Stuart Klimanskliman@vantagepartners.com

Making Alliance Relationships Work

Making Alliance Relationships Work

Vantage Partners: who we are and what we do

The criticality of the partner-to-partner relationship

Institutionalizing alliance relationship management capability

Examples– The relationship launch

– Alliance decision making framework

– Institutionalized relationship management processes

Q&A

Spin-off of the Harvard Negotiation Project Expertise in building corporate negotiation and alliance

relationship management capability Extensive Experience

– Full-time focus on negotiation and relationship management since 1984

Recognized thought leaders– Recent alliance-related publications:

• 3 year study on Alliance Relationship Management

• Alliance Relationship Handbook for alliance managers

• Negotiation as a Business Process, Harvard Management Update

– Co-authors of Getting to YES, Difficult Conversations, and other seminal works

– Frequent keynote speakers on negotiation and alliance relationship management

Leaders in international dispute resolution through Conflict Management Group

Alliances are Failing Because Partners are Unableto Work Together Effectively

Breakdowns in trust Build-up of negative

partisan perceptions Questioning of one

another’s motives Festering conflicts Little joint problem

solving Feelings of

disrespect/coercion

30%

6%

64%

Foremost Cause of Alliance Failure among Companies that Have Participated in >20 Alliances

Poor or Damaged Relationships

Between Firms

Bad Legal and Financial Terms and Conditions

Poor Strategyand Business Planning

* Source: Danny Ertel, Jeff Weiss, and Laura Judy Visioni. Managing Alliance Relationships - Ten Key Corporate Capabilities: A Cross-Industry Study of How to Build and Manage Successful Alliances. Vantage Partners, 2001. (Interviews were conducted with over 150 alliance managers from approximately 120 companies.)

10 Capabilities Enable Effective Management of the Alliance Relationship

1. Building and maintaining internal alignment

2. Evaluating and considering relationship fit with potential partners

3. Building a strong working relationship while negotiating an optimal deal

4. Establishing common ground rules for working together

5. Having dedicated alliance managers

6. Having collaborative skills in alliance employees

7. Having a collaborative corporate mindset

8. Managing multiple relationships with the same partner

9. Auditing alliance relationships

10.Managing changes that affect alliances

1. Building and maintaining internal alignment

2. Evaluating and considering relationship fit with potential partners

3. Building a strong working relationship while negotiatingan optimal deal

4. Establishing common ground rules for working together

5. Having dedicated alliance managers6. Having collaborative skills in alliance

employees7. Having a collaborative

corporate mindset8. Managing multiple relationships

with the same partner9. Auditing alliance relationships10. Managing changes that affect

alliances

Ten capabilities emerged as key torelationship management success

Essential

Irrelevant 1

2

3

4

5

1 2 3 4 5 6 7 8 9 10

Capability Importance Rating

Average rating across all ten capabilities 4.1/5.0

Companies Consider Ten Capabilities to be Important to Alliance Relationship Management Success

0%

20%

40%

60%

80%

100%

1 2 3 4 5 6 7 8 9 10

Degree of Capability Institutionalization

“When thinking about these [10 capabilities]I thought some people

have these, but theorganization does not.”

“We see a huge amount of inconsistency from alliance to alliance.”

“Our problem is that none of this is real

formal.”

Notwithstanding Recognized Importance, FewCompanies Report Institutionalizing Each Capability

PROCESS

An Integrated Approach to Relationship Management

In order to systematically create and capture value from alliance relationships, organizations need to focus on six levels of capability

An overall systematic approach to negotiation and relationship management

Analytical tools, templates, and guidelines necessary to support relationship managers effectively

IT infrastructure to deploy and support the process and tools

Facility in relationship management skills, including joint problem solving and collaborative decision-making

Individual mindset to promote the overall relationship management strategy supported through leadership and organization culture

TOOLS

TECHNOLOGY

SKILLS

MANAGEMENTSYSTEMS

OPERATINGASSUMPTIONS

Business processes, incentives, and roles and responsibilities supportive of the overall relationship management strategy

Building Relationship Management Capability

Explore Relationship Fit

Key Enablers: Technology, skills, and operating assumptions

Build and Maintain Alignment

Negotiate

Collaborative

ly

Launch

Relationshi

p

Manage

Relationship

Audit Health

of Relationship

AdjustRelationship

Building Relationship Management Capability (cont.)

ExploreRelationship Fit

LaunchRelationship

Manage Relationship

Audit Health

of Relationship

Negotiate

Collaboratively

• Mechanism for maintaining internal alignment (e.g., identifying and working through necessary trade-offs) and communicating change

• Mechanism for maintaining alignment across alliances (e.g., identifying and working through necessary trade-offs) and communicating change

• Template for evaluating relationship match

• Guidelines for discussing relationship fit

• Method for planning management of potential relationship challenges

• Negotiation substance and relationship preparationtools

• Methods for negotiating creative, value-maximizing solutions

• Methods for negotiating a strong working relationship

• Guidelines for changing difficult negotiating dynamics

• Guidelines for defining relationship vision and goals

• Method for defining relationship metrics

• Method for establishing common groundrules for working together

• Team launch toolkit

• Mechanism for managingconflict

• Method for managingmultiple relationshipswith one partner

• Protocols for dealing with change/crisis /surprises

• Method for establishing decision-making roles and accountabilities

• Survey tools for auditing the relationship

• Templates for analyzing audit results

• Guidelines for fixing identified problem(s)

