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Eli Lilly's Michael W. Magdycz discusses strategic considerations in international alliances.
In the first of a three-part series on leading across borders, we focused on maximizing the value of an international alliance. In the second article, we dove more deeply into a major factor in that equation: the ways in which country-level leaders approach governance and decision-making.
In this, the third and final installment of the “Lead Across Borders” series, we will focus on strategic considerations in international alliances. Key topics will include the international alliance lifecycle, value inflection points, and secondary and tertiary consequences. We’ll also touch on the alliance director’s role and interaction with senior leadership in seeking to create value across borders.
A plethora of publications exist related to the lifecycle of an alliance, focusing on the alliance phases of start-up, steady state (or value creation stage), and wind-down.1
Let’s build on the start-up, steady state, and wind-down phases of an alliance. As applied to international partnerships, the alliance lifecycle comprises many independent and discrete lifecycles. Given the reach and range of many alliances, this results in “lifecycles within a lifecycle,” where the start-up, steady state, and wind-down phases of an alliance may coexist in a range of geographies.
“Lifecycles within a lifecycle” may exist in the alliance start-up and steady state phases of an alliance. For example, countries in Asia may be in start-up, while the U.S. and Europe may be approaching steady state. “Lifecycles within a lifecycle” can also exist as an alliance approaches wind-down, where the partnership winds down in one geography, perhaps due to the end of data exclusivity period, and in other geographies the alliance remains in the steady state or value creation phase.
Given the potential for significant country to country and region to region variation in phases of the alliance, the alliance director needs to customize tools and resources to align with the relevant stage.
For example, once you’ve signed a new alliance deal, which countries will need to start up first? How do you handle a country-level start-up well after the alliance has been initiated, say three to four years out, when every other country is in the steady state phase? Perhaps an alliance product has been launched in one country but not in another. Perhaps there are several products or services contained within one alliance, all with different timelines for commercialization. Perhaps loss of exclusivity timing varies widely by geography.
The alliance director needs to understand all of these differences to be able to advise senior leadership on the human risks, business risks, and legal uncertainties,2 by geography and by alliance phase, within the international alliance. On any given day, an alliance director may be beginning the start-up of an alliance in one country, simultaneously directing it through steady state in another, and overseeing wind-down in yet another geography. Knowledge of the contract, the partner, and the business, as well as a fair amount of flexibility, are key components of the alliance director’s job. The goal, as always, is to ensure the international alliance continues to run effectively, creating value for the partners no matter the stage.
Indeed, with the current proliferation of alliances, “lifecycles within a lifecycle” may also exist within one geography. Consider the possibility of multiple local alliances, with different partners, in one country and the potential impact of the various alliances upon the local profit and loss statement. Directing these alliances effectively becomes critical to meeting country performance goals.
Many people understand the acronym VIP to mean “very important person.” In the alliance world, VIP might be more importantly considered an acronym for “value inflection point,” which is a moment in time when value is either created or destroyed.3 In alliances, value creation is not linear. There are ups and downs to all alliances, with the potential for value creation and destruction along the way. Examples of VIPs include regulatory due dates, line extension launches, and a competitor’s data release.
Do you know the major VIPs that may occur within your international alliance in the next year? If not, why not? When leading an international alliance, it can be easy to get caught up in the day-to-day management of the alliance, but it is critical that you pay attention and identify potential VIPs.
In practice, many VIPs are known. Said another way, many VIPs can be predicted, which means that you can plan for them. Of course, some value inflection points are unexpected. The point here is that preparing for inflection points can provide an additional measure of control over the creation of alliance value. Alliance directors should schedule time in governance meetings to proactively discuss VIPs. If possible, you can even plan the alliance calendar and governance meetings around the preparation for VIPs. Encourage alliance leadership to proactively assign working teams to the VIPs. Planning for VIPs gives the alliance a better chance to be on the value creation side of the coin when the event occurs.
The second of the “Lead Across Borders” articles4 touched briefly upon secondary and tertiary consequences of strategic decisions. Part of the alliance director’s job is to help leadership think through the consequences of a decision before it is made. If we go ahead with this decision, what could happen next?
Within alliances, there are times when being conscious of secondary and tertiary consequences is particularly useful:
1)In the contracting phase: Thinking through and applying the secondary and tertiary consequences of governance design and alliance decision making in the contracting phase will help ensure a contract that enables the right focus, by the right people, on the right topics, to maximize alliance value.
2) When evaluating human, legal, and business risks in an alliance: An alliance director must be able to effectively identify secondary and tertiary consequences involved in major decisions. Knowledge of the business, the partner, and the contract all play a key role in the alliance director’s ability to adequately inform leadership of potential risks.
By understanding the interwoven nature of an international alliance’s “lifecycles within a lifecycle,” value inflection points (VIPs), and secondary and tertiary consequences, alliance directors and their respective business leaders will have the information they need-at the right time-to lead international alliances more effectively. This in turn enables the alliance to remain on course, meeting customer needs and creating the value that the partnership is seeking.
1. Governance by Design How Well-Established principles and practices Set the Stage for alliance Success – Thompson, David S., & Twait, Steven E. – Editorial Supplement to Strategic Alliance Magazine, Quarter 3, 2012
2. Steady as She Goes: How Focus, Discipline Help an alliance Stay on Course – Thompson, David S., & Twait, Steven E. – Editorial Supplement to Strategic alliance Magazine, Quarter 1, 2013
3. Managing Alliance Conflict: Conflict Is Inevitable. How You Deal with It Can Be the Difference Between Success and Failure – Thompson, David S. et al., Editorial Supplement to Strategic alliance Magazine, Quarter 1, 2012
4. Lead Across Borders- How to Succeed at Country Level Governance of International Alliances – Magdycz, Michael W. – Pharmaceutical Executive, March 20, 2019
Michael W. Magdycz, R.Ph., CA-AM, is director of alliance management at Eli Lilly and Company, where he directs international alliances and oversees country-level alignment of international alliance commercial resources He can be reached at: firstname.lastname@example.org, or +1.317.966.9539).