Keys to Success - Pharmaceutical Executive


Keys to Success
An overview of recent industry deals reveals 10 principles for developing and maintaining strategic partnerships.

Pharmaceutical Executive

The steering committee of a joint venture or alliance is often a hotbed of decision-making conflict, and having a common decision-making process helps avoid gridlock. Steering committees and other decision-making bodies should focus their process on five key questions:

  • What's the intent of the decision?
  • What are the objectives?
  • Which objectives are "musts" and which would just be nice to have?
  • What are the alternatives and how well does each meet the objectives?
  • What are the risks?

There is another benefit to having a common decision-making process: "The higher the stakes, the higher emotions run," Brinkley says. "Using a standard process takes the emotional, subjective component out of the decision and focuses on the facts. By moving step by step—from objectives through risks—we analyze the available information objectively rather than merely exchanging opinions."

8 Plan Smart In 1995, Nellcor acquired Puritan Bennett. "Even though it was the acquiree, PB was larger than Nellcor," says DeBuono, Nellcor's cousel at the time of the merger. "Half its sales force was direct; the other half was comprised of third-party distributors who handled accounts for PB."

Nellcor decided to eliminate the third-party distributors and replace them with direct salespeople. The distributors were notified that their services would be terminated in 90 days. The planners thought this would be sufficient time to train a new sales force to replace the distributors.

"The planners never stopped to think that, as soon as they received notice, the distributors would stop working on PB accounts and begin looking for new business," DeBuono says. The 90-day lead time was a myth. To Nellcor's surprise, sales tanked immediately, and the company had to scramble to cover the impact of the loss of revenue."

At J&J, the focus on smart planning led to the formation of the Pharmaceuticals Alliance Management group. The group consists of dedicated staff who are assigned to each alliance from the beginning of the deal through commercialization. They are resident experts in every aspect of alliance planning. And it shows.

As proof, Wills points to the J&J/Millennium alliance for Velcade, which was consummated in 2003. It was the second time J&J applied the formal strategic alliance management process in negotiating and executing the deal after it was signed. The partners have both an R&D and a commercial relationship. They share resources and budgets, and representatives from each serve on joint committees. Some of these committees deal with operational issues; others are charged with strategic decision making. There have been few bumps in the road, and all have been minor.

"It works as well as it does because our dedicated staff ensures that the right experiences and conditions for operation are included in the deal structure," Wills says. "Before the deal is signed, our people construct a general integration plan, based on objectives and best practices from inside and outside J&J. They incorporate lessons learned from past partnerships."

Plan as you will, without communication, planning becomes an exercise in futility. Amy Flynn, former business analyst at J&J's Ortho Clinical Diagnostics and now an independent consultant, recalls an instance in which the implementation plan was never communicated: "In one company I worked with, the day after an acquisition was announced, people were standing around asking what they were supposed to do. They didn't know how their job was going to change, what impact the new structure was going to have on them. For example, the sales force didn't know whom they'd be reporting to, who would be selling what, how their responsibilities would be divided."

At J&J, the strategic alliance group has set up several communications channels to keep information flowing, especially within teams. "To avoid misunderstandings or surprises, we set up secure 'e-rooms,'" Wills says. "Team members can access or input information, get feedback from others, and pose questions. In addition, certain formal, written communications are required at specific milestones. We schedule regular videoconferences. We publish contact information for key players in both companies so team members can always find one another when they need to. And we say, 'If you still have a concern, pick up the phone.'"

9 Stay Flexible In today's environment, the race is more often to the nimble than to the swift. From contract negotiations through commercialization, most successful partners have learned to go with the flow and make mid-course corrections.


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