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He potential for frustration, time-wasting, and bad feelings between pharma and biotech partners is enormous. That some successful decisions are made under these circumstances is something of a miracle.
Most pharma-biotech alliances don't succeed. Though some breakdowns are to be expected—the science at the core of each deal will not work out in every case—many are entirely preventable. A deep look reveals that these full or partial failures are frequently a result of factors that can be controlled: timely decision making, effective communication, and goal alignment. Given the importance of such alliances for industry R&D, this article highlights what pharma and biotech companies can do to salvage faltering partnerships, or, better yet, design them to be successful from the start.
First, pharma and biotech partners must acknowledge that their significant differences make working together difficult. Transactional alliances—licensing agreements with arms-length relationships—used to be the rule. Today, strategic alliances are more collaborative, calling for integrated decision making and problem solving with multiple interactions among employees from each side. Many people from both partners jointly decide, plan, and exchange data, working side by side or in constant touch day after day.
To do this with people working within different organizational structures, following different strategies, using different processes, and guided by different implicit and explicit cultural norms is far more difficult than many realize. Consider a group asked to make a seemingly simple alliance investment decision. Matters are swiftly complicated because they all don't possess the same willingness to share strategic information. Their tolerance for risk is dissimilar. They work with mismatched budgeting cycles and use incompatible decision tools. The potential for frustration, time wasting, and bad feelings is enormous. That some successful decisions are actually made under these circumstances is something of a miracle.
These challenges, when poorly understood and handled, regularly lead to suboptimal alliances and, if left to fester, create full-blown fiascoes. Negative perceptions, misunderstood motives, feelings of disrespect, resentment, mistrust, or coercion contribute to the partners' inability to effectively work together. They lead directly to project delays, missed milestones, lack of innovation, mutual dissatisfaction, unresponsiveness to market changes, and ultimately, failure.
Challenges of this magnitude do not take care of themselves. Alliance partners must make collaborative behaviors flourish. Companies that are consistently successful at forming and managing alliances not only understand the kinds of behaviors people need to overcome organizational divides, they take pains to embed those behaviors in the processes that constitute their alliances. There are many such behaviors—too many to survey. But the three that follow serve to illustrate the potential usefulness of all:
Keys to Effective Alliance Implementation
Interests versus positions. Interests are defined as a party's needs, desires, fears, and concerns. In contrast, its positions are its demands—the things it wants the other party to do to meet its interests. The distinction is crucial. Imagine two sisters arguing over the last orange in the house. They each angrily demand to have the fruit. Finally, their mother makes a Solomonic decision, cuts the orange, and gives each girl half. One sister peels her portion and eats the fruit inside. The other peels her half, tosses the fruit away, and grates the rind into a cake she's preparing to bake.
The moral of the story? Each could have gotten all of what she wanted, not part—if she had discussed her interests instead of just making her demands loudly known.
Perhaps more important is the diminished quality of their working relationship that results. The sisters remain angry and frustrated, each feeling she didn't get all that she wanted. They may even hold grudges and try to "even the score" later. Had the sisters shared their underlying interests, they would have understood each other's true needs more clearly. Such understanding would create empathy, build trust, facilitate communication, and expand the possible solution set, eventually creating greater value for both.
The same lesson applies to alliance managers. When dealing with a demand, they should separate positions from interests and work toward mutual understanding.
Joint contribution, not blame. The concept of "joint contribution" is founded on two premises: situations are rarely black and white; and alliance relationships exist within a system of actions and reactions. In other words, actions are generally reactions—responses to actions taken by others.
The upshot is that each party is likely to have played a role in creating a situation. This does not mean they are equally culpable or legally responsible—merely contributory. A person mugged walking across a poorly lit park at night has done nothing to deserve punishment, but the route chosen was nonetheless a factor in that person's misfortune.
Troubled Relationship Lead To Alliance Failure.
Breaking down a situation's causes from a joint-contribution perspective allows alliance partners to see how different people, groups, and systems together produced unwanted results. This expansive examination of causes generates better problem-solving options and helps avoid a repetition of the pattern of interaction that created it in the first place.
