Strategic Partnerships and External Innovation

Catherine Carr D,  Founder Catherine Carr & Associates, UK

Andrew A Parsons,  Director Reciprocal Minds Limited, UK

Partnerships and collaborations to create external innovation are an increasing part of the industry landscape. This article highlights some examples of emerging trends in partnership and outlines key areas that can impact performance. We propose that these areas represent the 'how' of external innovation and to maximise success, need an active focus, review and appropriate skill development.

The last 15 years have seen tremendous changes in the pharmaceutical industry. The significant amount of public and private investment made into sequencing the genome, have brought about some important medical and scientific advances. However, these advances have not resulted in an increase in productivity across the industry.

Other industries have undertaken transformative changes to their cycles of productivity. A key change noted in the automotive, telecommunications and other industries is the move to harnessing external innovation as a driver for R&D productivity. As with other industries, an increased reliance on external innovation is emerging to create future value within R&D pipelines. Following a review of how technology industries changed to meet the difficulties of maintaining growth, Henry Chesborough (2003) coined the term ‘Open Innovation’. This was a way of describing how companies were combining their efforts to harness scientific advances and utilise new technologies to get commercial products to market faster.

Strategic partnerships now appear to operate during all aspects of the R&D cycle and a number of different collaboration frameworks have been described within the pharmaceutical industry (Roberston and Mayr, 2011).

Collaborations between industry and academic groups have flourished over the past decade with a number of public-private partnerships being formed to provide a kick start to innovation by pooling expertise and knowledge. A change in leadership culture and mindset combined with flexible approaches to portfolio and project management are required (Robertson and Mayr, 2011) to maximise the benefits of these collaborations (Hunter 2010).

The scope of strategic partnerships are rapidly changing as a number of independent contract research / manufacturing solution providers emerge. The growth of the contract research market is striking. One Pharma Magazine report states that the European contract research market reached revenues of US$6 billion in 2011 and is set for growth to nearly US$12 billion by 2018.

If strategic collaboration is the new framework for operations within the biopharmaceutical industry, how has the industry changed in recent years and what new capabilities need to be embedded to facilitate growth?

Outsourcing and offshoring

A focus on reducing cost has supported the growth of the contract research and manufacturing business. The outsourcing or offshoring of activities to a third party supplier has resulted in expansion of the R&D system to evolve core relationships between those who hold or access the intellectual property rights to the product and those who provide a service for its development. The past ten years have seen a change in the way outsourcing initiatives have moved from a service provision model to a more co-creative partnership especially in chemistry and early drug discovery. As a result there is now an increased integration of activities with more local decision making and the solution provider producing products according to agreed milestones.

As collaborative partnerships evolve even further to shared risk, the skills needed to work in this co-creative environment and distributed value network require a high level of competency in innovation and communication skills. A key feature of a co-creative collaboration is perhaps developing an engaged and empowered joint culture to equally contribute around a common purpose.

Risk sharing

A frequently used model of risk sharing is setting up Joint Ventures (JV). A JV creates a new entity that may have its own legal and governance framework and its own employees. Examples are numerous and also happening within Asia. These include MedImmune’s development collaboration with WuXi App Tec and AstraZeneca’s JV with Pharmeron to supply chemistry, early discovery and compound screening.

Risk sharing between organisations offers companies the advantage of setting up integrated units with an aligned work culture that in turn develops innovative products and ensures cost optimisation.

From service provision to

co-creation

Alternative approaches to sharing risk are also being developed within the pharmaceutical and investment community. Many multinationals have their own corporate venture funds However, some are now contributing R&D dollars into venture funds such as Index Ventures and Sanderling Venture. These co-creative collaborations in sharing the risks of early stage biotech will hopefully result in a more productive use of early R&D funding. There is also an opportunity to develop the co-creation model even further.

Innovation is certainly coming of age as pharma, academia, biotech and the investment community approach risk sharing opportunities that foster an environment for growth.

Innovation: Internal vs. External

The past decade has seen a consolidation of external innovation across the bio-pharma industry with an increased balance between home grown and licenced projects progressing through pharma pipelines.

The industry will likely consolidate even further into one that leverages external investment, resources and expertise. The dissolution of the larger R&D organisations has also led to a diffused network of knowledge across service providers. Different values and beliefs or mindsets are now required for those working in an independent service or solution provider to those of a scientist working within an internal organisation. Champions of projects are now multi-fold and complex. Projects begin with an initial ‘idea’, leading to a start-up company through to optimisation and various investment stages into development and finally, late stage development. The skills of scientists working in the industry now need to flex beyond deep technical skills to include ability to access technology from multiple sources. Harnessing diversity is a key competency in scientists that work in this environment (Holtzman and Anderberg, 2011). Further these technical leaders must focus on the common goals and move away from monetary rewards (Antikainen et al., 2010; Pink 2010). Recent work has demonstrated that connection and building trust or shared experience is a vital part of generating creativity across cultural domains. Therefore, the skills of building and maintaining trust and an interpersonal competence are likely to be necessary as the cultural diversity of an innovation ecosystem grows (Chua et al., 2012).

