A Game Plan for the Alliance Management Lifecycle	September 2008

Introduction
The Pharmaceutical and Biotech industry has evolved and become reliant upon a business model dependent on collaborations. The dramatic increase in alliance activity has led to the formation of strategies and organizations focused on how transactions are sourced and managed to enhance product portfolios. The following article represents collected input of ASAP’s (Association of Strategic Alliance Professionals) BioPharm council members and provides a real time view of best practices from alliance/collaboration professionals

This trend accelerated around the year 2000 as more of the larger pharma companies became increasingly involved in alliance activity. Even organizations such as Merck that dismissed the idea previously expanded its network of collaborations to add to its pipeline.  Some organizations have stated that product related alliances will comprise 50% of their portfolio, or more. 

Now in 2008, every major pharmaceutical company is not only engaged in this activity, they are becoming more and more sophisticated in how they manage it. Winning deals is a very competitive process and Alliance Management (AM) is becoming a competitive weapon at the most sophisticated organizations. It is important to have a track record of making deals work and being a partner that enables, rather than inhibits success in a collaborative environment. 

More and more pharmaceutical and biotech organizations are paying attention to their Alliance Management organizations. They are focusing on attributes of successful alliances as they build their organizations. They are concerned about the processes and methods required to achieve superior performance. Many are developing evaluation processes to gather feedback from their alliance partners so they can identify improvement opportunities.  All this is done in the spirit of recognizing the importance of alliances as part of an organization’s portfolio strategy and the importance of building a reputation as a preferred partner.

Leading AM organizations have begun to take a lifecycle approach to how they manage activity. We have characterized the AM lifecycle as having discrete phases that run from alliance formation through launch and eventually through exit.  Through the work of the Alliance Management Advisory Board (AMAB) – an eleven member board of Alliance Management executives associated with ASAP - the process and practices of the alliance management lifecycle have been defined and the tools associated with superior management of alliance relationships have been collected. The remainder of this article will present the best practice insights of the AMAB on the lifecycle and the methods and tools that enable superior alliance management performance.

The alliance management lifecycle is made up of four phases.  Each phase involves a different group of stakeholders and requires different skill sets, structures and processes to execute effectively.  Each phase of the AM lifecycle must be managed effectively to achieve the common objectives of the alliance partners.  The four phases of the Alliance Management lifecycle follow a chronological timeline and an overview of the key phases and processes are highlighted in the diagram below:

Although alliances normally follow the process depicted above, an extraordinary event can certainly disrupt this progression.  An extraordinary event can take the shape of a merger, an acquisition or simple recognition that the current business conditions are dramatically different than when the alliance was formed.  This type of event can lead to a change in priorities for one or both of the collaboration partners and as a result, the alliance could move rapidly to the exit phase or back to launch phase, if the deal is renegotiated. 

Form Alliance
Forming the alliance includes the activities associated with finding and finalizing the deal, which is typically led by the Business Development function but can also include the AM organization and or a scientific lead.  The focus of this phase is to clearly define the organizational or functional strategy, identify potential partners with the desired skill-sets and execute the alliance with the best-suited partner.  The approach taken while forming an alliance may differ if you are the ‘licensor or licensee’, but the processes and frameworks used do not significantly vary. 

In fact, we found that many companies effectively ‘source’ potential deals and can competently perform the due diligence.   What distinguishes the more advanced companies is their approach to finalizing the deal.  Leading organizations not only evaluate the science related to the potential alliance but also the ‘fit’ with their potential partner.  In fact, some organizations have taken the steps to define the partner criteria for future deals to improve the likelihood of success for the working relationship. 

In addition, many organizations have recently recognized the importance of including Alliance Management during the negotiation phase of the deal.  These organizations are focused on including contract terms regarding governance and process that facilitate an efficient and effective structure to operationalize the deal.  This approach is truly a competitive weapon for companies attempting to position themselves as a partner of choice.

Firms have also started to become more systematic about developing the contract.  In the past, many deals were structured in a ‘one off’ fashion, but now organizations are developing standard terms for all contracts and using templates and checklists to ensure the contract contains the appropriate terms, in a consistent format.      

Launch the Alliance
The first step to operationalize the alliance is focused on the launch activities, which normally take place during the first six months of the alliance relationship.  This critical phase will set the tone for the alliance and develop the foundation for success.  The activities for this phase focus on how to develop a common understanding of the alliance objectives and put in place the basic governance, procedural and communication elements to operationalize the alliance. 

