Business insightPaper Details

Buckles, J. F. (2011). Understanding the Benefits and Challenges of Strategic Alliances. Franchising World, 43(9), 48-49.
Gulati, R., Sytch, M., & Mehrotra, P. (2007, March 3). Business insight: Preparing for the exit: When forming a business alliance, don’t ignore one of the most crucial ingredients: How to break up [Special report]. The Wall Street Journal, R.11.
Kaplan, R. S., Norton, D. P., & Rugelsjoen, B. (2010). Managing alliances with the balanced scorecard. Harvard Business Review, 88(1), 114-120. Retrieved from: http://phoenixcg.com/files/Kaplan%20et%20al%20-%20Managing%20alliances.pdf
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Business Insight (A Special Report); Preparing for the Exit: When forming a business alliance, don’t ignore one of the most crucial ingredients: how to break up
Ranjay Gulati, Maxim Sytch and Parth Mehrotra. Wall Street Journal, Eastern edition [New York, N.Y] 03 Mar 2007: R.11.

Abstract
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The lack of an agreement is compounded by the fact that when tensions arise between partners, the alliance’s managers may be reluctant to alert their superiors back at the partner companies. They fear they may be blamed for the alliance’s failure, which would hurt their own careers. So instead, the managers focus their tensions on their alliance counterparts. The typical outcome: adysfunctional strategic alliance marked by deep animosity between alliance managers. Any ensuing discussions about possiblealliance termination are likely to be emotionally charged and ineffective.
Second, a core team of disengagement managers should be formed, drawing on managers not only from the parent companies but from the alliance itself. When a team comprises only managers from the parent companies, attorneys get involved too early and negotiations tend to focus solely on the observance of rights to stocks; this tends to alienate alliance managers and to hurt not only what remaining value the alliance has, but the flows of the partner companies as well. Additionally, the smartest companies assign the supervision of disengagements to senior corporate personnel at the parent companies who weren’t originally linked to the alliance. Such supervision not only enforces clear accountability and allows for greater impartiality, it enables alliance managersto better clear organizational and legal roadblocks during the disengagement process.
When a partnership has to be dissolved, a strong communication plan is key. In our view, a number of companies have learned that mishandling communications during a break-up can damage a company’s reputation and significantly hinder its chances of finding future partners. During disengagement, it’s important to avoid offending partners and to maintain your own company’s reputation.
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A WORD OF ADVICE for companies thinking about forming a business alliance: Before launching any partnership, make sure both parties agree on how you’ll know, and what you’ll do, when it’s over.
There is no doubt this can be challenging. Like a prenuptial agreement, in which a couple discusses divorce options on their way to the altar, negotiating exit options while still at the formation stage of an alliance seems almost counter to human nature. For onething, neither partner wants to admit that things could go awry. What’s more, there’s an eagerness to get the deal done — and a fear that raising the worst-case scenario will undermine the euphoria and trust that often accompany a new deal.
But partners ignore the issue at their own risk. Discussing the trigger points for exiting, as well as the disengagement process itself, while still in the negotiation stage is paramount for an effective partnership. In many cases, exit planning may actually enhance the alliance’s performance and longevity.
Interviews with managers who have overseen alliances reveal a pattern that sometimes emerges when a partnership with no adequate separation agreement becomes strained: Partner A grows dissatisfied with the venture and seeks an exit, but can’t find any easy options; Partner A then attempts to covertly appropriate as much value as possible from the alliance before the venture goes completely sour, while creating a paper and action trail aimed at placing the blame for the failed venture on Partner B; an angry Partner B discovers the maneuvers, and takes countermoves.
The lack of an agreement is compounded by the fact that when tensions arise between partners, the alliance’s managers may be reluctant to alert their superiors back at the partner companies. They fear they may be blamed for the alliance’s failure, which would hurt their own careers. So instead, the managers focus their tensions on their alliance counterparts. The typical outcome: adysfunctional strategic alliance marked by deep animosity between alliance managers. Any ensuing discussions about possiblealliance termination are likely to be emotionally charged and ineffective.
