Relationships Really Do Matter

Tuesday, September 07, 2010

A few years back, my job title read: "Associate Director, Strategic Alliances and Partnerships". Pretty cool, huh? But I know what you're thinking: what the heck is the job? Truth is, I got that a lot, even from my peers.

One of the most important (albeit overlooked) competencies within an organization is managing the relationships that the company has externally. Be it OEM vendors, co-development partners, or clinical research organizations, how well we manage these relationships can mean the difference between a successful program and a hot mess. Need more convincing?

A few years back, Vantage Partners, one of the leading consulting firms in Alliance Management, took a poll of their clients asking why business relationships fail. In 6% of the cases it was the terms of the deal. This would suggest that the Bus Dev guys and the lawyers are doing a pretty good job. Surprisingly, the major reason in nearly half the cases was a poor relationship between the firms. This resulted in an average of 80% of the potential value of the relationship - measured in forfeited milestone payments or unrealized revenues - was lost in the process. With a typical valuation being arond $100 million for a strategic alliance, we're talking serious money.

And that's just the business side. Imagine the regulatory implications of poor vendor communications leading to defect product. Or your development partner not adequately documenting their part of the design. Or maybe your CRO does a mediocre job of auditing the clinical trial data.

Keep in mind that how you manage your suppliers (or partners) is one of the first things an auditor looks for, especially when things go wrong. The resulting risks to the business, whether they are monetary or regulatory, are very large should these key external relationships go bad.

This is something that big pharma learned some years back in their deals with small biotech firms. Today, almost every large drug company has dedicated alliance managers looking after these deals. But diagnostics has been much slower to adopt this same strategy, even though more and more firms are leveraging external resources to bring new products to market.

Okay, so now that you are at least somewhat concerned, what can you do about it? There are some simple things that you can do to make sure your external relationships don't end in divorce. Here's a few to consider:

  1. Assign a Relationship Owner. No matter what the relationship - alliance, vendor, researcher - there should be someone within your company whose job it is to worry about what's happening. This person is also your business partner's conduit to your organization. Every communication should at least be cc'd to this person so that they can keep track of when things are being completed and when they are slipping through the cracks.

  2. Set-up Governance Structures. Most contracts do a good job of defining the deliverables and the payment structure, but they don't do very well at how you're going to execute. What if there is an issue that the team can't resolve? Is there even a team? Take the time to establish who's on the team, and who in both organizations is responsible for resolving issues that the team can't.

  3. Over Communicate. No one on a project ever said "Gee, I wish I didn't know so much about what's going on". The most important thing you can do when managing a relationship is to make sure the other side clearly understands what the status is. This includes everything from what the deliverable is to who's working on it to when is it due by. Plus all those nagging details in between. Don't be afraid to follow-up a phone call with an email, or to pick up the phone when the email doesn't make sense. And if possible, there's no substitute for periodic face-to-face meetings.

  4. Document Everything. Okay, part of this is to make the lawyers happy in case something goes wrong. But it's also important from a regulatory perspective. Are their design outputs matching your inputs? Are all the risks covered, and by whom? Is the product performing according to spec? Taking time to make sure that there are no gaps in the documentation can make the difference between a smooth audit and a rough one.

Like the relationships in your personal life, the ones in your business need attention to make them successful. It's worth spending some time making sure they stay in the honeymoon period as long as possible.

Tags: Best Practices, Design Control, Partnerships / Alliances, QSR

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