October 13, 2008
How to work together
You can't live with 'em…and you can't live without 'em. Joint ventures (JVs), co-marketing agreements and strategic alliances, these symbiotic arrangements have become the norm for pharmaceutical marketers. Although you can't avoid them, you can learn to function productively within them. It just takes work. As one top agency executive who has been involved with four major pharmaceutical alliances over the past three years recently noted, “Alliances are not for the faint-of-heart…or the faint-of-mind, either!”
The prevalence of strategic partnerships has grown significantly over the past few years, particularly since 2001. According to the American Management Association, revenues for Fortune 1000 companies from alliances rose 30% in 2006. Last year, IBM Business Services noted that revenues from alliances between biotech and “big pharma” rose at a compound annual growth rate of 8.6% between 2002 and 2006 and are projected to rise 7.9% through 2011. In today's financial environment, this kind of trend is phenomenal.
More than a third of all new pharmaceutical products are developed through alliances. While not all of these arrangements reflect equal partnerships, they do represent a broad range of treatment categories, and strengths and weaknesses between partners that is a key pattern in pharmaceutical marketing activity today.
What clients want from alliances
Since alliances have been a key component of pharmaceutical product development for the past few years, many companies have worked hard to set up organizations and structures to help collaborations function at optimal level. This can include creating a specialized physical JV environment as AstraZeneca and Bristol-Myers Squibb did for their new diabetes drug in development. They have leased rental office space located between the two companies for holding all meetings. All agency presentations are also conducted only in the special JV offices. Reasons may vary, but financial growth on both sides of an alliance is the key success metric.
Many companies thrive on alliances. Biotech giant Genentech even devotes space on its website to tout strategic alliances and encourage and invite new scientific collaborations. It reads: “Our Alliance Strategy: Developing alliances has been one of Genentech's key strategies for success since its inception.”
There are obvious tradeoffs and lessons to be learned from alliances, especially in partnerships between biotech and big pharma. Traditionally, these are seen as simple arrangements: Biotechs contribute scientific expertise and innovation while big pharma brings in regulatory, sales, and marketing muscle. Result: Biotechs see their discoveries come to market and big pharma gets a pipeline boost.
What agencies need to flourish within alliances
While big pharma companies have done a great deal to foster internal alliance management functionality and collaboration, very little has been done to encourage and reward advertising agencies or strategic partners that must work with two “bosses.” A recent survey of successful pharmaceutical and DTC agencies reveals that there are certain pitfalls that must be avoided to ensure that effective work is developed. There are also some key ingredients that are needed to ensure a productive “three-way” relationship.
One of the best ways to smooth the pathway for agency productivity is for the client companies to have totally aligned consensus on standard operating procedures (SOPs) prior to hiring their agencies. Andrew Schirmer, president of McCann HumanCare, notes that early in his career, he worked on a “dream team alliance” that succeeded because the partners aligned before the agency was brought in. “They worked really hard to make sure that everything was in place and operational before our agency was even engaged…and they worked actively to prevent the agency from being caught in the middle of the two partners.”
Darren Miller, a senior account director at DDB NY, and a veteran of many alliance partnerships, thinks that agencies have the opportunity to benefit from working within JVs. “By virtue of two organizations that have different areas of expertise, you can learn a lot from each.” He also believes that clashing corporate cultures can actually have an upside because “one can be aggressive and push the other to try new things. They can bring out the best in each other and challenge each other—all to the betterment of the work.”
Matt Giegerich, president and CEO of WPP's CommonHealth echoes that there can be positive aspects to alliances—and he attributes it to partner leadership. “It can be inspiring to see how great leadership can really unify two desperate organizations to benefit from achieving a unified goal. Really passionate and committed leadership can inspire the agency and that is a wonderful experience.”
One thing that all of those surveyed agreed on is that everything must be done in setting up an alliance partnership to make sure that one individual cannot dominate the three-way relationship. The force of a single personality can often derail established processes, delay production and even subvert good ideas. Everyone has experienced such a situation over the years and all warn against it. “With good, open and completely aligned SOPs in place, fractional individuals are not allowed to get in the way,” states one agency head who has worked with more than 10 alliance partnerships over the past 10 years. “When everyone is equally accountable for moving things along on a pre-set timeline, fewer derailments occur.”
Schirmer, however, noted that even if the alignment SOPs are codified and operational before the agency engagement occurs, there can still be problematic individuals who like to point fingers if deadlines aren't met. “The worse case is when the agency is held responsible for a breakdown in workflow,” he explains.