So, what kind of exit-plan pact works best? One that clearly specifies the point of disengagement, tells both parties what their subsequent rights and responsibilities are, and provides a clear and effective procedural map that minimizes time and capital losses.
More specifically, a successful disengagement plan should comprise the following:
— Clear definitions of what both parties will consider as exit triggers, or events that will set off specific exit provisions.
— A detailed description of each party’s rights in a fair separation of the partnership’s assets and products, as well as adetermination of rights and responsibilities with regard to third parties, such as customers, suppliers and employees of the alliance.
— A detailed description of the disengagement process, including specific strategic options, guidelines for creating the core disengagement team, and clear timelines.
— A communication plan for continuous flow of information to alliance partners, customers, suppliers and other involved parties during the dissolution.
Not clearly stating when an alliance should end can be lethal, even when partners have agreed on how the alliance should end. Partners’ perspectives on the timing of dissolution can differ, leading to lengthy and expensive haggling.
This is why the first step in devising a successful exit strategy is to have clear trigger provisions. Triggers may consist of such contingencies as the inability of the alliance to meet certain milestones, performance metrics or service-level agreements; breachesof contract terms; or the insolvency or change in control of one of the partners. When pharmaceutical and biotech companies teamup to bring an experimental drug to market, the partners often use milestones as exit triggers, such as whether the drug reaches aparticular stage of a clinical trial.
For example, a large U.S. pharmaceutical company we talked to often sets a deadline by which patients must be enrolled in Phase III clinical trials, typically the last round of tests before a drug is submitted to the Food and Drug Administration for approval. Other milestone triggers used in this area include failing to successfully complete Phase III trials, failing to attain approval from the Food and Drug Administration, or, for a drug that is already approved, failing to meet specific sales targets.
In some cases, exit triggers are linked not to goals but to events, such as a change in control of one of the partner companies. Onelarge domestic dairy manufacturer we investigated, for example, when entering alliances, often stipulates that it will end thepartnership if its partner’s percentage of voting shares in its own company declines without the dairy company’s prior consent. Thedairy maker makes this requirement to avoid having an undesired firm indirectly obtain a stake in the alliance by buying shares inthe partner company.
Once an exit trigger is reached, the next step is dissolving the alliance. This raises the question of each partner’s rights and responsibilities. What’s the fairest way to split everything up?
Partners can start by breaking things down into two broad categories: stocks, which we’ll define as the current products or services sold by the alliance, as well as the physical and intellectual assets used in their production; and flows, which are contractual commitments to third parties and to the partners.
Stocks include inventory of products and materials, any land and facilities, as well as intellectual property. The less integration there has been between the partners, the easier it is to determine these rights. The difficulties increase where joint ownership or joint operations are concerned, and even more when the alliance has grown to involve multiple product lines with competing brands and geographically dispersed physical infrastructure.
If a partial or complete buyout is a possibility, one has to consider not only present but future value of stocks. Certain contingencies can have huge effects on the alliance’s revenue streams and all manner of agreements involving revenue sharing, royalties and licensing, and options to buy or sell products or services in the future.
A recent alliance between a U.S. software maker and a Japanese electronics company included an exit agreement that paid particular attention to the assignment of intellectual property rights in case of certain contingencies. The agreement between thepair, which teamed up to produce a color-management system for the software maker’s new operating system, stated that if for any reason the operating system never made it to market, rights to intellectual property developed by the alliance would default to theJapanese company.
Similarly, in many of the biotech-pharmaceutical alliances reviewed, the partners made it very clear at the outset who would retainthe rights to jointly produced intellectual property if the alliance ended.
After rights to stocks comes the question of fulfilling contractual commitments — the so-called flows of the alliance. Big losses in an alliance’s value can arise from uncertainty about who is responsible for what.
Flows typically include contracts or other relationships with customers, suppliers, service providers, employees and providers ofcapital. If such relationships are mishandled during a dissolution, profits and productivity can suffer. Customers, for example, might switch to competitors in order to avoid service disruptions, or might seek to modify payment terms. Suppliers and other service providers might stop treating the alliance organization as a high priority. Employees, fearing uncertainty, might leave.