An organization may even gain from looking at its own actions in isolation from within a joint-contribution stance by helping it identify unilateral changes that might improve or remedy systemic or recurring problems.
If alliance partners are to successfully overcome their differences and consistently make good decisions, they must try to persuade, not bulldoze or coerce. Each side needs to make its case "on the merits." If the alliance is to last, the companies must share a belief that resolutions are legitimate and based on standards that both accept as reasonable. If not, the relationship will deteriorate, decision-making quality will decline, and the partnership's life expectancy will be diminished.
Alliance partners must therefore be prepared to implement the behaviors associated with "on the merit" decision making. This means partners have to explicitly commit to this kind of decision making as a matter of principle. They have to articulate and agree on what the appropriate standards of decision making are. They have to be open to the possibility that they might be wrong at any stage of discussion on any point, and be equipped to engage in conversations about metacriteria—the standards used to evaluate the appropriateness of other standards. By so doing, partners are likely to arrive at joint decisions both believe in; both feel were fairly made; both can accept, understand, and trust; and both can carry out.
Keep the Change
Collaborative behaviors are fundamental to overcoming any differences in pharma-biopharma alliances and a key to preventing them from occurring at all. But they won't happen if firms do not have the organizational capability to implement them in a systematic, ongoing way. Companies need to develop and institutionalize ways of managing alliances that have these collaborative behaviors at their core. Indeed, many organizations engage in multiple alliances and therefore must manage several relationships concurrently, a significant managerial challenge. Seen in this context, an organization that fails to focus on how it can support collaboration puts all its alliance-dependent strategies at tremendous risk.
Organizational management of alliance differences is a complex and seemingly forbidding task. But it is actually built from a relatively small number of essential components:
The right skills and mindset. Collaborative behaviors begin with people with the appropriate skills and orientation. Companies tend to rely on training programs to build necessary skills. Whether it's continuing education for executives working on strategic alliances or quarterly workshops for internal alliance teams, training though important, is not enough. Individual mindsets must be consistent with desired behaviors if employees are to apply them for more than the few weeks that follow a training course. To instill the desired skills and outlook in a lasting way, companies must use a three-pronged approach—training and hiring, leadership messages, and incentives:
How to Grow an Alliance
Companies with the right people still need processes and tools that support collaboration. "How to Grow an Alliance" illustrates the alliance management lifecycle and offers examples of processes and tools that assist collaboration at each stage.
Companies should establish structures specifically designed to support collaborative behaviors. This might be either a central alliance function, a center of alliance excellence, or an alliance manager community of practice (a cross-organizational support mechanism that links alliance managers across the enterprise). This last structure enables people throughout the organization to call on alliance management expertise, ensuring it is applied when and where it is needed.
Alliance Capability Model
They should also develop roles, responsibilities, and reporting relationships that describe and support collaborative behaviors. One way to foster them is by deputizing qualified people to play the role of alliance management mentor, coach, relationship manager, and executive champion.
The "Alliance Capability Model" describes the elements of alliance management and how they inter- relate. Putting a system like this in place allows collaborative behaviors to form, raising the likelihood of alliance success.
The main features of the model are:
Note that alliance capability is built in at every level so that every activity can be executed across many people and many alliances consistently and collaboratively.
As alliances between pharma and biopharma companies become increasingly complex and the sums and reputations at risk continue to rise, the importance of developing the ability to systematically manage differences between companies that elect to partner will only grow.
Companies can manage these differences by creating a collaborative mindset and cultivating appropriate behaviors with all the tools and techniques at their disposal.
Companies that meet these challenges will eventually be rewarded with more than just new relationships. They will also see their existing alliances function more smoothly, making it more likely that they—and their partners—will succeed.
Stuart Kliman, Laura Visioni, and Larraine Segil are all consultants at Vantage Partners, a Boston-based relationship management consulting firm. They can be reached at firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org, respectively.