Last week, our guest contributor, Pascal Goursaud, CEO of BACARU and General Secretary of ASAP France, discussed how open innovation and collaboration go hand in hand, and we couldn’t agree more. On this blog, we’ve talked a lot about how collaboration and partnering are key for successful innovation. One of the interesting points raised last week is the difference between collaboration and partnering, two terms likely to be tossed around interchangeably when discussing open innovation, even though there are important distinctions between the two concepts. As explained last week, collaboration is one of the consequences of open innovation and what a well-conducted partnering/alliance management strategy can achieve. But, are the benefits of being a good partner worth the effort organizations must invest? And, how can organizations handle the complexity that is increasingly common with projects and partnerships today in order to achieve a profitable collaboration?
The perks of being an exceptional partner
Being an exceptional partner brings both tangible and intangible benefits, making it worth the effort to implement best-in-class partnering strategies and practices. Over time, organizations develop a reputation as a good partner, giving them an important advantage the next time they are fighting for the most promising technology, molecule, opportunity, etc. Additionally, as we heard Inova CEO Gilles Toulemonde explain in his Partnering for Innovation presentation, a recent study by IBM demonstrates that the pharmaceutical companies most preferred for partnering activities also perform the strongest financially. In fact, over half of the top 50 selling drugs in 2011 were the result of partnering and collaboration. For further proof of the benefits of good partnering, just take a look at the success Procter & Gamble’s Connect+Develop program has had in creating innovative, profitable products. To achieve this level of success, organizations must structure their partnering and alliance agreements to facilitate collaboration, however, there are many impediments that make this problematic.
The challenges of collaboration
There are many challenges that make successful collaboration difficult, some of which we saw last week, i.e. the list of competing motivations for why organizations opt for collaborative relationships. Each of those reasons will have its own unique impact on how the agreement and relationship is structured. Even if the relationship is primarily transactional (i.e. M&A), the most successful agreements are those that take into account the differing motivations and enable collaboration, both between organizations and within them, facilitating the negotiation for and integration of assets.
These competing motivations can pose a serious complication including for the friendliest of relationships. Indeed, as Soren Petersen explains in the Huffington Post, expanding the innovation partnership model is particularly challenging as a result of the unresolved questions about IP and IP ownership and the fact that large organizations typically want to own more of the value chain, particularly with regard to R&D. However, it is not only large organizations that complicate the partnering process.
According to IBM’s study, biotechs are now becoming savvier in negotiations with large pharmaceuticals, striking local/regional agreements rather than global ones, which enable them to drive a harder bargain. Although local agreements increase the odds that a strong partnership will be formed, thanks to improved access to top management, it also leads to a significant increase in the complexity of deal and relationship management.
Even without the difficulty of reconciling competing motivations and competitive strategies, the complex agreements and number of people involved from both organizations make collaboration challenging. Often, teams from R&D, legal, finance and BD&L are not only all involved and but also spread out geographically. Further, agreements can come in many different forms, calling for collaboration, co-research, co-development, co-marketing, options based on licensing/compensation and more. Coordinating all of these teams and agreement terms within one company is already a challenge, which is then multiplied by two when it comes to relationship management.
Achieving effective pharmaceutical alliance management is a challenge that organizations must find ways to overcome, especially because the need for and level of collaboration is predicted to increase in the coming years. In this article, two IBM life science consultants, Stuart Henderson and Per Lindell, argue that pharma companies must go beyond supplementing their R&D with occasional agreements with biotechs and move into networked collaboration where they are able to share expertise and efforts on a regular basis.
The best practices
So, how can organizations navigate the challenges of partnering successfully? First of all, organizations should actively seek out new, promising opportunities through technology scouting and business development. One indispensable best practice is enabling departments from across the organization to actively collaborate, contributing their unique insights and expertise in order to uncover and push the best opportunities to the top.
After finding an attractive opportunity, organizations should then utilize software for technology due diligence. The most useful software will provide templates that include the business nature, process logic and tools specific to the transaction, helping ensure the necessary forms, steps and procedures are all followed. Additionally, because they are using a secure, central workspace, organizations can both encourage collaboration between departments and keep the information secure for years to come. This information will be crucial throughout the management of the relationship.
After negotiations are completed and a new project launched, the biggest challenge begins - successfully coordinating, tracking and managing the relationship while also integrating the new asset and ensuring profitability of the project. Doing this requires that organizations are able to keep track of assets, obligations and any modifications to the contract over long periods of time and despite turnover or M&A’s. Finally, as is the case in any relationship that lasts long enough, eventually organizations will confront an issue with their partner. When this occurs, the relationship can avoid damage if everyone involved has been well informed about governance and the resolution of issues.
Although collaboration can be challenging, in no small part due to competing strategic goals and needs, by implementing partnering best practices organizations can engage in successful, profitable relationships.