The value of flexibility can be eroded by the cost of time.
We’ve seen situations where one party would be economically disadvantaged by moving forward on a certain development path, but that party has final say over the development decision. Guess what—no decision made. The dispute delayed development for over a year. Or consider the case of a company that inadvertently gave their partner the leadership over the commercial team—despite the fact the partner didn’t have to opt into co-promotion until the product launched. Differences of opinion led to many unnecessary stalemates and delays. Ambiguity in what is meant by requiring input and advice when the risk and responsibility is on the other partner has resulted in costly litigation. In all of these situations, one can be sure that the licensors no longer felt they were working with a “partner of choice.” Additionally, alliance governance must be aligned with corporate decision making. Governance committees need the actual authority to make the decisions embodied in their role as envisioned in the agreement. If committee members regularly have to “get back to you” after consulting superiors and other stakeholders, the partner may begin to think that decisions are made behind closed doors and not collaboratively. It also likely adds to the number of times that decisions are reconsidered for no apparent reason.
Alliance Managers Manage Complexity, Mitigate Risk Strong alliance management capability can take out some of the complexity, charting a course to mitigate the risks caused by the “flexible” operating and governance terms of alliance agreements. When licensing professionals and alliance managers partner with one another to evaluate and negotiate with potential partners, they can be sure that the risks that exist due to having viewed flexibility as a currency are identified, planned for, and managed. Additionally, alliance managers bring their experiences in implementing and living with alliance agreements and can provide Quarter 2, 2011
MANAGE RISK TO REALIZE VALUE
MANAGEMENT COMPLEXITY POTENTIAL VALUE
collaborative.” Meeting these requirements is tough. Too little flexibility and the competition wins the deal. Too much flexibility and the deal eventually backfires because operating and governance complexity leads to squabbles that delay development.
specific examples of how well-intentioned provisions have caused operational chaos. In some companies, there is recognition of this need for internal partnering to smooth the transition from deal execution to deal implementation. Our 2010 study, Practice of Alliance Management in the Biopharmaceutical Industries, found that 67 percent of the alliance managers who participated (representing 47 companies from around the world) have a reporting relationship into business development. Additionally, 40 percent of respondents said that alliance managers in their company actively participate in the evaluation of potential partners and the structuring of the deal agreement. Getting the deal is important, but it’s not the end game. Rather, it marks the starting point for the real work of the alliance. Flexibility is a valuable currency, but unless the management risks it creates are properly identified, planned for, and managed, flexibility can become the Achilles’ heel of an alliance-centric strategy. n
Jan Twombly, CSAP and Jeff Shuman, CSAP, PhD, are principals of The Rhythm of Business, Inc. (www.rhythmofbusiness.com) in Newton, Mass. Twombly is a member of ASAP’s Executive Committee and Shuman, a professor of management at Bentley University, is co-chairperson of ASAP’s Collaborative Innovation Council. An earlier version of this article appeared in the January 2011 issue of Effective Executive.
The magazine of the Association of Strategic Alliance Professionals