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 / Spring 2003 / Issue 30(originally published by Booz & Company)


Is Your Company Over-Allianced?

Multiple alliances still present many pitfalls, however. An organization’s internal complexity can hamper its external alliance capacity. That is to say, the more compartmentalized a company’s activities, the more difficult it is for the most crucial benefit of an alliance — the flow of new knowledge — to find its way to the people who can best leverage it. Pfizer Inc. tested the drug sildenafil citrate as a treatment for angina, discovered in clinical trials that it could be used to treat erectile dysfunction, and then developed Viagra. Would such information on desirable side effects have reached the right marketers at Pfizer had the drug been developed by a biotech partner and clinical trials been conducted by a contract research partner? These information flows are difficult enough to manage within a large organization such as Pfizer; doing so only gets harder when an alliance partner is involved. Pfizer got it right with Viagra, but how many other companies have lost opportunities because a partner was unable to convey key information to the right decision maker?

Another barrier to developing alliance capacity is the diversity of alliance partners. Experience gained from managing one partner cannot always help improve the management of another relationship. Pharmaceutical firms, which now place a significant portion of their R&D budget in alliances with biotech partners, face an array of partnerships with firms that focus on different geographical, disease, and technological segments. The challenges of coordination and the concomitant costs of R&D are likely to increase when companies have to build bridges among multiple partners as well as between those partners and themselves.

Profitable partnerships aren’t like Lego bricks that can be stacked ever higher. Companies must systematically analyze organizational complexity and partnership diversity, and identify and remove barriers to knowledge flow. That’s how they can build stable — and profitable — alliance portfolios.

Ha Hoang, [email protected]
Ha Hoang is associate professor of entrepreneurship and the Rudolf and Valeria Maag Fellow in Entrepreneurship at INSEAD.
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