How to Find the Right PartnersHow to Find the Right Partnersto Maximize Your ROIto Maximize Your ROI

Barb Eccles, HBSc JDBarb Eccles, HBSc JD

Innovation Management Office Innovation Management Office

Lakehead UniversityLakehead University

for thefor the

FPTT Conference, May 30, 2003FPTT Conference, May 30, 2003

National Arts Centre, OttawaNational Arts Centre, Ottawa

The Question:The Question: How do you find the How do you find the

right partners to right partners to maximize your ROI?maximize your ROI?

The Question:The Question: How do you find the How do you find the

right partners to right partners to maximize your ROI?maximize your ROI?

The Answer:The Answer: It depends.It depends.

The DetailsThe Details

1.1. What is a partnership?What is a partnership?2.2. Why partner? Why not?Why partner? Why not?3.3. How to Find PartnersHow to Find Partners4.4. How to Pick PartnersHow to Pick Partners5.5. Designing the co-operationDesigning the co-operation6.6. How to Keep PartnersHow to Keep Partners7.7. Role of the Tech Transfer ProfessionalRole of the Tech Transfer Professional8.8. The GGI ExampleThe GGI Example

Partnerships: a dating game?Partnerships: a dating game?

1. What is a partnership?1. What is a partnership?

Source: Walker et. al.

“a long term commitment between two or more organisations for the purpose of achieving specific business objectives by maximizing the effectiveness of each partner’s resources … The relationship is based upon trust, dedication to common goals, and an understanding of each other’s individual expectations and values.”

2. Why partner?2. Why partner?

Why not partner? Why not partner?

Pros of Partnering:Pros of Partnering:

Raising financing & mentorshipRaising financing & mentorship Head-start on exit strategyHead-start on exit strategy Reduced costsReduced costs Enhanced credibility and legitimacyEnhanced credibility and legitimacy Access to other/bigger marketsAccess to other/bigger markets Achieve fast and economical growthAchieve fast and economical growth Improve competitivenessImprove competitiveness Retain autonomyRetain autonomy Enhance and speed organisational learningEnhance and speed organisational learning More control over supplier qualityMore control over supplier quality

Pros of Technology AlliancesPros of Technology Alliancesfor Large Firmsfor Large Firms

adequate internal technical capacityadequate internal technical capacity market powermarket power established key linkages to customers, distributors, established key linkages to customers, distributors,

suppliers, regulatorssuppliers, regulators access to capital marketsaccess to capital markets potential synergy with current products and operationspotential synergy with current products and operations better protection of proprietary technologybetter protection of proprietary technology professional management for later-stage growthprofessional management for later-stage growth ability to absorb large, fixed transaction costsability to absorb large, fixed transaction costs

Pros of Technology AlliancesPros of Technology Alliancesfor Early-Stage Partnerfor Early-Stage Partner

strong commitment to the technologystrong commitment to the technology ability to move rapidlyability to move rapidly lower costs of development and operationslower costs of development and operations less bureaucratic, more innovativeless bureaucratic, more innovative more efficient job and wealth creatorsmore efficient job and wealth creators entrepreneurial management for early-stage entrepreneurial management for early-stage

growthgrowth increase firm valueincrease firm value

Cons of Partnering:Cons of Partnering:

Loss of flexibilityLoss of flexibility Increased external scrutinyIncreased external scrutiny Difficulties in future financing roundsDifficulties in future financing rounds Potential co-dependencyPotential co-dependency Costs associated with partneringCosts associated with partnering Confidentiality issues & loss of proprietary Confidentiality issues & loss of proprietary

knowledgeknowledge Organizational disruptionsOrganizational disruptions Damage to firm’s reputationDamage to firm’s reputation

3. How to3. How to find partners find partners

Types of partnersTypes of partners

Major suppliers

Complementary

BusinessesCompetitors

Customers

The BaitThe Bait

Put your best foot Put your best foot forward, but ensure forward, but ensure accuracyaccuracy

Connect the dots for Connect the dots for the potential partnerthe potential partner

4.4. How to Pick Partners:How to Pick Partners:Due DiligenceDue Diligence

Track recordTrack record Budget for project is adequateBudget for project is adequate Competencies of preferred Competencies of preferred

partnerspartners Complementary specialized Complementary specialized

skills and strengthsskills and strengths Scrutinize values, commitment, Scrutinize values, commitment,

and capabilitiesand capabilities Partners Benchmarking Partners Benchmarking

Assessment SystemAssessment System

Success Factors for Alliance-MakingSuccess Factors for Alliance-Making

TrustTrust Strategic compatibilityStrategic compatibility Cultural FitCultural Fit Top management alignmentTop management alignment Appropriate governance mechanismsAppropriate governance mechanisms Careful strategic planningCareful strategic planning Good partnership preparationGood partnership preparation Recognize time requirementsRecognize time requirements