There’s a leading sports-apparel company that outsources almost all of its production in numerous small alliances and yet maintains tight control over its supply chain — even when an alliance occasionally ends. The company tries to manage the procurement processes of the suppliers in those alliances. This way, when terminating an alliance, it can forecast exactly how much inventory it will need from that supplier right up until the termination point. It also eliminates the risk of having the inventory go into brand-damaging outlets, such as discount stores.
A typical disengagement agreement can include various strategic options such as rights of first refusal to various stocks and flows, or buyout clauses based on different conditions. The specifics of these are dictated by the nature of the exit trigger, changing markets and partners’ shifting strategic priorities.
Some constants can be followed, however, and interviews with alliance managers suggest a three-step process that can serve as akind of roadmap to disengagement.
First, partners should agree to a mandatory unwind period. An unwind period gives each party enough time to implement its exitstrategy successfully, and ensures that the alliance organization is able to fulfill its obligations and remain competitive in themarketplace until the time when it is dissolved.
Second, a core team of disengagement managers should be formed, drawing on managers not only from the parent companies but from the alliance itself. When a team comprises only managers from the parent companies, attorneys get involved too early and negotiations tend to focus solely on the observance of rights to stocks; this tends to alienate alliance managers and to hurt not only what remaining value the alliance has, but the flows of the partner companies as well. Additionally, the smartest companies assign the supervision of disengagements to senior corporate personnel at the parent companies who weren’t originally linked to the alliance. Such supervision not only enforces clear accountability and allows for greater impartiality, it enables alliance managersto better clear organizational and legal roadblocks during the disengagement process.
Finally, there must be a clear timeline for achieving goals related to disengagement, and managers should coordinate all related activities with relevant departments at the partner companies. If you’ve got plans to drop a product or service, discontinue sales in certain territories or to certain customers, close a plant or renegotiate a contract, you have to let the right people at both partner companies know.
When a partnership has to be dissolved, a strong communication plan is key. In our view, a number of companies have learned that mishandling communications during a break-up can damage a company’s reputation and significantly hinder its chances of finding future partners. During disengagement, it’s important to avoid offending partners and to maintain your own company’s reputation.
Maintaining transparency with partners, customers, employees and even rivals helps to manage the impact of news about thebreakup on financial markets; it also helps maintain morale at the alliance, and helps to preserve any value that remains in the alliance. Lack of transparency leads parties to focus on protecting their own interests without regard for those of the partner, and eventually causes things to implode.

Managing
Alliances
with the Balanced
Scorecard
Fifty percent of corporate alliances fail. But you
can increase your partnership’s odds of success
by applying these techniques. by Robert S.
Kaplan, David P. Norton, and Bjarne Rugelsjoen
Robert S. Kaplan
([email protected]) is the
Baker Foundation Professor
at Harvard Business School.
David P. Norton (dnorton@
thepalladiumgroup.com)
is the founder and president
of the Balanced
Scorecard Collaborative,
Palladium Group, in Lincoln,
Massachusetts.
Bjarne Rugelsjoen
([email protected])
is a director at GoalFocus,
a performance-coaching
consultancy based in
London.
114 Harvard Business Review January–February 2010
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Corporate alliances are
a 50/50 bet—at least according
to a recent study
by McKinsey & Company,
which found that only half
of all joint ventures yield
returns to each partner
above the cost of capital.
That’s worrying, given that
partnerships and alliances
are central to many companies’ business models.
Originally used to outsource noncore parts of supply
chains, alliances today are expected to generate a
competitive advantage. So it is necessary to dramatically
improve their odds of success.
