How to Find the Right Partners to Maximize Your ROI

1. How to Find the Right Partnersto Maximize Your ROI Barb Eccles, HBSc JD Innovation Management Office Lakehead University for the FPTT Conference, May 30, 2003 National Arts Centre, Ottawa

2. The Question: How do you find the right partners to maximize your ROI?

3. The Question: How do you find the right partners to maximize your ROI? The Answer: It depends.

4. The Details • What is a partnership? • Why partner? Why not? • How to Find Partners • How to Pick Partners • Designing the co-operation • How to Keep Partners • Role of the Tech Transfer Professional • The GGI Example

5. Partnerships: a dating game?

6. 1. What is a partnership? “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.” Source: Walker et. al.

7. 2. Why partner? Why not partner?

8. Pros of Partnering: • Raising financing & mentorship • Head-start on exit strategy • Reduced costs • Enhanced credibility and legitimacy • Access to other/bigger markets • Achieve fast and economical growth • Improve competitiveness • Retain autonomy • Enhance and speed organisational learning • More control over supplier quality

9. Pros of Technology Alliancesfor Large Firms • adequate internal technical capacity • market power • established key linkages to customers, distributors, suppliers, regulators • access to capital markets • potential synergy with current products and operations • better protection of proprietary technology • professional management for later-stage growth • ability to absorb large, fixed transaction costs

10. Pros of Technology Alliancesfor Early-Stage Partner • strong commitment to the technology • ability to move rapidly • lower costs of development and operations • less bureaucratic, more innovative • more efficient job and wealth creators • entrepreneurial management for early-stage growth • increase firm value

11. Cons of Partnering: • Loss of flexibility • Increased external scrutiny • Difficulties in future financing rounds • Potential co-dependency • Costs associated with partnering • Confidentiality issues & loss of proprietary knowledge • Organizational disruptions • Damage to firm’s reputation

12. 3. How to find partners

13. Types of partners Major suppliers Complementary Businesses Competitors Customers

14. The Bait • Put your best foot forward, but ensure accuracy • Connect the dots for the potential partner

15. How to Pick Partners:Due Diligence • Track record • Budget for project is adequate • Competencies of preferred partners • Complementary specialized skills and strengths • Scrutinize values, commitment, and capabilities • Partners Benchmarking Assessment System

16. Success Factors for Alliance-Making • Trust • Strategic compatibility • Cultural Fit • Top management alignment • Appropriate governance mechanisms • Careful strategic planning • Good partnership preparation • Recognize time requirements

17. 5. Designing the Co-operation • Define rights and duties • Equal contributions from all partners • Emphasize the potential for joint value creation • Keep and protect core competencies • Continue building trust • Agree on objectives • Create plan with fixed milestones • Dispute resolution plan • Formulate a termination plan

18. Implementation and Management • Establish information & coordination systems • Establish required resources • Ensure top management support • Protect your secrets • Encourage learning from partners • Move quickly • Continual review of performance

19. How Close Should You Get? • Avoid co-dependency • Minimizing dependency risks • Forced competition • Watch the balance of power

20. Why do Alliances Fail? • Failure to detect/handle expectation shortfalls • Differing pain thresholds • Changing expectations by parent company • Lack of commitment to partnership

21. Hexagon and NAMCO • J.V. to produce and distribute a new ecological cleaning liquid worldwide • Partner contributions: • Hexagon: trademarks, production technology and know-how • NAMCO: access to global distributor network for manufacturing, packaging and distribution

22. Hexagon and NAMCO (2) • Early in relationship, JV unilaterally decided to change direction, which cannibalized NAMCO’s products • Chain reaction of several different unilateral moves by partners followed: • NAMCO negotiated special compensation with JV • Hexagon delayed key R&D, threatened to make deal with NAMCO’s main rival • Result: relationship dissolved

23. 6. How to Keep Partners

24. How to keep partners • managing expectations • conflict resolution • building and maintaining trust • be flexible • open communication • joint assessment of problems & expectation shortfalls • manage conflict of interest

25. Rescuing Troubled Alliances • Know your partner’s interests • Understand the value your partner attributes to intermediate outcomes • Tell your partner when you are troubled • Before blaming partner, think of alternate causes of troubles • If problems are caused by partner, consider partner’s organisational constraints

26. 7. The role of technology transfer professionals • Think: do you really want to go there? • Devote: assign proper resources • Networks: use your networks to find appropriate partners • Experience: enlist the help of those who have done this before • Infrastructure: work with other T2 profs to create/maintain gap filling initiatives

27. 8. Example: Genesis Genomics Inc.

28. The Base Technology Recognizable changes in Mitochondrial DNA that are associated with certain disease states

29. How it works Mitochondrial DNA acts as an index to cancers that begin in the nucleus

30. What makes it practical? • The small size of Mitochondrial Genome • The test can be performed on everyone

31. Genesis Genomics Inc. • Initial cost estimates to “make it” $77M & 10y • Strategic outsourcing reduced to $20M & 3y • Credibility gain extremely valuable to GGI • Partnership selection through networking • Negotiation involved site visits • Some procedural issues solved through close communication • Benefits accrued to both parties

32. Special thank you to … • Morna Paterson, FPTT • Sean Wise, E&Y EBC • George Macey, NWO Innovation Team

33. References • Africa Arino and Yves Doz, “Rescuing Troubled Alliances … Before It’s Too Late”, European Management Journal, Vol. 18, No. 2, pp. 173-182, 2000 • Werner H. Hoffmann and roman Schlosser, “Success Factors of Strategic Alliances in Small and Medium-sized Enterprises – An Empirical Survey”, Long Range Planning 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.

34. 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

35. References (3) • Charles D. Kerns, “Strengthen Your Business Partnership: 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.

36. For More Information: Barb Eccles Innovation Management Office Lakehead University 955 Oliver Road Thunder Bay, Ontario P7B 5E1 Phone: (807) 343-8184 Fax: (807) 346-7749 barb.eccles@lakeheadu.ca www.lakeheadu.ca/~techtx