5. Designing the Co-operation5. Designing the Co-operation Define rights and dutiesDefine rights and duties Equal contributions from all partnersEqual contributions from all partners Emphasize the potential for joint value creationEmphasize the potential for joint value creation Keep and protect core competenciesKeep and protect core competencies Continue building trustContinue building trust Agree on objectivesAgree on objectives Create plan with fixed milestonesCreate plan with fixed milestones Dispute resolution planDispute resolution plan Formulate a termination planFormulate a termination plan

Implementation and ManagementImplementation and Management

Establish information & Establish information & coordination systemscoordination systems

Establish required resourcesEstablish required resources Ensure top management supportEnsure top management support Protect your secretsProtect your secrets Encourage learning from partnersEncourage learning from partners Move quicklyMove quickly Continual review of performanceContinual review of performance

How Close Should You Get?How Close Should You Get?

Avoid co-dependencyAvoid co-dependency Minimizing dependency risksMinimizing dependency risks Forced competitionForced competition Watch the balance of powerWatch the balance of power

Why do Alliances Fail?Why do Alliances Fail?

Failure to detect/handle expectation shortfallsFailure to detect/handle expectation shortfalls Differing pain thresholdsDiffering pain thresholds Changing expectations by parent companyChanging expectations by parent company Lack of commitment to partnershipLack of commitment to partnership

Hexagon and NAMCOHexagon and NAMCO

J.V. to produce and distribute a new J.V. to produce and distribute a new ecological cleaning liquid worldwideecological cleaning liquid worldwide

Partner contributions:Partner contributions:– Hexagon: trademarks, production technology Hexagon: trademarks, production technology

and know-howand know-how– NAMCO: access to global distributor network NAMCO: access to global distributor network

for manufacturing, packaging and distributionfor manufacturing, packaging and distribution

Hexagon and NAMCO (2)Hexagon and NAMCO (2) Early in relationship, JV unilaterally decided to Early in relationship, JV unilaterally decided to

change direction, which cannibalized change direction, which cannibalized NAMCO’s productsNAMCO’s products

Chain reaction of several different unilateral Chain reaction of several different unilateral moves by partners followed:moves by partners followed:– NAMCO negotiated special compensation with JVNAMCO negotiated special compensation with JV– Hexagon delayed key R&D, threatened to make Hexagon delayed key R&D, threatened to make

deal with NAMCO’s main rivaldeal with NAMCO’s main rival Result: relationship dissolvedResult: relationship dissolved

6. How to Keep Partners6. How to Keep Partners

How to keep partnersHow to keep partners

managing expectationsmanaging expectations conflict resolutionconflict resolution building and maintaining trustbuilding and maintaining trust be flexiblebe flexible open communicationopen communication joint assessment of problems & expectation shortfallsjoint assessment of problems & expectation shortfalls manage conflict of interestmanage conflict of interest

Rescuing Troubled AlliancesRescuing Troubled Alliances

Know your partner’s interestsKnow your partner’s interests Understand the value your partner Understand the value your partner

attributes to intermediate outcomesattributes to intermediate outcomes Tell your partner when you are Tell your partner when you are

troubledtroubled Before blaming partner, think of Before blaming partner, think of

alternate causes of troublesalternate causes of troubles If problems are caused by partner, If problems are caused by partner,

consider partner’s organisational consider partner’s organisational constraintsconstraints

7. The role of technology transfer 7. The role of technology transfer professionalsprofessionals

Think: do you really want to go there?Think: do you really want to go there? Devote: assign proper resourcesDevote: assign proper resources Networks: use your networks to find Networks: use your networks to find

appropriate partnersappropriate partners Experience: enlist the help of those who Experience: enlist the help of those who

have done this beforehave done this before Infrastructure: work with other T2 profs Infrastructure: work with other T2 profs

to create/maintain gap filling initiativesto create/maintain gap filling initiatives

8. Example:

Genesis Genomics Inc.