Why do alliances fail so often? The prime culprit
is the way they are traditionally organized and
managed. Most alliances are defi ned by service level
agreements (SLAs) that identify what each side commits
to delivering rather than what each hopes to
gain from the partnership. The SLAs emphasize operational
performance metrics rather than strategic
objectives, and all too often those metrics become
outdated as the business environment changes. Alliance
managers don’t know whether to stick to the
original conditions or renegotiate. By that time, the
companies’ leaders have returned to run their own
organizations and haven’t followed up to ensure that
their vision for synergies is being realized. The middle
managers coordinating the alliance, who have
no clear way to translate their leaders’ vision into
action, simply focus on achieving the operational
SLA targets instead of working across organizational
boundaries to make the alliance a strategic success.
ILLUSTRATION: BRETT RYDER
January–February 2010 Harvard Business Review 115
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Regulators
Fulfi ll my regulatory
requirements so I can approve
safe and eff ective drugs.
Prescribers
I want safer and more
eff ective drugs.
Investigators
Involve me in the
alliance to bring
innovative drugs
to patients.
Payers
Off er me drugs
at a fair price.
Patients
I want access
to eff ective
medications that
treat my illness.
A strategy map brings together
all of a company’s strategic
objectives to illustrate causal
linkages. It allows managers to
see how attaining objectives at,
say, the employee level helps the
fi rm achieve business-process,
customer, and, ultimately,
fi nancial objectives.
The chart to the right presents the
strategy map created by Brusselsbased
Solvay Pharmaceuticals and
North Carolina-based Quintiles, a
biopharmaceutical services fi rm, to
manage execution of their alliance
strategy. It identifi es the fi ve strategic
themes of the partnership and shows
how achieving them would translate into
real value for both companies. To reach
consensus on joint objectives, measures,
targets, and initiatives, participants
engaged in candid dialogue, which
helped to increase trust and improve
collaboration.
We have color coded the strategic
themes to make it clear how each
one relates to the various strategic
perspectives. Some themes reside only
in one perspective; others span multiple
perspectives.
The project team regularly updates
the map with traffi c lights (red, yellow,
green) adjacent to each objective to
signal what has been achieved and which
performance issues need executives’
attention.
The chart reads from the bottom up.
The Alliance Strategy Map
Wins for Solvay Pharmaceuticals
Compounds to market; maximized value of portfolio
Wins for Quintiles
Expanded revenue base; milestone payments
EMPLOYEES &
ORGANIZATION
BUSINESS
PROCESSES
CUSTOMER
VALUE
STAKEHOLDER
OUTCOMES
Value for Both
Speed and Process
Innovation
Growth
Collaboration
Living the Alliance
Improve protocol development
Reduce time between patient testing
and release of statistical report
Adopt new trial methodolgies
Compress time from site identifi cation
to patient enrollment
Accelerate fl ow of
compounds
Improve investment
management
Make joint go/no-go
decisions
Develop
transparent
cost drivers
Manage
resources
to ensure best
use of talent
Leverage
the services
in existing
organizations
Use third
parties
to deliver
excellence
Ensure trust
at all levels
Execute the
strategy with
visionary
leadership
Align
incentives
to focus
employees
on alliance
strategy
Implement
comprehensive
IT strategy
to increase
speed and
collaboration
Dramatically
improve clinical
development
effi ciency
Create shareholder
value for both
organizations
by bringing a
signifi cant number
of commercially
viable compounds
to market
Increase value
from innovative
approaches to
clinical development
EXECUTE
THAT
DELIVER
WHICH
DRIVES
Values
Put patients fi rst. Focus on science and innovation. Communicate.
Trust. Respect. Support. Commit. Make a diff erence.
MANAGING ALLIANCES WITH THE BALANCED SCORECARD
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Idea in Brief
A recent study by McKinsey
& Company found that only
half of all joint ventures
yield returns above the cost
of capital. That’s a problem,
given that partnerships and
alliances are a central part
of almost any company’s
business model.
An alliance usually gets
defi ned from the start by
service level agreements
about what each side will
contribute, not by what
each side hopes to gain.
The agreements focus on
operational metrics rather
than on strategic objectives.
The balanced scorecard
management system can
help companies switch their
alliance management focus
from contributions and
operations to strategy
and commitment.
Solvay Pharmaceuticals
and Quintiles used the
balanced scorecard tool
kit to manage their alliance
and together reduced the
total cycle time in clinical
studies by 40%.
