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Governance—SMBs Learn to Live with It, Alliances Can’t Live Without It

Posted By Administration, Friday, June 20, 2014
Originally posted on 4/23/2013

In our continuing series on alliances between large multinational companies and smaller entities (SMBs and start-ups), we examine an issue that surprisingly didn’t make it into the cover story of our forthcoming Q2 2013 issue of Strategic Alliance Magazine on the same topic. When we originally set out in pursuit of this article on so-called “David-Goliath” alliances, we postulated based on informal conversations with members that a big part of managing this type of alliance would be to help SMBs, biotechs, and start-ups deal with both alliance governance processes as well as the inherent bureaucracy that comes with large company operations.

As part of this issue we examined whether the bigger organization would find itself having to quell the practice of “decision shopping” by its smaller partner—circumventing the alliance governance structure and chain of command when the larger organization’s primary contacts are not giving you the answer you want, and getting a “go” signal from an executive at another branch, division, regional unit, or other part of the multi-armed multinational. The smaller organization can in theory say it got necessary approvals to proceed on a course, even if that decision really was never sanctioned by the big company’s alliance constituents.

According to the people we spoke with, this practice is generally the exception, not the rule. Most of the time, those bypassing the alliance communications channels are not necessarily ill intentioned, according to ASAP New England chapter president Frank Curran, director of business development and alliances at SUSE.

“Some people go around for honest reasons where they know somebody [at the big company] and they think that that can help. It frustrates and actually causes chaos because it hurts your peer’s stature because someone else above [at the large company] is going to question him,” he said.

Rob Wills, vice president of alliance management at Janssen Pharmaceutical Companies of Johnson & Johnson, said biotechs and other smaller pharma companies are very good about utilizing the governance structure properly. He outlined a rare exception—when “this no-yes is the death of the program,” which is covered in the Q2 2013 cover story. He also added that Janssen has had experiences when the smaller partner has sidestepped the larger company entirely, not just its governance structure.

“What we have had is they get impatient and they make a decision without us, and then they ask for forgiveness,” he said.

Later in our conversation, Wills explained that the committees, which of course have smaller company representation, ultimately help resolve disagreements a large majority of the time. He acknowledged that there are occasional situations that grow so contentious that they cannot be settled using the formal governance measures, but he said these instances are “more rare than common.”

Wills also said that trust, open lines of communication, and rigorous education on the alliance governance and internal Janssen corporate processes go a long way in preventing snafus that might arise from a failure to properly navigate a large company, in general. Pannie Trifillis, Ph.D., CA-AM, director of alliance management at PTC Therapeutics, agreed.

“Even though we are a small company, we understand and embrace the need to have governance committees and processes. We expect our partners to be transparent about these processes and to help us navigate the system within their organization,” she said.

Curran certainly understands how employees at start-ups might get tripped up trying to make sense of the many tentacles of a global company. In a previous life he orchestrated alliances on behalf of a few start-ups. If nothing else, the speed of decision making alone might frustrate the smaller company alliance counterparts.

“When I was in a startup or emerging tech, we went into a room and made a decision—the CEO was there. [At large companies], CEOs and vice presidents are traveling around the world, and the stakeholders for each initiative are often dispersed,” he said. “You have to bring more people into the conversation often from many geographies and product groups.”

Besides, added Curran, getting the most senior people at a large organization isn’t necessarily going to help the immediate cause since alliance initiatives with smaller organizations are rarely big enough to warrant their attention.

“[My smaller company counterpart might say] ‘Why can’t you get something done? So-and-so is on vacation. Can’t you go higher?’ No. Even if I went to the vice president, he’s going to say, “Go work with the marketing manager,’” said Curran.

Corporate and alliance governance might create seemingly extra hurdles, but without it these multinational/SMB alliances would ultimately get tripped up.

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