The Base Technology

Recognizable changes in Mitochondrial DNA that are associated with certain disease states

How it works

Mitochondrial DNA acts as an index to cancers that begin in the nucleus

What makes it practical?• The small size of Mitochondrial

Genome

• The test can be performed on everyone

Genesis Genomics Inc.Genesis Genomics Inc. Initial cost estimates to “make it” $77M & 10yInitial cost estimates to “make it” $77M & 10y Strategic outsourcing reduced to $20M & 3yStrategic outsourcing reduced to $20M & 3y Credibility gain extremely valuable to GGICredibility gain extremely valuable to GGI Partnership selection through networkingPartnership selection through networking Negotiation involved site visitsNegotiation involved site visits Some procedural issues solved through close Some procedural issues solved through close

communicationcommunication Benefits accrued to both partiesBenefits accrued to both parties

Special thank you to …Special thank you to …

Morna Paterson, FPTTMorna Paterson, FPTT Sean Wise, E&Y EBCSean Wise, E&Y EBC George Macey, NWO Innovation TeamGeorge Macey, NWO Innovation Team

ReferencesReferences Africa Arino and Yves Doz, “Rescuing Troubled Alliances … Before Africa Arino and Yves Doz, “Rescuing Troubled Alliances … Before

It’s Too Late”, It’s Too Late”, European Management JournalEuropean Management Journal, Vol. 18, No. 2, pp. , Vol. 18, No. 2, pp. 173-182, 2000173-182, 2000

Werner H. Hoffmann and roman Schlosser, “Success Factors of Werner H. Hoffmann and roman Schlosser, “Success Factors of Strategic Alliances in Small and Medium-sized Enterprises – An Strategic Alliances in Small and Medium-sized Enterprises – An Empirical Survey”, Empirical Survey”, Long Range PlanningLong Range Planning 34 (2001) 357-381 34 (2001) 357-381

Pratibha A. Dabholkar and Sabrina M. Neely, “Managing interdependency: a taxonomy for business-to-business relationships”, Journal of Business & Industrial Marketing, VOL. 13 NO. 6 1998, pp. 439-460

H.C.W. Lau, W.B. Lee and Peter K.H. Lau, “Development of an intelligent decision support system for benchmarking assessment of business partners”, Benchmarking: An International Journal, Vol. 8 No. 5, 2001, pp. 376-395.

Elias G. Carayannis, Suleiman K. Kassicieh, Raymond Radosevich, “Strategic alliances as a source of early-stage seed capital in new technology-based firms”, Technovation 20 (2000), pp. 603-615.

References (2)References (2) Andrew D. Brown, Inger Boyett and Phil Robinson, “The Dynamics

of Partnership Sourcing”, Leadership & Organization Development Journal, Vol. 15 No. 7, 1994, pp. 15-18.

Matthew J. Robson, “Partner Selection in Successful International Strategic Alliances: The Role of Co-operation”, Journal of General Management, Vol. 28 No. 1 Autumn 2002.

Ramesh Kolluru and Paul H. Meredith, “Security and trust management in supply chains”, Information Management Computer Security, 9/5 [2001] 233-236

Derek H.T. Walker, Keith Hampson and Renaye Peters, “Project alliancing vs project partnering: a case study of the Australian National Museum Project”, Supply Chain Management: An International Journal, Vol. 7, No. 2 (2002), pp. 83-91.

Joseph E. Coombs and David L. Deeds, “International Alliances as Sources of Capital: Evidence from the Biotechnology Industry”, The Journal of High Technology Management Research, Volume 11, Number 2, pages 235–253

References (3)

Charles D. Kerns, “Strengthen Your Business Partnership: Charles D. Kerns, “Strengthen Your Business Partnership: A Framework and Application”, A Framework and Application”, Business Horizons, July-August 2000, pp. 17-22.

Monica L. Perrya, Sanjit Senguptab, Robert Krapfelc, “Effectiveness of horizontal strategic alliances in technologically uncertain environments: are trust and commitment enough?”, Journal of Business Research 5871 (2002) 1– 6.

John D. Neilla, Glenn M. Pfeifferb, Candace E. Young-Ybarrab, “Technology R&D alliances and firm value”, Journal of High Technology Management Research 12 (2001) 227–237.

For More Information:For More Information:

Barb EcclesBarb EcclesInnovation Management OfficeInnovation Management OfficeLakehead UniversityLakehead University955 Oliver Road955 Oliver RoadThunder Bay, Ontario P7B 5E1Thunder Bay, Ontario P7B 5E1

Phone: (807) 343-8184Phone: (807) 343-8184Fax: (807) 346-7749Fax: (807) 346-7749barb.eccles@lakeheadu.cabarb.eccles@lakeheadu.cawww.lakeheadu.ca/~techtxwww.lakeheadu.ca/~techtx