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What makes the difference between alliances that exceed both parties' expectations and those that fail in the eyes of one or both parties?

Tom Finn

Alliance Assessment Tool

Given that most biotech companies look to licensing or alliances to commercialize their technology, this is an important question to explore - and one P&G Pharmaceuticals addresses every day. In fact this year, the company was awarded the 2007 Alliance Program Excellence Award from the renowned Association of Strategic Alliance Professionals (ASAP). In announcing the award, Nick Palmer, a Partner with Accenture Ltd. and chairman of the ASAP Awards Committee, noted that, "This is a company where alliances are not simply integrated into its strategy; alliances are its strategy."

After the awards ceremony, Tom Finn, Vice President - Worldwide Strategic Planning & New Business Development, shared what earned P&G Pharmaceuticals this notable award and why the company is confident enough in its alliance management capability to make the strategic decision to source 100% of its new drug development projects from an array of academic, biotech, and pharmaceutical company collaborations.

"This is hard, time-consuming work," says Finn. "Avoid an alliance if at all possible." Finn has spent nearly half his 23 years at P&G Pharmaceuticals building its alliance management capability, so this was surprising advice coming from someone who is obviously passionate about alliances. He explains that while it is certainly easier to bring a product to market on your own, you need three essential ingredients to do so - true innovation, the expertise to develop and commercialize it, and sufficient financial resources. In today's biopharmaceutical industry, it is increasingly rare that one company has all three - so alliances are often the answer.

START WITH AN OPEN, INQUISITIVE MIND-SET

So if forming an alliance is a necessity to bring your new therapy to market, where do you start? When reflecting on the lessons he's learned, Finn says he asks himself the following questions. Are you ready to give up some control? Are you starting with the expectation that each side will add unique value - that each has something to learn and something to teach? Are you ready to become interdependent - to have your success depend on your partner's success? "Win/Win or Lose/Lose are the only long-term options," Finn explains. "Win/Lose is temporary, and if you put somebody in a lose position, it's only natural that they will likely find a way to reciprocate."

NEGOTIATE FOR IMPLEMENTATION

"We sincerely believe that a successful negotiation is much more than just a signed contract," Finn explains. "It is whether the companies share a common vision, feel like the deal is truly fair, are contractually motivated to do what's right, and can work together over the long term." For example, Finn says that in the early days he often found that the contract itself became an obstacle to good collaboration - but he learned his lesson and developed a somewhat radical negotiation style. "When I guest lecture at colleges and business schools on my negotiation style, most professors think I'm nuts because I don't mind leaving some nickels on the table," he adds. "It's the philosophy of 'if I take every nickel I can get now, I'm potentially jeopardizing the hundred dollar bills that could come five or ten years from now.' It's a long-term mentality - a deliberate focus on the golden anniversary, not just the wedding."

Before getting into the terms of the deal, Finn has the negotiation teams outline both the best-case and worst-case scenarios for the product. Remembering those two long-term scenarios throughout the negotiation process - ensuring that the contractual terms motivate mutually beneficial behavior in both situations - helps protect against the contract ever hindering good collaboration.

DON'T RUSH IT - GET TO KNOW EACH OTHER

With the race to be first to market and the drive to make the most of the patent life, there's a natural tendency to dive into the work as soon as the contract is signed. However, there are potential pitfalls to collaborating before you get to know each other. No matter how pressing the next milestone, it pays dividends to invest time up front in better understanding each other's culture, processes, fears, and expectations. This is usually accomplished in a "join-up retreat," hosted at a neutral location and attended by senior management and key project personnel from both companies.

Importantly, this formal join-up is just the beginning of the process. "I take advantage of every opportunity I get - conversations over dinner or during breaks at meetings - to probe and understand more about why my counterparts do things a certain way or why something is particularly important to them," Finn explains. "All too often, people debate whose way is right rather than taking time to explore the idea that there may be a third way - a combination of the best of how both of the companies typically do something."

IT ALL COMES DOWN TO TRUST

For an alliance to be efficient, decisions and work must be delegated to the party that has the respective expertise. However, you can't artificially delegate work until there is trust. So alliances will be inherently inefficient at the start. The faster you build trust, the faster you can realize the benefits of the alliance. "To be trusted, you need to be seen as competent, reliable, honest, and empathetic," Finn explains. "A lot of trust can be built or eroded during the initial negotiations. Use the negotiation process as evidence of how you're going to operate long-term."

YOU CAN'T TURN YOUR PARTNER INTO YOU

It's obviously important to try to align as many processes and systems as practical - especially financial reporting - but it's equally important to realize that your partner has operated successfully for years before you came along, has other products in their portfolio, and has responsibilities beyond those of the alliance. It's usually unrealistic to expect your partner to change:

Corporate culture and values

Organizational structure

Fiscal year and budget planning processes

Hiring and training practices

Compensation and reward structure

"The key is expecting and respecting those differences - not trying to change them," adds Finn. "It's important to openly talk about the differences up front, especially those that could come into conflict."

AN OUNCE OF PREVENTION IS WORTH A POUND OF CURE

"Most issues that derail alliances are preventable by investing time in good join-ups, open communication, transparent budgets, aligning systems, and clarifying decisions explicitly," explains Finn. "Again, this is hard, time-consuming work, but we've learned the hard way that it's worth it."

P&G has developed more than 40 tools to help prevent issues and improve the effectiveness of its alliances. For example, the Alliance Key Element Assessment is used to periodically measure the "health" of the alliance.

The tool enables the joint project team to rate nine key elements and capture what's working well and what's not in each:

1. Senior Management Commitment
2. Right People and Resources
3. Aligned Direction and Plans
4. Clear Responsibilities and Expectations
5. Robust Communications
6. Effective Decision Making
7. Disciplined Improvement Approach
8. Aligned Work Systems
9. Constructive Conflict Resolution

Like many larger pharmaceutical companies, P&G Pharmaceuticals has dedicated Alliance Managers who support various project teams and serve as "marriage counselors" to help resolve any issues that arise.

IN THE END, ALLIANCES ARE ABOUT PEOPLE

Finn acknowledges that even with a toolkit full of proven tools and processes, it's the people from both companies who make or break the alliance. That's why he's worked hard to instill the "alliance mind-set" throughout his global company. "Even before we made the decision to in-license 100% of our new drug development projects, most of our R&D projects and marketed brands involved alliance partners," Finn explains. "Most of our people have worked in at least one alliance. During the past few years, we've implemented a formal alliance effectiveness training curriculum for everyone involved in any of our alliances - it's part of our DNA."

As you set out to find your next partner or prepare to negotiate your next contract, keep these simple lessons in mind. Tom Finn is the first to admit that he doesn't have all the answers and to reiterate that he's eager to learn more, but we can clearly benefit from the lessons he's already learned the hard way.