And because the managers usually remain under the
HR policies and follow the career development paths
of their parent organization, they have little incentive
to commit much energy to the project.
With this dynamic in place, it’s easy to see why
most alliances deliver disappointing performance.
But the problems can be remedied if companies
switch their focus from operations and contractual
obligations to strategy and commitment. In the following
pages we show how the balanced scorecard
(BSC) management system helps companies create
better alignment with their alliance partners.
Drawing on the experience of two strategic partners,
Solvay Pharmaceuticals and Quintiles, we demonstrate
how applications of BSC techniques can clarify
strategy, drive behavioral change, and provide a governance
system for strategy execution.
Anatomy of a Strategic Alliance
Solvay, a top-40 pharmaceutical company, develops
leading neuroscience, cardio-metabolic, infl uenza
vaccine, and pancreatic enzyme products. Headquartered
in Brussels, it employs 10,000 people
worldwide.
A research-driven organization, Solvay has formidable
competencies in the drug discovery process.
But the average cost of bringing new drugs to market
has escalated to more than $1 billion per successful
compound, making it harder for Solvay to capitalize
on its research skills. Clinical trials require access to
patients, physicians, and health care organizations,
areas where Solvay has less of an advantage. Historically,
it had selected clinical trials suppliers through a
competitive bidding process for each new compound.
In 2000, Solvay’s R&D unit worked with 50 diff erent
suppliers. It’s no wonder executives believed that
Solvay could be more efficient and achieve better
results if it could outsource the management of all
clinical trial work to a single partner.
Solvay began the transition to this model by
choosing Quintiles, one of its existing suppliers, to
perform all stages of the trial process. Based in North
Carolina and employing 23,000 people in more than
50 countries, Quintiles has helped develop or commercialize
all of the 30 best-selling pharmaceutical
products and nine of the top 10 biologics (medical
products created by biological processes). In 2001
the two companies moved from a transactional relationship
to a preferred partnership. Under the terms
of the agreement, Solvay consolidated a signifi cant
number of its outsourced projects under Quintiles
in return for reductions in Quintiles’s normal prices.
The two companies formed a joint clinical team for
each compound in order to manage strategic and operational
aspects of conducting clinical trials. They
also formed functional teams, staff ed by employees
from both fi rms, to improve the major processes in
the drug development cycle, such as procurement
of clinical supplies and alignment of finance and
human resources practices. A joint development
committee provided oversight, set milestones, and
monitored progress.
The initial five-year contract worked well. But
when it came up for renewal in 2006, both companies
thought that they could generate even more
value if they could upgrade their partnership to a
true alliance. An integrated development platform—
leveraging each company’s respective strengths—
would provide opportunities for gains in productivity,
efficiency, and development speed above and
beyond traditional outsourcing. Both parties were
also willing to share development costs for certain
Solvay products, thus increasing Solvay’s development
capacity and sending more work to Quintiles,
which generated more opportunities for milestone
payments, should successful outcomes be achieved.
The alliance’s proponents had to overcome concerns
within Solvay about loss of control as more
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1 2 3 4
• focusing more on the contractual terms of the alliance
than on a joint strategy;
• spending more time and eff ort selling the alliance
internally than managing its strategy;
• concentrating more on controlling the alliance and
extracting returns than on removing barriers to the
successful execution of the strategy.
The executives believed that a management
system based on the tools of the balanced scorecard,
which both companies already used internally,
would help address those issues. From past experience
with the system, both sides felt that jointly
drawing up a balanced scorecard and a strategy map
would promote consensus on and alignment with
the goals of the alliance. The scorecard and strategy
map would also serve as a framework for a governance
system to monitor progress toward goals and
create incentives for both parties to achieve them.
Building the Alliance Scorecard
A seven-person joint steering committee (JSC)
oversaw the creation of the map and scorecard and,
subsequently, led the governance process. Chaired
by Solvay’s head of R&D, the committee included
Solvay’s head of clinical research, its CFO, the president
of Quintiles’s clinical development group, and
its executive vice president of corporate development.