Organizations have begun to recognize the importance of the Launch phase and more are now taking a structured and comprehensive approach to kicking off the alliance.  In addition to the application of launch planning guides and checklists, the most sophisticated alliance management organizations are focused on identifying and reconciling key organizational difference in the early stages of the relationship.  Even though achieving this requires a great deal of time on topics that are often judged as “soft”, it sets the right tone for the relationship and helps to mitigate downstream relationship risk.  Cultural assessment tools and outside facilitation are often used to achieve these goals.

Beyond organizational culture, there are three main areas to be covered in the launch phase: Governance, Process and Communication.

Governance
The governance process and structure is crucial to the success of an alliance as it represents the foundation for how the alliance functions.  Extending the governance beyond what is stated in the contract is necessary, but there is also the danger that too many teams will be established with overlapping scope and objectives.  In order to avoid this common pitfall, alliance managers are leveraging team charters and other tools to define the mission, goals, stakeholders involved for all of the alliance teams, and this normally leads to a streamlined and effective governance structure.  The most advanced organizations are also concerned about extending roles and responsibilities on alliance teams to the performance management process for goal setting and measurement.

Process
Managing the key processes of the alliance with the alliance partner is a very effective way of defining the activities the team will perform.  While the intent is not to overburden the alliance team with process, often we find that there is not enough process to keep the alliance operating efficiently and that the processes that do exist are handled in an ad-hoc manner.  Although this can work in some instances, alliances are becoming more complex and many require this additional level of structure and management.  As a result, many AM organizations are clearly defining processes such as issue resolution, project management and training / onboarding. 

The issue escalation process is normally highlighted in the contract, but there is another level of management required that focuses on avoiding the need to escalate the issue to the executive steering committee.  Systematically documenting and following up on issues that face the alliance is once clear requirement for effective issue management.  In addition, alliances partners will often craft escalation process within the alliance working teams.  By defining the process and proactively managing potential issues, some organizations are avoiding the need to escalate issues to the executive steering committee, which saves time (and effort) and also builds a stronger working relationship.

Communication
Many times collaboration partners assume that people will communicate with their counterparts in a timely and appropriate manner, but more and more larger alliance teams are leveraging formal communication plans to ensure that communication among the team is timely, informs the appropriate people and avoids misinformation.  Communication plans are an effective tool to accomplish these objectives and do not require a great deal of effort.  The golden rule of communication is that face-to-face is best.  Realistically, not all meetings can be face-to-face but certainly some of them can and barriers to moving forward are often removed once face-to-face connections are established.
Another major challenge is to instill the discipline to employ the proper communication channels when there are issues to resolve and potentially escalate.  There is little that upsets a relationship more when an alliance partner does an “end around” and directly contacts the counterpart’s senior management to address a problem or voice some form of complaint.  Alliance team members need to consider the negative impact this approach can have on the relationship and avoid this type of communication, where possible.

It is also critical to explain the dangers of employing communication methods that hinder rather than help resolve issues. For example, email can be a dangerous communication medium. The tone of communication is often left to interpretation and it often does not translate over email – what is said in a neutral or humorous tone can easily be interpreted as antagonistic by the receiving party.  Also, the use of email to raise objections and respond to challenges often breeds more conflict.  Email is best kept short, positive and away from controversial topics.

Manage the Ongoing Relationship
Once the alliance has been launched there is still plenty of work to be completed.   Managing the ongoing relationship is usually the longest phase of the lifecycle.  Companies that operate according to best practices proactively manage the alliance.   One of the key components of doing this is to evaluate the performance of the alliance.

Most alliance teams evaluate the alliance on a couple of key metrics: budget compared to actual, achievement of milestones, etc.   Alliances that are truly attempting to get the most out of the relationship are evaluating the performance of the alliance on a broader scale and developing an understanding of how to improve it.  Formal health check surveys are one way of evaluating the performance of the alliance and identifying ways to improve the working relationship.  AM organizations are also now conducting a similar exercise for the entire alliance portfolio, where they solicit feedback from all of their partners to identify their strengths and weaknesses and ultimately build a better and more respected AM organization.  Even if a strong foundation has been developed in the Launch Phase, alliances should systematically evaluate performance and receive feedback to continually improve the working relationship.

