CAN_Eli Lilly_Group 8

IIM KOZHIKODE

Innovation without walls: Alliance Management at Eli Lilly and Company Innovation without walls: Alliance Management at Eli Lilly and Company 3/10/2011

Submitted By: Section B Group 08 Aman Singh (PGP/14/066) Anuj Khemka (PGP/14/075) Gesu Mittal (PGP/14/085) Isha Nag (PGP/14/086) Karan Malhotra (PGP/14/090) Shruti Prakash (PGP/14/120)

Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)

Innovation without walls: Alliance Management at Eli Lilly and Company 

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During the mid-1990s, the senior executives of Eli Lilly and Company, following a major strategic review, chose to focus on fostering strong organic growth rather than expanding through mergers and acquisitions. To implement this strategy, Lilly decided to achieve critical mass in certain key capabilities and complement those efforts by developing “virtual size” from partnering efforts throughout its operations. From a historical perspective, however, partnering was not new to the pharmaceutical industry or to Lilly. But Lilly's commitment to collaboration as a fundamental part of their strategy was new.

Lilly Alliance Management Process

Find it

Get it

Create Value

• Innovation Sourcing Group under Lilly Research Laboratory

• Corporate Buiness Development Group

• Office of Allinace Management

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The process for bringing external innovation into their Lilly Research Laboratories begins with a group called innovation sourcing group. This is their “find-it” group, which scours the world for new technologies or molecules that will complement their own internal research efforts. In the next phase of the process – which we refer to as the “get-it” phase – their Corporate Business Development group takes the lead in talking to and negotiating with potential business partners. When all goes well with a prospective partner, an agreement is negotiated and the alliance moves forward to the next phase: working toward a successful venture. This final phase of Lilly's sourcing-innovation process is where the potential payoff will be determined: the “create-value” phase. This is also the point at which their Office of Alliance Management group assumes the primary responsibility for coordinating the alliance and seeing it through to a successful conclusion.

The best practices of Lilly's alliance-management process The reason Lilly has established an alliance-management process in the first place is to define approaches that work through a relatively predictable lifecycle that is common to every corporatealliance relationship.

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Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120) Enhancing communication   

The people involved first get to know one another and feel comfortable serving as each other's alliance teammates. People at Lilly believe that meeting in person are required for solidification of the alliance. So, the alliance groups are often contractually required to hold at least a minimum number of face-to-face meetings. Long-term success is also more likely if there is a communications plan in place and everyone communicates.

Responsibility Centers

Alliance Champion • Senior Executive • Provides high level supoort and oversight

Reponsilbility centers

Alliance Leader • Technical Leader or Project Manager • Day to day management of alliance and line budget responsibilities

Alliance Manager • Represents OAM • Business integrator between the partners

Key metrics Key measurements constitute another critical element in Lilly's alliance-management process. These measurements often take the form of various surveys of the alliance participants – surveys that are professionally administered and fully anonymous to encourage frank responses. Lilly conduct voice of the alliance (VOA) surveys. The VOA represents one of Lilly's primary standards of alliance measurement.

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Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)

leadership commitment

strategy

trust and fairness

flexibility

VOA

knowledge management

communicatio n

team coordination

conflict management

performance measurement

decisionmaking skills and competence

The three-dimensional fit analysis Lilly has developed a “three-dimensional fit” analysis that helps us to identify elements of strategic fit, cultural fit and operational fit between Lilly and their partner company. And the results of this careful analysis can be amazingly accurate in helping us predict – and, therefore, often prevent – conflicts that might otherwise potentially cripple an alliance and make it virtually impossible to succeed.

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Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)

Strategic

Operational

Cultural

• strategic alignment between their companies • level of commitment to the alliance • trust or fairness with our partner

• All parameter of VOA survey • communication,conflict management, decision-making, leadership, etc.

• flexibility • knowledge management.

Maintaining a good fit requires that in both partners of the alliance, well-placed champions must genuinely have the ear of upper management. Without that kind of high-level commitment on the parts of both alliance partners, the long-term chances of success are significantly diminished. Keeping a good fit also requires that everybody involved in the alliance understands the decisionmaking process – and that everyone's opinion will be thoroughly considered.

Eli Lilly’s Alliances Lilly- Alpha Partnership: A Research Alliance

Lilly – Beta Partnership: A Marketing Alliance

Lilly – Gamma: A Manufacturing Alliance

•Alpha Biotechnology Co was started in 1987. •It had leadership in gene transcription technology and had developed several mechanisms to regulate gene activity and enhance safety profiles of drugs. •Alliance was formed in late 1990’s for discovery and development of products based on Alpha’s gene splicing technology. •Lilly provided for $100 mn in upfront payments ( included a minority stock in Alpha) , $50 mn in R&D over 5 yearsand $75 mn in milestone payments over several products. •Agreement was for two parallel activities- (a) development of last stage molecule and (b) 5 year research agreement through which Lilly funded 50 scientists at Alpha. •Scott Fishman, an endocrinology scientist with more than 24 years experience at Lilly was made the alliance manager.His role was to engage different functions that made up the governance structure in talks with each other.

•Beta Pharmaceuticals – largest in Japan and among the top 15 gloal firms. •It manufactured array of drugs for ulcer, prostate cancer, hypertension and diabetes. •The agreement was signed in 1998. •It was done to co-promote a novel drug for diabetes treatment. •Beta wanted to establish presence in US wheras Lilly wanted to complete its portfolio through the oral diabetes market. •Both the companies shared the costs and revenues in the manner in the contract. •The drug got rapid review, was launched within 9 months of date of signing. •Problems arose in operationalizing the alliance – Beta wanted to build its organization while Lilly wanted to maximize the new product sales •Michael Ransom, an organic chemist was made the alliance manager for this project.

•Gamma manufacturing - one of the largest employee-owned companies in the United States. •It designed, manufactured and supplied parts for corporate customers. •Lilly had a Pharmaceutical Delivery Systems (PDS) which focuses on devices needed to deliver drugs. It worked with external vendors. •Alliance formed in 2000. •Design and development jointly done by Lilly and Gamma team but final production and packaging was done by Gamma. Through this alliance, Lilly could enhance its manufacturing capability. •Dave Haase, a manager at PDS with more than 20 years of experiencewas the alliance manager. •His role required him to oversee all manufacturing alliances. •He put together a steering committee thus providing central point of contact between Lilly and Gamma and also provided alliance management training to various units.

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Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)

Recommendations 1. Eli Lilly should identify executives from within the organization as well from outside who have the requisite skills for becoming future alliance managers. A mentorship program can be devised whereby they are put under mentorship of existing alliance managers. Also successful alliance managers can document their experiences and best practices in different countries to give a holistic view to the new alliance managers. Timely training and development programs can be arranged by the organization to disseminate knowledge about different cultures and intercultural practices that are to be followed in different geographies. 2. Lilly should extend the OAM structure of alliance management to other geographies and functions by acquiring and building skills and competencies in these areas. Also, it should create regional or subsidiary OAM that will report to the corporate OAM of the parent company. 3. Lilly should adopt a balanced approach towards alliances emphasizing sufficient focus on relationship building, operations and capability generation. An integrated approach should be encouraged and applied. 4. Lily should adopt a conservative and cautious approach towards forming alliances with companies operating in geographies having weak intellectual property regime. It should ensure clear processes and codes are defined in the agreements to prevent future tensions and conflicts.

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