When and how should you invest with partners? (94.397Kb) - DOWNLOAD

Good, deep, long-term relationships with partners are increasingly important in most industries. Such relationships deliver real value.

But they are hard to forge. 

Many suppliers are wary of wasting money with partners who are not really ready to commit or to give anything in return. Dig deeper and you usually find suppliers have a history of disappointment here.  There may even be a mindset within the industry of apparently milking big suppliers for all they have got.

Part of the problem is that most suppliers approach such commitments piecemeal and informally, often making decisions about when and where to invest based on personal chemistry.

Suppliers also often get stuck in selling mode, rarely quantifying what the other party is really prepared to put into the pot.  This again leads to suppliers over-committing, without really measuring return.

Partners are often unappreciative of the effort suppliers are making. Indeed they may not even be aware that you are making a special effort!
Yet there is a way out of this mess.  This involves systematically mapping out how far suppliers and intermediaries are prepared to go, in exchange for a particular level of commitment from the other side.  

“Dig deeper and you usually find suppliers have a history of disappointment.”

Pfizer recently initiated a project to work out how to develop better alignment and stronger relationships with primary care trusts (PCTs) in the UK National Health Service.
PCTs are powerful influencers with an increasing role in controlling the NHS budget, commissioning services and specifying the drugs which are prescribed throughout an entire region. Their role as influencers is broadly akin to that occupied in other industries by say IT or telco consultancies or architects.  However, this approach goes beyond influencers and can be used very successfully with dealers, distributors and large retailers.

The pharmaceutical industry has found it hard to develop long-term relationships with these important players. It often feels that PCTs are not prepared to reciprocate investments and commitment. This is not for want of trying. There have been successes - for instance, Pfizer is involved in a public/private partnership with Haringey PCT in North London in a disease management programme designed to improve patient care in heart disease and diabetes.

But often PCTs seem unwilling to form partnerships.

There was a puzzle here.  VIA’s annual survey of PCT decision makers reveals that almost one third of respondents say they would like to form long-term alignments with pharmaceutical companies.

Pfizer was interested in the reasons for this gap, whether expectations about these relationships were realistic and whether the gap could be closed. What were the real opportunities for productive long-term relations? 
To find this out Pfizer developed a conceptual model for measuring precisely how much PCTs were prepared to commit to and what they were looking for in exchange. Pfizer then tested this model with 25 senior managers in PCTs who were either pharmaceutical advisers (the equivalent to the technical buyer) or chief executives.

The model looked at different ways that PCTs and pharmaceutical companies could work together and systematically mapped out different criteria and levels of commitment and cooperation required for both parties. It mapped eight different axes for PCTs, including product endorsement and disease management and a similar number for Pfizer, including promotional behaviour and investment spend.

Each criterion comprised 5 levels, each requiring a higher level of commitment. Pfizer defined the levels on each axis as widely as possible. Level 1 described things that were currently going on, whilst level 5 was a real stretch. For example, for information sharing, at level 1, PCTs could merely give pharmaceutical companies access to their publicly published plans.  At level 5, they could carry out joint planning, and, even involve the pharmaceutical company in setting their priorities and goals.

This exercise was in itself very useful, forcing Pfizer to really think through the different ways and levels at which it could cooperate with PCTs, and at what cost. It also prompted Pfizer to ask itself how far it was really prepared to go itself.  It used a decision-tree to test at each level whether the decision-maker would value the offering from the pharmaceutical company, and whether they would be prepared to commit the PCT to certain things in return.

If they weren’t prepared, for example, to work with a pharmaceutical company as a preferred partner in an agreed disease area, the survey asked them whether they were prepared to do this if they received an additional commitment from the pharmaceutical company.

This enabled Pfizer to comprehensibly map out what the PCTs were prepared to do and what they were not and to identify the barriers that prevented PCTs from going further.

This process gave Pfizer a very clear, quantifiable picture of what PCTs actually wanted, what PCTs were prepared to do in exchange, and to assess in the cold light of day what they were prepared to do and whether it was really worth while investing.

“This process gave Pfizer a very clear, quantifiable picture of what PCTs actually wanted.”

What were some of the specific findings of the research?

Most PCTs do believe that there is an opportunity for long term alignments that represent a win for the PCT, a win for the pharmaceutical company and a win for patients. They see the major benefits in cooperation for the PCT in being able to undertake projects that it would otherwise not be able to afford, or would be done more slowly. The research was able to pinpoint the things that PCTs felt were of the highest value.

So what are PCTs prepared to offer in exchange?
PCTs are willing to use established mechanisms to encourage prescribers to follow guidelines that are in the interests of patients, PCT and the pharmaceutical company, but they are less willing to commit to switch programmes.

When asked about product endorsement, they are willing to commit to increasing levels of incentives and product specific messaging (levels A through D), but unwilling to commit to the highest level of endorsement, product switch programmes (level E).

However, there appears to be a lack of commercial awareness and understanding that, in order to justify the investment required for a formal long-term relationship, the pharmaceutical company must be able to demonstrate the commercial benefits that will accrue. Does this sound familiar? How many partner managers or retail buyers have you dealt with who would like all the benefits of a strategic relationship, as well as taking a big fat margin?

There is also a clear difference between the attitude of pharmaceutical advisers and chief executives, with CEOs being prepared to go an extra level on some axes, possibly because they had a more strategic view of cooperation.  However, they also sought more in return from pharmaceutical companies.

This mirrors what is generally found in partner organisations – the more senior the manager, the more likely he or she is to envisage and to want deep cooperation.

The research also demonstrated that PCTs were risk averse to making formal commitments to pharmaceutical companies.

They are concerned about the probity of exclusive relationships, the need for the selection of partners to be transparent and open, being tied into any long-term relationship and being overly associated with a partner’s brand. This situation has been intensified by recent bad press the pharmaceutical industry has suffered from, such as non-disclosure of information. For different reasons, partners in other sectors are often reluctant to align themselves to a particular supplier or to actively use their brand.

The Conditions for Successful Relationships
It is interesting to map these findings against a framework developed at Cranfield University by Professor Malcolm McDonald and colleagues. In their research on key account management, they identified a set of conditions for successful relationships:

• Both parties acknowledge their relative importance to each other
• Large number of multifunctional contacts
• High volume of dialogue
• High level of information exchange
• Mutual understanding
• Pro-active, rather than reactive
• Prepared to invest time and money in the relationship
• Wide range of joint and innovative activity
• Joint focus for the future

You can also map these findings to examine how far relationships between pharmaceutical companies and PCTs match these requirements (see table below).  Likewise, it can be used for any supplier/partner relationship.

“There is no point trying to develop an intimate relationship with someone who feels they cannot respond to your advances.”

There is no point trying to develop an intimate relationship with someone who feels they cannot respond to your advances. It also showed the best way to couch relationships in future and the sensitive issues that need to be carefully negotiated.

The research should also serve as a platform for a debate within PCTs about long-term alliances, what they involve and the need for PCTs to see them as something other than one-way streets.

VIA will shortly publish its fourth Annual PCO Account Management Survey. Based on in-depth interviews with 100 senior managers in Primary Care Organisations, this detailed report gives subscribers: A clear understanding of how their individual company is perceived by this vital group and a deep insight into the present and future needs of senior PCO management. It also allows them to calibrate their account management efforts against competitors.

The report is available in two versions, costing either £3,500 or £7,000. To get more information on the report or on VIA's routes to market consultancy for the pharmaceutical industry contact David Coleiro at VIA International on +44 207 585 3399 or email him on, dcoleiro@viaint.com.