Another important consideration in this phase is how to expand relationship with the collaboration partner from one collaboration to a series of collaborations over a period of time.  One way to accomplish this is to truly understand the organizational constraints of the collaboration partner and incorporate them into the operating procedures of the alliance.  Additionally, leading organizations are focused beyond the individual collaboration and attempting to identify other collaboration opportunities that may exist with the partner organization.

Exit the Alliance
Companies will exit an alliance for a number of reasons: the contract term ends, the science or technology is no longer considered desirable or a change in the business environment can lead to one or both partner(s) wanting to end the relationship.  As a result, the steps required to terminate an alliance, will vary based on the trigger event.

Most firms take a very ad-hoc approach to managing this phase of the alliance, but more recently AM organizations are proactively planning for alliance exits.  In some cases, organizations are building additional exit language into their contracts and other firms are developing detailed exit plans that include the roles and responsibilities for all of the key stakeholders.  However, the range of activities that have to be addressed at exit cannot always be anticipated in the contract. There needs to be coordinated planning to develop an exit strategy that secures IP, positions the partners to fairly achieve their goals and wind down mutual obligations in an effective and efficient manner. The main set of issues to address during this phase focus on facilitating a smooth exit from the alliance and doing so in a way that will allow you to do business with the alliance partner in the future.  To do so, some AM organizations are now developing tools and templates to facilitate this process.

Extraordinary Event
One aspect to consider within the lifecycle framework is an unplanned occurrence, which can take place at any time during the alliance lifecycle and can have a significant impact (e.g. a merger).  The alliance partners need to examine the cause of the event, its impact and what is required to maintain successful collaboration.  The tools used in this phase of the AM lifecycle are a combination of those implemented in the previous phases. 

Conclusion
Alliance Management has become more defined as a business function and is becoming institutionalized within the Pharma/Biotech enterprise.  Leading companies have started to follow the alliance management lifecycle and leverage the frameworks and tools presented in this article, or some derivative, on a regular basis. To support their alliance teams, a variety tools and templates have been collected and discussed by the AMAB. The following is a list of tools the AMAB believes should included in the management of a development based or commercially based alliance.

Phase	Tool / Template	Description
Form Alliance	Partner Evaluation Criteria	Cultural survey that enables each partner to better understand the other and address issues and opportunities proactively
	Contract Checklist	Detailed description of terms to be used for all contracts
Launch the Alliance	Alliance Kick Off Plan	Checklist of key activities to be performed during the alliance kick off meeting
	Decision Making and Issue Resolution Process	Process definition for how decisions are made, who is involved and when
	Team Charter	Guiding principles and rules that a team will use to govern and manage
	RACI Matrix	Specific activities and/or decisions to be completed along with the roles for the key stakeholders involved
	Onboarding and Transition Plans	Training documents for new team members
Manage the Ongoing Relationship	Decision Making and Issue Logs	Documents that capture the key decisions and issues and provide a means to effectively manage them
	Collaboration & Data Retention Applications	Electronic forum for sharing documents between collaboration partners
	Communication Plan	List of information needs for the alliance team and how, when and by whom this information will be communicated
	Health Check Survey	Survey used to evaluate the performance of the alliance and identify strengths and opportunities for improvement
	Performance Management Dashboard	Report that captures performance in a quantitative manner
Exit the Alliance	All of the tools from the previous phases are potentially applicable

Many organizations have further developed their Alliance Management capability, but some are still far behind. While alliances are considered a major part of all company’s strategy many have not formalized their program to ensure these alliances are effectively managed throughout the alliance management lifecycle.  We believe these companies will be less able to capitalize on collaboration opportunities as a vehicle to accelerate revenue growth.

For those companies that have adopted a collaboration oriented mindset, there are trends that indicate which next steps are required to enhance performance in Alliance Management: 

• Involve alliance management earlier in the relationship
• Proactively manage the performance of the alliances through health check surveys
• Realize the need for greater proficiency and planning around how to exit alliances
• Evaluate alliances from a portfolio perspective

We believe that the firms that make the adjustments and respond to these trends will be positioned to use their Alliance Management programs to generate value and productively expand their alliance portfolio.

This article was written and edited by Mark Mozeson and Jonathan Fox with the broad input and thanks to The Alliance Management Advisory Board; a sub group of “ ASAP” the Association of Strategic Alliance professionals, BioPharm Council which is chaired by Michael Leonetti, Business Unit Head for Healthcare Partnerships at Boehringer Ingelheim.