Two “alliance managers,” one from each company
but agreed on by both, rounded out the team.
The alliance managers were responsible for driving
the implementation of the strategic objectives set
by the JSC. They oversaw projects, developed management
structures, implemented performance
management tools, and served as the primary communication
contacts for alliance participants.
The JSC appointed a project team consisting of the
two alliance managers and employees from both organizations’
strategic planning, project management,
and corporate communications departments. An external
consultant provided an objective perspective
and helped negotiate agreement on joint goals. Team
members conducted one-on-one interviews with key
executives, asking questions such as, “How can we
create shareholder value for both companies?,” “How
do we create diff erentiation in the marketplace?,” and
“What issues and current problem areas should we
address?” The discussions uncovered some negative
aspects of the companies’ fi ve-year partnership. The
Quintiles alliance manager observed, “There are still
pockets of people not working strategically within the
alliance. We need to help them understand that this
of its in-house activities got outsourced. Senior executives
of the two companies had to endorse and
commit to the alliance strategy, which included
sharing profi ts and risks. The companies knew they
would have to change the way they worked together.
Armed with knowledge gathered from the McKinsey
study and others about the likely shortfalls in alliance
outcomes, executives identifi ed the following
problems that had to be overcome:
Once you have sorted your strategic objectives into themes and
mapped them, you need to create metrics that enable you to track
your progress on the objectives in each theme. You also need to
select initiatives that will drive improvement in the scorecard metrics.
The Collaboration Theme Scorecard
PROCESS OBJECTIVE
Develop
transparent
cost drivers
Manage
resources
to ensure best
use of talent
Leverage
the services
in existing
organizations
Use third
parties
to deliver
excellence
JOINT WINS
Create a development
plan that
ensures commercial
viability and regulatory
approval
Put the right people
in the jobs they
are best suited for,
reducing the need
for oversight
Increase probability
of success by
improving access to
diverse information
and expertise
Increase probability
of success by engaging
key external
stake holders
Leverage opportunities
outside
the alliance
METRICS
Quality and risk
assessment score
of development
plan
Trust and transparency
survey
score
Skills and capability
index
% Duplicated
activities (% of
activities in value
chain unnecessarily
carried out at
both Solvay and
Quintiles)
Viability risk score
(experts’ assessment
of viability:
scientifi c, commercial,
regulatory, and
market access)
Net present value of
compound
Loyalty index
% Stakeholder
coverage: key
stakeholders
(investigators,
regulators, patients,
health agencies,
and so on) involved
in the process
INITIATIVES
Create a new
development plan
process
Establish a resource
management
program
Map the value chain
Map RACI (responsible/accountable/
consulted/
informed) overlap
Design a new
expert-led endto-end
challenge
process
Promote early
engagement with
stakeholder process
Collaboration
MANAGING ALLIANCES WITH THE BALANCED SCORECARD
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alliance is diff erent from a traditional, transactiondriven,
customer-vendor model.”
After a series of workshops and interviews with
each JSC member, the project team identifi ed the alliance’s
strategic objectives. Following BSC practice,
it sorted those objectives into fi ve strategic themes:
Living the alliance: Ensure that we have the right
culture (including trust), communication, leadership,
people development, IT, and rewards and
recognition.
Collaboration: Create the transparency we desire
and make the best use of resources and services
across organizations and third parties.
Speed and process innovation: Do things right;
leverage our global expertise; and improve the startup
and management of studies to achieve breakthrough
results.
Growth: Create the right portfolio of new products;
collaborate on decisions to develop compounds;
improve investment management; and
accelerate the fl ow of compounds into the clinical
development phase.
Value for both: Create value for both organizations
by jointly driving all these activities.
The project team next worked with the JSC and
the employees who would be involved in the alliance
to draw a complete strategy map that showed how
the objectives embedded in these various themes
would collectively deliver value. In the exhibit “The
Alliance Strategy Map” on page 116, the map is broken
down into four areas (or perspectives, in BSC
parlance) that show how the objectives for the employees
and organizations feed into the objectives for
business processes, which satisfy the needs of the alliance’s
customers. Fulfi lling customer expectations,
in turn, creates value for the alliance’s stakeholders.
