Jargon and catch phrases grate on our ears like fingernails on a blackboard. Plain old English is enough. Important-sounding buzzwords are designed to conceal the underlying ideas, not illuminate them.

But in the case of “alliance management,” a phrase that sounds new to our weary ears, we may have to make an exception. That’s largely on the strength of Richard Marshak’s presentation this week at the 2008 Clinical Trials Congress in Orlando, Florida. Marshak heads the alliance management group at Abbott Laboratories. His talk was memorably practical and representative of a high-quality Institute for International Research (IIR) conference.

So what does “alliance management” mean? Our rough journalistic rendering of the MBA-speak is that alliance management involves a dedicated team and program to both negotiate and sustain deeper, more strategic and intimate ties between multiple organizations. Make no mistake. This is not a simple partnership, nor a vendor-sponsor contract. It’s a closer way of aligning your organization with another firm. It’s a marriage, not a courtship.

Non Essential

For starters, alliance management is not project management. Project management targets day-to-day operational issues; it is essential in any organization. “You won’t survive without project management,” Marshak says. “Companies can get by fine without alliance management.”

Alliance management, in contrast, requires a big-picture assessment of what each party possesses (manufacturing ability, intellectual property, money, technology) that could be shared over an extended period of time.

Pipeline Worries

Education on the importance of alliance management may be helpful. “There is often a bias against alliances and we have to make sure our management understands the value of it,” says Marshak. The core point: for some companies, patent expirations, slim product-development pipelines and the resulting financial austerities make alliances more urgent than ever. Wall Street may not like it, but alliances could be a life line for sponsors who’ve been waiting to bring a new medical entity to market for years.

As an example, Marshak cited an unidentified European pharmaceutical company which had traditionally assumed it could go it alone, only to see half of its stock market value vanish when a big trial crumpled. Marshak believes all companies will recognize the value of alliances: “There is no way one internal pipeline is going to get all the products you need.”

Risk Management

Across the industry, he says, there is a new appreciation not of the risk inherent in clinical development (which has long been well understood) but of the importance of spreading the risk through something more protracted and serious than a co-marketing deal. At Abbott, he reports, more than half of all revenues are now derived from alliances.

“What everyone’s realized is that if we are not resourcing our external pipeline at the same rate we are resourcing our internal ones, we will crash and burn,” says Marshak. “We will not succeed in our growth expectation if we do not source externally and use that strategically.”

A hypothetical development program to bring a new cardiovascular drug to market, he estimated, might require $1 billion. Alliance management might be able to use that money in a more intelligent way. “It’s about reducing the risk,” he says, “hedging your portfolio, making sure you have things that hit.”

On a nitty-gritty level, alliance management may include discussions of whether the governance of the alliance is working; whether contractual milestones will be met; whether the alliance is healthy; where there are conflicts. “Alliance management should focus on the gestalt of the whole collaboration,” says Marshak. “Alliance managers need to be proactive. If there is a problem, identify it and address it. Don’t wait for it to come up. I’m not interested in your telling me there’s a problem. I’m interested in your telling me there is a problem coming up.”

Eyes Wide Open

Effective communication, in the context of alliance management, can mean relaying another organization’s view of your firm accurately. This is not always easy or painless to report. In Abbott’s case, Marshak reported, it can be delicate for him to present Genentech’s or Amgen’s view of Abbott to his own Abbott colleagues. But it must be done. “We have to fairly and accurately represent their view,” says Marshak. “We may not agree with it. But you have to present it.”

Marshak is candid about the risks of alliances. He cited historical analyses of the alliance throughout the business world showing high failure rates. “Most alliances fail,” he says. “If anything, it’s gotten worse.” The odds of fruitful alliances in the IT world, he said, are especially low.

Advance Work

Part of the reason for that dubious legacy, he says, may be that not enough time is spent setting up the alliance. So he advised his audience to get to know the alliance partner and work out the contract carefully. In one case with AstraZeneca, Abbott spent 18 months negotiating the terms.

Which probably wasn’t fun. But Marshak pointed out that once the project got going in earnest, it was operationally beneficial to have an agreement that clearly laid out the mutual responsibilities of both parties. Everyone knew what they needed to do. Some elements of the project, especially those involving regulatory bodies, had extremely short timelines that required adroit execution. In other words, a good plan.

Deviations or departures from any alliance plan are allowed. But Marshak says they are routed to the highest levels of his organization. Missed milestones are a common reason that many business alliances dissolve. It’s clear Abbott puts such episodes under the microscope in every case.

One Governance

One of the lessons from Abbott’s experience with alliance management, Marshak said, is that multiple governance structures don’t really work. The company is tweaking some contracts to include a single, more standard governance arrangement. In the past, the governance for a particular alliance could be driven by which Abbott lawyer happened to handle the legal paperwork.

Marshak didn’t address the point, but we were struck by similarities between the life sciences and Hollywood, which has long spread the risks of large movie projects across several companies that may be both collaborators and competitors. More such alliances in pharma will by definition shrink the bonanza that a single company can reap from a blockbuster, since the windfall will be divided. But if the overall risk of a company’s portfolio of trials is reduced, alliance management could postpone an unavoidable reckoning over the industry’s declining scientific productivity.