Project vs. alliance management
By Art Canter and Jan Twombly
News flash: A major industrial equipment manufacturer has just agreed to partner with a leading power company to develop, manufacture and market a new battery that introduces significant innovation and reduces environmental waste. As project manager on the battery program, you’re excited about the new relationship. The company has begun to engage in some significant strategic alliances such as this, and you like that your responsibilities are expanding to include engaging with people from outside the company. The engineers in your program are talented, so collaborating with another company should be no problem. You’ll run the project as you always have, simply considering the partner as one of the stakeholders.
You are busy learning about the project when you receive a call from someone within your company who calls herself the “alliance manager.” You thought you were running the project. Who is this person and how does her role relate to yours?
Embracing openness
Slowly, firms are embracing the power of openness and innovating not just product and service offerings, but processes, business models and ways of working to harness opportunities –and using that openness and collaboration to manage the risks of globalization. No one company, entity, government or association has the talent, resources or time for the continual innovation that the global marketplace demands, nor can one organization or agency solve the critical issues such as the energy crisis facing society today.
To help tackle these big challenges, organizations are opening themselves to stakeholders and communities. In the process, they tend to specialize and develop relationships with other organizations that complement and extend their core expertise. These relationships are the linchpin in efficiently and effectively providing a complete solution to take to the marketplace. One can think of the organization today as a collection of components from both within and outside of its offices brought together to harness individual capabilities for a specific, customer-centric purpose. These relationships take many forms and labels, including preferred supplier, outsourcing partner, contract manufacturer, research collaboration, as well as alliance, to name a few. Each involves a difference degree of collaboration and differing level of management complexity.
For most companies, it is no longer a question of whether to ally, but rather how to do it right. Done well, alliances foster innovation, provide resources and spread risk. Done poorly, alliances waste resources, create unnecessary risks and exhaust people. By nature, alliances are complex. Despite their promise, many alliances aren’t successful. Studies conducted by McKinsey and others have shown that fewer than 50 percent of alliances achieve their objectives.
To remedy this situation, scholars, consultants and industry practitioners have developed a body of knowledge to guide partnering organizations in making the management of alliances a repeatable and consistent process. In doing so, the success rate has improved, and the processes, practices and tools of alliance management have come to be recognized as a unique professional management discipline. Professional certification by the Association of Strategic Alliance Professionals (ASAP) exists, complete with an underlying framework of skills and leading practices. Alliance management is a way of thinking and includes a specific skill set and tool set that effectively addresses the unique challenges of managing an alliance. It is also a profession and a corporate function, requiring a defined vision, structure, goals, ways of working and metrics.
The alliance manager’s role
Managing alliances – driving two or more entities that may compete in other realms – to achieve a shared objective is not for the faint of heart. Alliance managers have the responsibility to ensure effective governance of the relationship, protect their company’s assets and maximize long-term value for the company, its partners and customers.
Alliance managers focus on the “collaborative” work of the alliance – bridging partnering organizations and uniting independent functions within each of them to ensure activities are coordinated, communication flows, decisions are made and resources are leveraged to achieve the goals of the alliance. They are the choreographers or orchestrators of the alliance.
Steve Steinhilber, vice president of strategic alliances at Cisco, a company known for its prowess at alliances, and author of Strategic Alliances: Three Ways to Make Them Work, describes alliance managers as, “Conductors [who] craft a compelling business plan, get executive buy-in up and down the chain of command and work with business units and sales people to execute.” It is a role that requires deep knowledge of the business, political savvy, sophisticated negotiation skills and an ability to get beyond what is being said and understand the meaning and implications behind the words. It often requires great amounts of both tenacity and empathy – the job requires difficult and frank discussions with people senior to the alliance manager and entails challenging traditional hierarchies, lines of authority and existing ways of working within each partner organization.
The project manager in the opening scenario might be scratching his head, thinking, “That sounds a lot like my job.” In some ways it is. Project managers need good business skills in addition to project management skills. They too have to coordinate activities and ensure communication flows. How the job is carried out also depends on the project manager. Mary Ann Borton, an alliance director at the global pharmaceutical company Astellas, has a unique perspective, as she was formerly a project manager for the company.
“As project manager, I not only focused on managing the project, but also on managing the team. The project would go more smoothly if the team was aligned,” she said. “However, as an alliance manager, I find that my focus is even more people-oriented and my thinking must be more multidimensional and less task-oriented.”
The project manager as alliance manager
Our fictitious project manager assumed that his responsibilities naturally would extend to the alliance. In many situations, this is true. Unless alliances are a significant part of a company’s strategy, it is unlikely that an organization will have a dedicated alliance manager or devote the resources to creating an alliance management capability. For many companies, project managers may assume some aspects of the role, accepting the alliance as just another component of the project. Even when a company does have dedicated alliance managers, their number is usually small, leaving others, often project managers, to attend to the needs of the alliance in addition to the needs of the project or program in all but the most complex situations.
