Collaboration and partnering for competitive advantage
Pharma companies of all sizes need to make alliances with a wide range of firms and institutions so that they can tap into the latest innovations quickly, wherever they emerge.
In technologically-intensive fields, such as pharma, where there are big advantages from being innovative, but rapid obsolescence for inaction, competitive advantage derives from the speed at which firms acquire rare and valuable knowledge.
Modern biopharmaceutical science is no longer a single discipline, or even an industry, but rather a confluence of technologies and bodies of knowledge, where inter-organisational collaboration is a necessity. It is very hard for any single firm, however well-organised, to assemble the skills and possess the organisational scale to manage all the knowledge under one roof.
As a consequence, innovation is found increasingly in collaborative networks and knowledge centres. Moreover, as information emerges quickly and is geographically dispersed, firms should have several alliances and participate in multiple knowledge centres to maximise any potential benefits.
While pharma firms recognise this new reality, they vary significantly in their approach to collaboration. Larger companies have been more successful at building partnerships, enabling them to capture and exploit the latest scientific breakthroughs. Smaller firms, constrained by resources, have not been so successful. But this needn’t be the case if they adapt quickly and learn the art of building a portfolio of alliances.
Types and scope of collaboration
Current inter-organisational collaborations fit in two broad categories:
First are transactional or exchange-orientated collaborations involving two or more organisations joined by a common undertaking, usually to achieve a specific, short-term objective. These collaborations often involve mutually-negotiated exchanges of information and other resources and are typically time-limited.
The second category is more relational and longer-term, with the collaborators typically pooling resources and combining competencies. The relationship is never static but evolves over time as the firms cement existing cooperation activities and explore new ones.
Whether a firm adopts a transactional or a relational collaboration depends on several factors, not least the strategic objectives being sought from the partnership. The important thing is to successfully establish the obligations and duties of each partner. Many organisations, particularly academic institutions, tend to focus too much on transactional details, especially intellectual property (IP). This is not to say that is not important, but this approach risks missing the bigger picture. It is more important to focus on processes first.
In a recent study, I analysed the collaboration portfolios of a number of multinational pharma companies, identifying four main categories of practice (Figure 1) with unique features:
Figure 1: Categories of collaboration
Gleaners, which include Novo Nordisk, Boehringer Ingelheim, Bayer and Roche, depend mainly on their internal capabilities, not only to create, but also to manage, their innovations. Even when projects are sourced externally, they are mainly developed in-house using their own resources and expertise. Diabetes-focused Novo Nordisk has a high R&D intensity and a strong commitment to internal R&D.
Assimilators (including Amgen, AstraZeneca, Norvatis and Bristol-Myers Squibb) prefer externally-sourced projects. However, like Gleaners, they prefer to utilise their internal capabilities to develop them. Value is created from capabilities in R&D management of internally- and externally-acquired projects from a select number partners in targeted fields of strategic importance.
Elaborators are firms that collaborate widely with multiple and diverse partners and translate the acquired knowledge into internal management of projects. This group includes Eli Lilly, GlaxoSmithKline, Pfizer and Johnson & Johnson, which are well-known for their strength in internal R&D capabilities. Their openness to external collaborations allows them to acquire and translate this knowledge to boost internal capabilities and projects.
The final group is Mobilisers, as exemplified by Shire, Gilead and Celgene. Mobilisers predominantly acquire R&D projects and knowhow externally. They are extremely open to external collaborations and undertake these with multiple and diverse partners. Mobilisers are masters of extracting value from available internal and external capabilities. These firms tend to pursue a lean strategy focused on high margin speciality products.
The Red Queen effect
Larger companies have responded to the productivity challenge by opening up to external collaboration. In the last five years, new drug approvals have averaged around 40, nearly doubling from their lowest figure in 2010.
The situation is not so good for smaller and medium-sized enterprises. In particular, European small-to-medium R&D-intensive pharma firms (revenues ≥ £300million ≤ £2 billion), such as Ipsen, Norgine BV, Almirall, Merz, Grunenthal, Tillotts, Ferring, Leo Pharma, Actelion, Orion, Pierre Fabre, Recordati, Esteve, Sigma-Tau and Gedeon Richter, face a massive innovation gap. In the last 10 years, there have been few successful (novel) new drug launches from them.
The industry is an aggregated value chain in which all firms – small, medium and large – collectively contribute to the conceptualisation, discovery, manufacture and supply of pharmaceutical products/services. So, all firms have important roles, playing to different strengths and servicing different aspects of the value chain.
Akin to a biological ecosystem, the industry functions well when all participants are thriving and co-evolving their capabilities to match the threats and opportunities the environment throws their way. This is the basic premise of the Red Queen hypothesis, which supposes that, in co-evolved interactions, evolutionary change by one species can lead to extinction of others. Therefore unless smaller firms can learn how to build effective alliances, they will continue to struggle not only in keeping up with the competition, but also to survive.
Innovation brokers and scouts
Innovation brokers intervene at appropriate times to help firms achieve higher value and productivity by gaining access to appropriate innovation assets at each stage of the business development process. It is their job to facilitate the efficient linkage of ideas, people, services and capital to improve innovation outcomes. By enabling open idea flow, mutually beneficial exchanges happen that eventually help firms launch new plans.
The pharma industry, like all other innovation-driven fields, is in a learning race, which is defining a new frontier for competitive advantage. Success depends on the speed at which firms can capture ideas and learn from diverse collaborations and partnerships.
Larger companies, helped by their financial and talent base, are managing to quickly build capabilities to collaborate with a vast array of partners and figuring out how to diffuse this knowledge within their organisations.
Innovation brokers can help to bring together the main innovation protagonists, thereby catalysing the activities that enable ideas and knowledge to be transformed into marketable technologies. Smaller firms, meanwhile, having less means to build their internal brokerage departments, can use external brokers to ensure they don’t miss out on potential opportunities.
About the author:
Enosh Mwesigwa, PhD, MBA is the founder and owner of Bricklane Innovation Partnerships, a Cambridge-based consultancy that provides primary research solutions to high technology firms in the biomedical, engineering and science sectors. He is also a Visiting Research Fellow in the Department of Pharmaceutics, UCL School of Pharmacy. He can be contacted via email: EMwesigwa@bricklaneinnovations.com Twitter: @Emwesigwa