure that potential issues bubble to the surface over the course of the project. Then guide people through a constructive resolution process that doesn’t rely on who has the loudest voice or strongest personality, which will backfire in the long run.
Prepare to handle conflicts objectively, with a process both partners build together. It can be as simple as developing a “pros and cons” list. Another technique is to assign weights to different criteria against which you’ll assess various options, to make decision-making semi-quantitative. Or you could seek external opinions for a fresh or expert view, either from others within the alliance companies (though not on the alliance team), or from outside consultants (such as physicians or scientists, in the pharmaceutical realm).
The key to conflict resolution is creating an environment in which people feel safe to bring up their concerns, instead of stewing over them in silence. This is where a project manager’s skills truly come into play. By getting to know alliance team members face to face, through frequent team meetings and site visits, you can read body language or even pick up an “off” note on a conference call. If someone is uncharacteristically quiet, for example, or speaks with a different tone, draw her out (“Sarah, I’m getting the sense that you’re not totally comfortable with this”). Structure meeting agendas to enable people to express their thoughts. Allow time for discussion, or put issues in the “parking lot,” to be discussed later by a subset of the team.
Occasionally, a team member cannot be mollified and resists efforts to find a common solution at every turn, time after time. At that point, give up. Some people simply do not function well in a collaborative environment. It’s not their fault, but they jeopardize the alliance and should be moved tactfully to a new assignment.
What Defines Success?
What does success look like? Not just through your eyes, but through your partner’s, as well. Success is measured not only by concrete milestones, such as launching a product on time, but by softer elements, as well, such as teamwork, communication and trust. These elements often become your key success metrics, which you track over time and use to keep the alliance healthy and strong. How you succeed in these areas will help you decide whether to collaborate with your partner again in the future, and even influence how other companies perceive what it’s like to do business with you. Your reputation is everything.
If you’re not doing well on the softer stuff, it’s a good bet that your hard targets will soon be in trouble, too. Executing hand-offs with precision, making timely decisions, staying on schedule—they depend upon seamless collaboration across alliance companies. Caring for the relationship is a hard-nosed business activity with one goal: Deliver the project. Missing the mark is expensive, especially in the life sciences industry. Each day a new product misses its launch date can cost millions of dollars in lost revenue opportunity.
Consider the following scenario: You work for months (perhaps years) with your partner, only to have your final deliverables fall short of expectations, or miss them altogether. How frustrating would it be if that outcome could have been prevented through proactive monitoring of the relationship throughout the partnership? Measuring how you proceed to your final result allows you to deal with problems when they are small instead of waiting until they place the partnership in jeopardy.
One measurement technique is to construct a “spider diagram.” The first step is to decide what you and your partner want to measure, which may differ depending on the alliance. Then ensure both parties have a mutual understanding of each area you plan to measure. Use semi-quantitative terms, wherever possible, to define each element. Does “good communication” mean phone conferences three times a week? Bi-weekly progress reports? Ensuring that informal exchanges (in the elevator, at the lunch table) get funneled into the formal communication process? Finally, track performance on a periodic basis, perhaps every six months for a long-term project, more frequently for shorter or more intense effort.
In evaluating performance, alliance team members rate each element on a numeric scale. How well are you doing in decision-making? Is it going as well you as you expected? Does it need improvement?
By graphing all your results (Exhibit 2), you get an at-a-glance view of where you are now and where you need to go. How did you rate performance compared to your partner? Where are the gaps and why? Do you need to do something about it? If so, what?
Exhibit 2 – Success Metrics: Spider Diagram
For example, you and your partner agree that “communication” needs improving. You dissect the problem and brainstorm together. Can you fix it alone? Should you bring in an external facilitator? What is the root cause for people’s dissatisfaction? Should you formalize the communications process a bit more? You develop an improvement plan and reassess yourselves six months later. Hard evidence of real progress is a powerful team motivator.
Note in particular if there any major disparities between your and your partner’s ratings. Why are you pleased, for example, with decision-making, while your partner is not? Perhaps your partner thinks the decision-making process takes too long. But, as referenced previously, taking two months to make a decision may be your company’s corporate norm. Perhaps that’s even good by your standards. Understanding one another’s circumstances in and of itself may alleviate a problem, or if a remedy is required, you can explore the options together with a shared perspective.
Share Your Findings
For metrics to do their job, everyone needs to understand them and participate. Metrics define the team’s mutual expectations. If they’re not visible, if you don’t communicate expectations and achieve buy-in from the group, resentments can develop and fester. Clarity, communication, and follow-through keep alliance coworkers aligned.
What About a Project Plan?
This paper did not address the typical project management mechanics associated with conducting an alliance, such as developing a robust project plan, creating a risk-mitigation plan (that addresses project, not relationship, risks), and driving execution. Though some special considerations come into play in a collaboration project, basic project-management principles apply. The more skillfully you conduct overall project management, the more secure alliance partners will feel, and the healthier the alliance relationship will remain.
Structure is Not a Substitute for Leadership
Even with a full roster of processes, procedures, and teams, if you don’t have a project manager who drives the program with discipline and diplomacy, the alliance with falter. Good plans and schedules are necessary, but not sufficient. At the end of the day, you need strong leadership that facilitates a collaborative environment to ensure success.
Think Outside the Contract
Try to provide your partner with added value. Exceed expectations. Go above and beyond. That’s obvious when it comes to a client relationship, or in helping your own company succeed. But the Golden Rule applies also to your alliance partner, which may, in fact, be your competitor once the collaboration is over. If you have expertise they lack, even on a project outside of your joint endeavor, help them. Put them in touch with useful resources. Such goodwill builds the relationships, and, this author believes that generally “what goes around, comes around.” You never know how the favor may be returned to you many fold in the future.
Cortada, J. W. & Fraser, H. E. (2006, February 14) IBM Learning the biopartnering game: How to achieve more from your biotech alliance. Business Consulting Services. Retrieved on July 11, 2007 from http://www-935.ibm.com/services/us/index.wss/ibvstudy/imc/a1005825?cntxt=a1000060
Hess, J. & Evangelista E. (2003, September) Pharma-Biotech Alliances. Contract Pharma Retrieved on July 14, 2007 from http://www.contractpharma.com/articles/2003/09/pharmabiotech-alliances
© 2007, Timothy J. Noffke
Originally published as part of 2007 PMI Global Congress Proceedings – Atlanta, Georgia 7