Zooming In and Zooming Out: Strategically Measuring and Managing Partner Portfolios
In many biopharma companies, collaboration is the strategy as partnering is responsible for somewhere between 40% and 60% of both revenue and product pipeline. Alliances and other forms of business collaborations are central to how companies deliver value to customers and shareholders. Managing business collaborations of all types must be a core capability of every organization.
An Evolution in Alliance Management
This requires an evolution of the alliance management function to an organizational partnering capability. To do that, it needs to expand its focus from individual alliances to portfolios of alliances. A portfolio is simply a grouping based on a similar characteristic. Traditionally, when an alliance team organized a portfolio, it was typically based on alliance type or asset lifecycle stage. Today, we need to more closely anchor the portfolio to the strategy it is connected with and the value it is intended to produce. With this more expansive view, any collaboration that advances the strategy can be considered as part of the portfolio. Value and risk can thus be considered holistically and from the perspective of desired outcomes.
Think of this expanded focus for alliance management as zooming out to the portfolio and zooming in on individual alliances (or relevant groupings of partners). When zooming out, your perspective is on realizing the overall value the strategy needs from partners. You’re able to classify and organize the individual partnerships in the portfolio and develop baseline management strategies for each classification. Scarce alliance management resources can be smartly allocated and systemic issues identified. A portfolio perspective is essential to evolving alliance management into the organizational capability required today.
Zooming in identifies potential opportunities to create value with individual collaborators in many ways. It might come from identifying new opportunities, ensuring executives have all the information they need to make value-creating decisions, or focusing in on specific causes of complexity and risk. The alliance professional can then take targeted actions.
Practical Benefits of Adding a Portfolio Perspective to Your Practice
Even if the number of alliances and other business collaborations is small, there are still practical benefits to looking at them from a portfolio perspective. They include:
- Establishing standard strategies, which creates accountabilities for alliance managers and expectations of how stakeholders will engage with partners
- Determining resource requirements, helping make the business case for the number of alliance managers of varying expertise required by the portfolio
- Identifying common issues and root causes, allowing actions that create broad-based benefit to be highlighted and acted upon
Managing an Alliance Portfolio through Multiple Lenses
It is beneficial to manage a portfolio through strategic, operational, and execution lenses. The strategic lens allows a baseline alliance management strategy to be developed for each classification tier that sets minimum standards for how each alliance in that tier will be managed. The operational lens tracks metrics across the portfolio, providing insight that is key to tackling systemic issues that erode effectiveness and thus prevent resources from being utilized where they can create the most value. The execution lens must include zooming in to assess whether or not a single alliance is producing intended value and zooming out to assess the portfolio as a whole.
When zooming in, the specific value sought by an individual collaboration is captured, as are specific conditions creating complexity. Both can be measured on a scale. This provides a roadmap for the alliance professional to focus on to ensure that desired strategic value is realized and the complexity managed appropriately. Once the portfolio is measured, it is mapped, making clear which alliances are requiring more effort to be put into them than others because of the time involved in managing the complexity. By managing portfolios through strategic, operational, and execution lenses, alliance professionals are able to fluidly zoom in and zoom out depending on the level of analysis required.
Start Zooming!
The chief accountability of alliance professionals is to realize the value of an alliance intended at the time the deal was done – and hopefully perhaps opportunities to expand that value. The primary way of accomplishing that objective is to prevent the risks and complexities of alliances from getting in the way. Clearly, value and complexity need to be measured in order to be managed. The methodology presented in this paper offers a means to similarly measure across different alliances that is directly tied to the strategy the alliance portfolio is assembled to achieve.
This is a summary of a white paper with the same title published in July by our partners The Rhythm of Business. This paper is an update to their Value/Complexity Partner Portfolio Management methodology introduced in 2012 and included in Part 3 of the 2014 ASAP Handbook of Alliance Management: A Practitioner’s Guide, as an emerging practice.