In our project manager’s case, he will have an alliance manager on board. Co-development, co-manufacture and co-commercialization are becoming much more frequent in industry. What makes an alliance an alliance is that there is shared decision making, shared responsibility and accountability, shared resource commitment and shared risk and reward.
Generally, the ultimate risk and reward cannot be determined at the time an alliance agreement is reached. Examples of successful alliances include the Renault-Nissan alliance, in which the two companies have benefited from sharing various aspects of product design, development and manufacturing. Also, semiconductor manufacturers such as IBM have found great benefit in teaming up with competitors, including AMD, Sony and Toshiba, to spread the costs and risks of next-generation computing power. On the other end of the spectrum, Boeing’s 787 Dreamliner program has not met with such favorable results; the company attempted to use alliances and outsourcing relationships to help transform itself from a manufacturer to an integrator, only to find itself with confused communications, schedule overruns and penalties for late delivery to customers.
According to Norma Watenpaugh, founding principal of Phoenix Consulting, “In high-tech industries, alliance management often has cradle-to-grave responsibility for the alliance and its performance, similar to that which a general manager might have.”
Our project manager probably won’t report to the alliance manager in our scenario; however, he will share some accountability for the project. The project manager will continue to have responsibility for the execution of the project. He’ll have all the usual requirements of bringing the project in on time and within budget. He will have to do everything he would if it were a strictly internal program.
However, because it is an alliance, there will be great differences compared to management of the usual internal project. He will work directly with his counterpart from the partner organization to orchestrate the creation and execution of the development and manufacturing plans for their new joint battery project. He will have to build a working relationship with his counterpart in the partner company, ensuring their work is coordinated and that they are not duplicating efforts. He’ll have challenges around aligning different ways of working and different standard operating procedures to produce the same outcome. He’ll have to understand two different chains of command and ensure that they don’t get in the way of getting the resources and actions he needs to deliver on the project plan.
Tarja Mottram is chief executive officer of Action for Results, a consultancy focused on helping life science companies enable rapid execution through cross-functional capability building. He said that for complicated co-development projects, “I would look for a very senior project manager, if not a program manager, to lead a multiyear full co-development effort, with shared IP and commercialization strategies. This person would need to have extremely good business savvy, be an excellent facilitator capable of driving the achievement of shared goals, and be able to clear any issues and conflicts as they come along.”
Mottram, also an advisory board member of Brandeis University’s Master of Science in Management of Projects and Programs, is quick to add that, “A small outsourced subcomponent of a project does not require the same kind of strategic relationship skill but would still require an understanding of basics around leadership, collaboration, contract management and ‘boundary management.’”
The unique contribution of the alliance manager
What should our project manager expect from having an alliance manager on board?
According to Borton, “The alliance manager pays attention to governance of the relationship. That includes how the roles and responsibilities are shared and who has the right to make which decisions throughout the lifecycle of the alliance.”
Borton adds that she sees three primary ways in which the alliance manager adds value: “We know the contract intimately and carefully monitor both our company’s and our partner’s commitments to ensure that each is realizing the value expected when the partnership was being negotiated, plus we look for ways to create even more value. Secondly, we’re proactive risk managers. I spend a lot of time with the heads of the governance committees briefing them on the issues that could pose risk, either directly or through unintended consequences. I give them guidance on what I think is right for both the project and for Astellas.”
Third and equally important: “The Astellas alliance managers are constantly evaluating, measuring and analyzing our alliances, thinking about what could be better and where we could really make a step change. We have to think across the business – from development to commercialization and across the globe.”
Mottram added that alliance managers attend to the relationship first, not just the contractual agreements, but the processes and behaviors that need to be in place to make it work right and to have a consistent approach over time.
“In those environments, the project managers would take direction from the alliance managers in how they need to be managing the tactical project activities under the alliance agreement and principles,” Mottram said.
Managing relationships isn’t soft and fuzzy – at times it means facing conflict head on for the good of the alliance. Borton agreed.
“The alliance manager has to be both strategic and tactical, always thinking about the implications each step in the project has on the larger relationship while ensuring the project manager can deliver within their constraints of time, staffing and budget,” she said. “In our industry, when drug development, manufacturing and commercialization are carried out through an alliance, the project managers focus on the project, while the alliance manager focuses on the alliance. Together we form a great partnership internally to deliver on the objectives of the alliance for our company, our partners and the patients we serve.”
This not-so-subtle distinction in focus is why a growing number of organizations find that their alliances are more successful with a dedicated alliance manager.
Art Canter is the president and executive director for the Association of Strategic Alliance Professionals. He has more than 20 years of management and leadership experience and received a Bachelor of Arts from Northeastern University and a Master of Public Administration from the University of New Haven.
Jan Twombly is president of The Rhythm of Business. She serves on the executive committee of the Association of Strategic Alliance Professionals’ board of directors and is chairperson of the marketing committee. She has been a partner and human resources director in a leading Boston CPA firm and president of a business conference and publishing company.