Being Strategic About Strategic Partnerships

By Carolyn Buck Luce
carolynbuckluce.com
@caroylnbuckluce

 

 

I spend a lot of my professional time working with senior pharmaceutical executives on conceiving and constructing innovative partnerships with “non-traditional” players who are coming into the health care space as a means to accelerate pharma’s business model from the products they make to the patients they serve.  (see EY Progressions 2012 – The third place – Healthcare everywhere)

re consumer and commit to delivering health outcomes and not just the pill, there is great opportunity to collaborate with payers, providers, pharmacies, retailers, consumer product companies, telecom, technology and other sectors who haspend a lot of my professional time working with senior pharmaceutical executives on conceiving and constructing innovative partnerships with “non-traditional” players who are coming into the health care space as a means to accelerate pharma’s business model from the products they make to the patients they serve.  (see EY Progressions 2012 – The third place – Healthcare everywhere)

As Pharma companies extend their business model to the ultimate healthcare consumer and commit to delivering health outcomes and not just the pill, there is great opportunity to collaborate with payers, providers, pharmacies, retailers, consumer product companies, telecom, technology and other sectors who have assets and attributes necessary for architecting the new business models in health.

Many pharma companies are creating innovation units or initiatives to address the challenge and opportunity that awaits them in HC’s “The third place”.  I have found that most of the activity is around what pilots should be created and launched by Big Pharma.  Given the importance of innovative partnerships in this space, traditional business development professionals who are used to arranging biotech alliances or pharma mergers are called in. However, building innovative partnerships with non-traditional players requires building an expertise in businessmodel development –  which is quite different from business development.

Business model development to create new businesses to deliver health outcomes in new ways requires pharma to think about how they fit into other sectors’ rapidly changing and evolving business models. The magic is in figuring out how to combine the assets and attributes of each to create something new and different.  The ‘How” includes creating a diversified portfolio of different types of strategic partnerships as well as different bets on specific pilots and projects in order to optimize resources and the chances of success.

Each different type of partnership requires varying degrees and types of resources, has a different time frame to “launch”, and will monetize value in a different way.  For example, to buy someone else’s “technology” or “data” and significantly enhance it through a build and scale strategy (“scale it yourself”) will take a lot of the host’s time and resources as it is a commitment to build and operate a new business which will need to compete internally against all existing businesses.

A strategic investment of resources, knowledge and relationships into a fast growing business that is capitalized with “growth” capital and has the “superpowers” of a start up (“strategic investor”), will require less management and operating talent and can monetize through the capital markets at a P/E ratio that might be much great than the host P/E (which is how the revenue of the first model will be judged).

An “ecosystem partnership” requires the realignment and collaboration of multiple stakeholders which necessitates a complex negotiation and creative architecting of a new system for collective impact but has the chance to create the new standard of healthcare delivery with a lifelong relationship with the patient, and thus a continual channel for innovation.

A “platform partnership” of an equally-matched global enterprise will have the value of being able to spawn multiple projects once a trusted institutional relationship is built.

Our recommendation is that executives put equal attention to the portfolio of partnership models that dictate how and with whom they want to innovate as well as the specific portfolio of projects that define the spaces they want to place their bets in.

As we know from personal experience in our own lives outside of work, partnering is not for the faint of heart.  However – – in HC’s third place, Big Pharma’s brand will be built by the partners that are on their side.

 

carolynAbout the Author
Carolyn Buck Luce is the Ernst & Young Global Life Sciences Sector Leader, Emerita responsible for serving global life sciences companies with assurance, advisory, tax and transaction solutions. In that capacity, Ms Buck Luce is responsible for E&Y’s strategy, thought leadership, resourcing, learning and solution development to best serve our clients in the Life Sciences Industry.