These four perspectives correspond closely to those
on a conventional map or scorecard, except here, the
stakeholder perspective replaces the fi nancial one.
Three of the themes contain strategic objectives
that cross multiple BSC perspectives. The speed and
process innovation theme, for example, includes
objectives in the business-process, customer, and
stakeholder perspectives. Two themes exist in only
one of the four perspectives. To further clarify joint
expectations, the project team placed the expected
“wins” for each company next to each objective.
These served as helpful reference points when the
companies negotiated targets.
The process of reaching consensus on the themes,
the objectives within each theme, and the overall
strategy map created buy-in and understanding
among all participants. Alliance employees engaged
in candid dialogue during joint working sessions
about the potential benefits for each company.
Having such frank conversations was the fi rst step
toward achieving greater transparency and establishing
trust.
Next, the functional teams (which already existed
under the preferred partnership arrangement)
put together scorecards for the fi ve themes, specifying
metrics, targets, and initiatives for each objective.
(The scorecard for one theme is shown in the
exhibit “The Collaboration Theme Scorecard.”) With
the complete map and the fi ve theme scorecards in
hand, the alliance managers could then determine
the personal objectives of and rewards for each of
the more than 500 employees involved in the alliance.
Each company, of course, had its own incentive
and reward system. But now the performance
metrics for employees in the alliance were aligned
with those identifi ed in the map and scorecards.
The functional teams used the map and scorecards
to identify best practices and to redesign key
business processes. All the joint clinical teams then
implemented the improved processes in the trials for
their compounds.
Finally, the alliance managers, with help from
both companies’ internal communications departments,
led a major push to promote the message to
alliance employees. Ambassadors used such tools
as laminated strategy maps, video presentations by
company executives and alliance leaders, and even
an alliance game to make sure all stakeholders understood
the mission and the goals of the partnership.
The ambassadors followed up with periodic
newsletters and e-mails touting progress made on
the fi ve strategic themes.
Establishing the Governance
Structure
Although drawing up the map and scorecard got the
two companies and alliance employees on the same
page, participants recognized that they needed
a governance process to continually monitor the
partnership and to keep it on track. The alliance
managers asked five senior executives to become
“theme leaders”; each would be accountable for one
theme’s objectives and would oversee related cross-
functional initiatives.
The executives were supported by theme teams,
employees who worked to ensure that the functional
Here are the teams
and committees
that keep the
Solvay-Quintiles
alliance on track.
JOINT STEERING
COMMITTEE (1)
Governs the alliance,
provides leadership,
and defi nes strategy
JOINT
DEVELOPMENT
COMMITTEE (1)
Provides oversight,
sets milestones, and
monitors progress on
clinical trials
PROJECT TEAM (1)
Facilitates creation of
alliance strategy map,
strategic objectives,
and scorecard of
measures and targets
THEME TEAMS (5)
Align functional and
clinical team eff orts
with each theme’s
cross-functional
objectives
CLINICAL TEAMS
(1 PER COMPOUND)
Manage strategic and
operational aspects
of conducting clinical
trials
FUNCTIONAL
TEAMS (MANY)
Improve the major
processes in the drug
development cycle
HBR.ORG
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and joint clinical teams contributed to the theme’s
cross-functional objectives. For example, the speed
and process innovation team held regular meetings
to stimulate ideas on improving and accelerating
clinical trials and to share those suggestions with
the functional and joint clinical teams. The theme
teams also solicited suggestions from the functional
and joint clinical teams on ways to achieve the
theme’s strategic objectives. Theme team members
presented the most promising initiatives to the joint
steering committee. When proposals were approved,
the theme teams then monitored their execution by
the functional and joint clinical teams.
The Solvay–Quintiles joint steering committee
meets quarterly to discuss the alliance’s progress.