• Mechanism for capturing and disseminating audit “learnings” internally and across thealliance interface

AdjustRelation

ship

• Protocols for transitioning key people out of and into the alliance

• Guidelines for adapting alliance strategy and operations to changing external conditions

• Methods for exploring if and how to expand and contract the relationship

Build and Maintain Alignment

Building an Effective Relationship

Alliance Goals

Working Relationship

Collaboration Mechanisms

Common Vocabulary & Tools

• Collaborative decision-making• Problem-solving• Facilitation• Conflict management

• Decision-making and consultation processes• Communication pathways• Conflict resolution methods• Relationship “health check” mechanism

• Common picture of the necessary working relationship• Clear understanding of key challenges to working together• Implemented set of strategies and procedural agreements

for overcoming challenges to working together

• Clear understanding by all involved of alliance partners’ individual and joint goals

• Unified picture of key challenges and success factors

To enable an effective relationship, partners need to ensure that each of the following components is in place:

Launch

Relationship

Overview of a Relationship Launch Process

Draft Relationship Management

Mechanisms and Design Launch Agenda

Gather Information

Roll Out Broad-BasedImplementation of

Mechanisms, Skills, and Messages

Revise and FinalizeRelationship Management

Mechanisms

On-Going Relationship Management, Audit

and Adjustment

Conduct Joint Relationship Launch Event

Provide Partnership Briefing

Jointly PlanRelationship

RefineRelationship Management Mechanisms

Provide Joint Relationship Management

Training

Launch

Relationship

Launch

Relationship

Overview of a Relationship Launch Process: Deliverables

A common definition of the necessary working relationship

A relationship scorecard that provides the metrics and tests for assessing the quality of the working relationship over time

A set of strategies for addressing possible challenges to working together effectively

Procedural agreements that define the partners’ core set of norms and operating assumptions for working together effectively

Decision-making protocols and responsibilities

Conflict resolution methods and escalation procedures

Communication procedures and protocols

Change management methods

A relationship audit mechanism

A common vocabulary, tools, and techniques to effectively enable the partners to:

– Engage in difficult conversations

– Make decisions– Resolve conflict,

negotiate or renegotiate– Jointly solve problems

A common set of experiences in, and mindset about, effectively working together

A clear understanding by the management team of the goals, terms, and intent of the negotiated agreement

A unified picture and shared knowledge of any identified implementation, or relationship management, challenges

JointRelationship

Planning

Refinement of Relationship Management Mechanisms

Partnership Briefing

Joint Relationship Management

Training

Draft Relationship ManagementMechanisms and Design Launch

AgendaGather Information

Roll Out Broad-BasedImplementation of Mechanisms,

Skills, and Messages

Revise and FinalizeRelationship Management

Mechanisms

On-Going Relationship

Management, Audit and

Adjustment

Conduct Joint Relationship Launch Event

Provide Partnership Briefing

Jointly PlanRelationship

RefineRelationship Management Mechanisms

Provide Joint Relationship

Management Training

Building Relationship Management Capability (cont.): Alliance Decision-making Framework

Heads of Marketing and alliance managers for all other co-marketing alliances in both companies

Head of Manufacturing from partner, with both heads of Product Development

Head of Manufacturing has authority to make final decision

Alliance managerQA methodology for production of new indication

All others on the joint steering committee and alliance managers for all other co-marketing alliances in both companies

Heads of Product Development from both companies

Heads of Finance from both companies and head of Distribution

Alliance managerTransfer pricing agreement between parties for new indication

Heads of Product Development and alliance managers for all other co-marketing alliances in both companies

Head of MarketingHead of Marketing from partner has authority to make final decision

Partner alliance manager

Selection of advertising agency to handle launch of new indication

All others on the joint steering committee and alliance managers for all other co-marketing alliances in both companies

Both alliance managers, marketing consultant, alliance managers responsible for similar partnerships

Heads of Marketing and Product Development from both companies

Partner alliance manager

Marketing plan for new indication

All other on the joint management committee, except heads of Distribution (who asked not to be kept informed) and alliance managers for all other co-marketing alliances in both companies

Heads of Marking from both companies (to ensure match of investment to size of market opportunity), heads of Product development (re-estimated costs). Alliance manager and partner alliance manager

Heads of Finance from both companies

Alliance managerBudget for joint R&D project to develop new indication

InformConsultNegotiateDriverIssues/ Decisions

Building Relationship Management Capability (cont.)

Building Relationship Management Capability (cont.)

Building Relationship Management Capability (cont.)

Building Relationship Management Capability (cont.)

Further Information on Relationship Management

•Managing Alliance RelationshipsTen Key Corporate Capabilities

A Cross-Industry Study of How to Build and

Manage Successful Alliances

•Alliance Management Newsletter

•Articles

•White papers

•Q&A

Making Alliance Relationships Work