Transforming Technology Agreements into Profitable Alliances

Last week, we discussed some of the most common issues that hamper technology scouting efforts. However, once an organization has decided to license or partner for a technology, there are new concerns to consider. As Steve Coomber points out in his article on technology alliances, the days of innovating in isolation are over, but firms must carefully consider the best form for a partnership.

Broadly speaking, organizations can choose between joint ventures, involving the creation of a separate legal entity, or contractual agreements. These agreements vary widely, sometimes involving the clearly defined use of the other party’s asset (i.e. licensing, R&D or distribution agreement) and sometimes requiring both entities to contribute resources for collaboration (marketing alliance, production alliance or optimized-customer-supplier relationship). Joint ventures were previously the most popular way to organize an alliance but are expensive to set up and tend to limit portfolio agility. Contractual agreements, on the other hand, are more flexible but risk knowledge expropriation. Further, it is difficult to anticipate what knowledge will be gained before the R&D begins, making it a challenge to design agreements appropriately.

Research by Hans Frankort found that although joint ventures improved innovativeness through better knowledge sharing, in dynamic markets innovativeness is more directly related to the number of new partners. Thus, in dynamic markets, contractual agreements are better, because they enable more agility and greater access to new knowledge, but without the significant investment joint ventures require. However, just because these partnerships are contractually based does not change the fact that they still require careful alliance management and long-term relationship development. Additionally, as organizations work with more partners, using a wider variety of contractual agreements, the need for effective alliance management further increases.

In this short video clip, Jack Pearson from ASAP, explains the importance of alliance management and how it is becoming the way of the future for most industries:

 

Not yet convinced of the importance of alliance management? In addition to bringing greater levels of innovation and opening new markets, partnering brings better financial results. Just take a look at this graph from IBM, which demonstrates that, in Pharma at least, the best partners perform better.

Technology Alliance Management_Preferred Partners

Clearly, being a preferred partner has its benefits, but how can an organization achieve this level of performance? Here are a few points to consider:

Open Communications

We’ve discussed effective, open communication a lot on this blog, but it really is one of the most fundamental and yet elusive capabilities for partnering activities. By providing all teams with access to the same, up-to-date information, the new asset can be integrated as quickly as possible into the pipeline and valuable time will not be lost hunting down information. Additionally, organizations should consider getting the alliance manager involved before the deal is concluded, providing an opportunity for the manager to establish a working relationship and to hit the ground running. For further explanation on how to align your business development and alliance management teams, have a look at this webinar.

Fulfill obligations

This one may seem a little obvious, but few things damage a relationship and destroy trust more than failing to fulfill obligations, both financial and non-financial. By leveraging tools that not only track milestones and obligations, but that also automatically notify the relevant people, organizations avoid being caught off-guard and missing a deadline. Given the rate at which people change positions and companies, information must be kept centrally so that it is not lost. Confidentiality and IP agreements are also important obligations, which organizations can fulfill by using secure workspaces with customizable access. A secure workspace will also enable the organization to interact both securely and freely with partners.

Survive alliance issues

Finally, every alliance is bound to have issues at some point or another, whether it’s due to differences in working style, structure or reaction to changing events. By anticipating this fact and putting a strategy in place, companies can help their alliances survive whatever comes their way. In particular, companies should track all governance documents, resolutions and minutes and perform periodic relationship health checks, allowing them to uncover and track teams’ issues as soon as possible. This Harvard Business Review article provides additional advice on how to make alliances work and survive differences.

Alliance management can be tricky, but if done well, it is a sustainable competitive advantage. With effective management, more agreements transform into profitable alliances, enabling the organization to quickly adapt to changing market conditions or strategic needs and to attract the best partners – powerful advantages in today’s dynamic, competitive markets. Best-in-class partnering software provides organizations the tools, workflows and processes they need to rise to the challenge, earning them the reputation as a partner of choice.

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