As the industry continues down this track of balanced internal and external innovation there will be key challenges to overcome. One of these will be how to ensure focus on making co-creative collaborative working environments maximise efficiency and growth for those involved in innovation systems.

Delivering the strategy

Partnership teams today need to be both internally responsive, at the same time adapt to and partner well with other teams. Thus, companies are learning to collaborate in co-creative partnerships to achieve mutually desired outcomes. Effective management of the collaboration has been a traditional focus of effort within strategic partnerships (Hughes and Weiss 2007) and even seen as a source of competitive advantage (Ireland et al., 2002). Key areas of the skills needed for success in strategic partnership or collaboration are outlined below with high performing team and co-creative group traits.

Trust

It takes a long time to build trust and a moment to destroy it. However, trust is critical to high performing co-creative groups and teams that must come together quickly, work in somewhat ambiguous circumstances, assume good intent, and be collaborative in style. Trust is built through being consistent and reliable, respectful, open, and honest (Larson and LaFasto, 1989). Once these basics are in place, team members will be more likely to cooperate, share knowledge and be able to generate business results as a shared vision, clear roles and responsibilities and processes will develop (Hackman and Wageman, 2005).

Resilience

Change is constant in co-creative partnerships and thus individuals must find ways to cope with letting go of the familiar. As change is stressful, one protective factor to keep in mind is peer support. Peer support has been shown to reduce health problems, decrease personal stress, and is a leading driver of team engagement and performance (Corporate Leadership Council, 2011).

Motivation and engagement

Engagement is an essential prerequisite for high performance. The Gallup Q12, which studied over one million employees and y (xx), identified 12 key expectations that were predictive of engagement. Gallop emphasised that peer support and feedback was a key motivator for what makes work worthwhile. Building mechanisms for feedback and support are therefore a vital consideration for co-creative collaborations as peer factors lead to greater engagement, motivation and productivity.

Leadership and management

Leaders need to see the way, show the way and walk the way. These attributes and behaviours are critical to building a shared purpose amongst team members and developing the best approach to execution of its work. Research has demonstrated that high performance is linked to well-rounded teams. This is a challenge given that teams are typically assembled quickly rather than carefully constructed. Therefore, it becomes critical for the collaboration team to be aware of where there are gaps in its knowledge and experience base.

The big three leadership competencies of results focus, people orientation and thought leadership are needed. Some specific competencies sought after include high emotional intelligence, creative and strategic thinking, agility, change management and entrepreneurial courage. Emotional intelligence is particularly predictive of leadership ability (Offermann, et al., 2004). Carefully selected for and developed across the leadership team, competencies reflect, communicate, and foster the evolution of that organisation’s culture.

Professional and developmental growth

Invest in strengths rather than focus on areas to improve. A focus on only improving faults results in a low engagement score of the workforce. However, a focus on building on the strengths of the team significantly increases engagement to nearly 3 out of 4 members (Gallop Q12 study in Buckingham and Coffman, 1999).  From an organisational perspective, team members who develop their emotional intelligence ability are known to improve performance (Naseer et al., 2011).

Constructive communication across cultures

Building on strengths does not mean ignoring differences or discouraging disparate views. On the contrary, healthy teams are strong enough to withstand some task conflict, are open about alternative possibilities for viewing and doing and know that the best answers include many minds thinking in different directions. These high performing teams also extend these skills to their engagement with other stakeholders and parties in the ecosystem.

Culturally intelligent individuals and teams that are capable of communicating across cultural differences are essential. Characteristics of these individuals and teams are to be curious, open, willing to learn and appreciative of differences. Also an ability to exercise clear communication with sensitivity to differing cultural preferences, including organisational, ethnic, age, geographical location and gender differences to name a few.

Team processes

Team processes are ever changing in today’s environment. After over 20 years of studying teamwork, Edmondson (2011) concluded that the focus needs to be on how teams and groups work together, in a dynamic environment, and build abilities of adapting to dynamic environments. The skills needed include: interpersonal awareness, appropriate skillful inquiry, and an ability to teach others what you know. Team processes to maximise collaboration should focus on sharing crucial knowledge quickly, asking questions clearly and frequently to make small adjustments through which different skills and knowledge are woven together into an effective and dynamic process.

Risk and innovation

Co-creative teams must mitigate risk carefully to prevent actual threats while encouraging innovative opportunities. Clear articulation of risks allows them to be avoided, reduced or accepted. At the same time teams want to encourage innovation. Risk and innovation go hand in hand and an understanding of the strategic and practical needs of the customer is integral to success. Team networks often include a broader group of stakeholders to oversee the whole innovation to market process. Teams need to be permeable and engage in the broader community.

Conclusions

Strategic partnerships are continuing to evolve within the pharmaceutical industry and collaborations need to align different work values and cultures to maximise the collective intelligence.

To support this approach, the authors are making available an open source tool called the Adaptive Team Assessment (ATA). This tool supports co-creative groups to assess their functioning in six domains as outlined above.

Success in the new world of partnership will require individuals and organisations to flex their existing cognitive and emotional intelligence skills and strengthen all skills to ensure a focus on not only the technical but people element of the collaboration.

-- Issue 18 --

Author Bio

Catherine Carr D
Andrew A Parsons
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