With input from the theme, functional, and joint
clinical teams, the JSC monitors achievements, addresses
emerging relationship issues, reallocates
resources, and makes decisions on any unresolved
issues. It serves, in eff ect, as a court of fi nal appeal
over disagreements about what projects should or
should not be carried out by the alliance.
The theme team meetings and JSC reviews help
the two companies resolve problems that, if left
unchecked, would undermine the collaboration required
by the alliance. For instance, the theme teams
realized that security systems and fi rewalls blocked
employees of one company from accessing information
stored inside the other. Because all sides had
agreed that information sharing was a strategic priority,
the JSC felt empowered to work with the IT functions
in each company to overcome their resistance
to giving alliance employees access to Quintiles’s operational
dashboards. Now members of the alliance
can easily monitor the progress of clinical trials.
The Payoff
The new approach has yielded impressive results.
The alliance reduced total cycle time for clinical
studies by approximately 40%, an achievement
that brings new products to market much faster and
leads to tremendous cost reductions. Three global
registration programs were completed from 2003 to
2007, a much faster rate than the companies had previously
achieved. In addition, one functional team
developed a new way to manage nonperforming
sites (those recruiting inadequate numbers of patients).
That led to the alliance halving the number of
nonperforming sites and saving €25,000 to €35,000
per site (a study can have 20 to 150 sites). Moreover,
the teams felt that the shared understanding of joint
objectives on the strategy map empowered them to
make strategic and scientific decisions much earlier
in a clinical program’s design—saving time and
money and, more important, keeping everyone’s
focus on delivering the alliance strategy.
Members of the joint steering committee acknowledge
that building the alliance strategy map
and theme scorecards required more time than any
map or scorecard built within their own companies.
The process required aligning two organizations with
entirely diff erent business models and cultures—one
is a research-driven pharmaceutical company, the
other an operationally oriented services company.
Yet the JSC is so pleased with the benefi ts of the new
management system that it is replicating the process
with several key customer groups, medical specialists
in the world’s leading academic medical centers,
and payer organizations.
We’ve described in detail the Solvay-Quintiles
experience of using balanced scorecard techniques
to create alliance value. But this experience is not
unique. Infosys, the Indian IT services provider,
has built more than two dozen “relationship scorecards”
with customers and uses these in quarterly
meetings with executives in its client organizations
(see A. Martinez, “Infosys’s Relationship Scorecard:
Transformational Partnerships,” HBS Case 109-006).
LagasseSweet, a $1 billion wholesaler in the building
services industry, also collaborates with its leading
trading partners—manufacturers and distributors—
to produce scorecards to measure performance. As a
result it has saved millions of dollars and improved
responsiveness, service, and availability up and
down the supply chain. What’s more, it has identifi
ed $150 million in new revenue opportunities.
FOR CROSS-ENTITY COLLABORATION to yield the highest
rewards, the partners must fi rst agree on strategy
and then design metrics to determine how well the
strategy is being implemented. They must communicate
a common vision and offer incentives that
motivate employees to improve collaboration and
deliver results. They also need a process that allows
them to talk candidly about difficulties, resolve
disputes, share information, and continually adapt
the strategy to evolving external conditions as well
as to newly created internal capabilities. The balanced
scorecard management system provides a
framework for partners to work collaboratively and
productively to achieve benefi ts that neither could
accomplish on its own. HBR Reprint R1001J
FOR FURTHER READING
More than a decade ago,
Robert Kaplan and David
Norton introduced the
balanced scorecard (BSC),
which has transformed
companies by helping top
executives set corporate
strategy and translate it
into objectives, measures,
and targets that the entire
workforce understands.
To learn more, consult the
following articles, which are
available at www.hbr.org:
“Putting the Balanced
Scorecard to Work” (HBR
September–October 1993)
“Having Trouble with Your
Strategy? Then Map It”
(HBR September 2000)
“How to Implement a
New Strategy Without
Disrupting Your Organization”
(HBR March 2006)
“Mastering the Management
System” (HBR
January 2008)
MANAGING ALLIANCES WITH THE BALANCED SCORECARD HBR.ORG
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