Unfortunately, blaming and finger-pointing is not an uncommon occurrence in alliance partnerships. In their book, Alliance Competence: Maximizing the Value of Your Partnerships, authors Robert E. Spekman and Lynn A. Isabella recommend a process called, “The No Blame Review” (NBR), which is a collaborative, non-judgmental process to help alliances constructively confront times when things go off track. The purpose of the NBR is to provide an objective, non-threatening, non-value-laden opportunity for managers and partners to investigate and review issues. Unfortunately for agencies, there often is no time to stop and review the process since launch and production timelines are usually not too flexible. The best way to avoid potential derailments is to establish all SOP's in advance.
7 steps to heaven: Tips for increased agency productivity
A roundup of the agency and client executives interviewed for this article indicates that there are a few action steps that will help agencies work better for two (or even three) alliance partners:
- Create parallel structure at the agency that lines up precisely with the client. This will facilitate alignment up and down the line. Each agency staff member should have a corresponding “partner” at both alliance members. This starts at the bottom and reaches the top of the chain, with agency executive leadership lined up to the highest level at the clients. One agency executive told us that this type of agency staffing also prevents one side of the client partnership from dominating the relationship.
- Ensure that the client recognizes that proper alignment will take extra time. Therefore, extra hours will need to be added to the fee arrangement. This means that the client must be made to understand that since the agency will be the pivot point for integration, it will take extra time to accomplish goals across multiple partners. As one agency executive noted: “We don't want to wait for year-end reconciliations to find out that we haven't been compensated for the time it takes to keep the integration running smoothly. We shouldn't be penalized because an alliance requires extra time and is different from traditional agency arrangements.”
- Maintain senior-level support and strong leadership at all times. Consistent senior level engagement is imperative for all three partners. Giegerich confirms this importance: “As soon as the troops get the signal that the leaders aren't in alignment, those down in the trenches can quickly get lost.” Strong and consistent leadership will ensure that no one party or set of ideas is allowed to take precedent over the other two. It is also morale-building for all three teams' members who can sometimes become overwhelmed by all of the extra process. Strong agency leadership and participation must also be maintained in order to raise a red flag to the client if things are not going right—and strong agency leadership will engender the respect needed to act as a mediator if needed.
- Utilize a clearly defined single process for workflow and for supplier engagements, such as market research and measurement. Everyone agrees that as much process and procedure that can be set and agreed to in advance, the better and faster the eventual outcome. This means that both clients should agree a priori on testing methodologies and benchmarking expectations. A key result should be faster decision-making, which will make agency hours more efficient.
- Use a governance policy to optimize decision-making. Think about it: 2x clients + 2x decision-makers = bigger meetings and the ultimate “ad by committee.” A quadrupling of inputs can sometimes result in the neutralization of good work. If an agency tries to please every master and answer every concern every time, the work itself risks becoming blander and blander as a result. As one executive noted: “All of the alignment that is needed can put a real time crunch on the work, and it can exhaust people. That kind of churn can really be debilitating.”
- Eliminate individual direction derailments. The agency must make sure that direction reflects joint agreements from both client partners at all times. They can't let an individual client make special requests that can cause reworks, resentment, and confusion when presented. There is always the opportunity to use clarifying language in a meeting or by e-mail. “What exactly did you mean? Here is how we understand the request, assignment, etc.”
- Communicate! Open and consistent communication is always the key to success in alliances. It enables transparency and keeps things on track. Codified and agreed upon tools and systems are needed to ensure day-to-day monitoring of workflow. Technology can enable these systems and also protect the work.
Trust is the main ingredient
Whether working in big pharma, inside a small biotech or at an advertising agency, it is important to be able to succeed in an alliance and to be able to collaborate. The basis for best alliances is trust—trust in the expertise and knowledge of your partners and trust that everyone shares the same goals. Alliance partners and agency leaders can work to ensure that an environment of trust and productivity is activated. If everyone follows the rules and works together, great things can be achieved for all of the partners and lessons can be shared. But the best thing that can ultimately be accomplished is positive business results and a strong brand.
Getting there is best summarized by DDB's Miller: “When you're in a JV, you must have one master—and that master is the brand. If you keep that in focus, you can't go wrong.”
Deborah Dick-Rath is SVP, healthcare practice leader, at FactorTG