IIM KOZHIKODE

Innovation without walls:

Alliance Management at Eli
Lilly and Company
Innovation without walls: Alliance Management
at Eli Lilly and Company

3/10/2011

Submitted By:
Section B Group 08
Aman Singh (PGP/14/066)
Anuj Khemka (PGP/14/075)
Gesu Mittal (PGP/14/085)
Isha Nag (PGP/14/086)
Karan Malhotra (PGP/14/090)
Shruti Prakash (PGP/14/120)
Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company
Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)
Innovation without walls: Alliance Management at Eli Lilly and Company

 During the mid-1990s, the senior executives of Eli Lilly and Company, following a major strategic
review, chose to focus on fostering strong organic growth rather than expanding through mergers
and acquisitions. To implement this strategy, Lilly decided to achieve critical mass in certain key
capabilities and complement those efforts by developing “virtual size” from partnering efforts
throughout its operations.
 From a historical perspective, however, partnering was not new to the pharmaceutical industry or
to Lilly. But Lilly's commitment to collaboration as a fundamental part of their strategy was new.

Lilly Alliance Management Process

Find it Get it Create Value

• Innovation Sourcing • Corporate Buiness • Office of Allinace
Group under Lilly Development Group Management
Research Laboratory

 The process for bringing external innovation into their Lilly Research Laboratories begins with a
group called innovation sourcing group. This is their “find-it” group, which scours the world for
new technologies or molecules that will complement their own internal research efforts.
 In the next phase of the process – which we refer to as the “get-it” phase – their Corporate
Business Development group takes the lead in talking to and negotiating with potential business
partners.
 When all goes well with a prospective partner, an agreement is negotiated and the alliance
moves forward to the next phase: working toward a successful venture.
 This final phase of Lilly's sourcing-innovation process is where the potential payoff will be
determined: the “create-value” phase. This is also the point at which their Office of Alliance
Management group assumes the primary responsibility for coordinating the alliance and seeing it
through to a successful conclusion.

The best practices of Lilly's alliance-management process

The reason Lilly has established an alliance-management process in the first place is to define
approaches that work through a relatively predictable lifecycle that is common to every corporate-
alliance relationship.

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Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company
Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)
Enhancing communication

 The people involved first get to know one another and feel comfortable serving as each other's
alliance teammates.
 People at Lilly believe that meeting in person are required for solidification of the alliance. So, the
alliance groups are often contractually required to hold at least a minimum number of face-to-face
meetings.
 Long-term success is also more likely if there is a communications plan in place and everyone
communicates.

Responsibility Centers

Alliance Champion
• Senior Executive
• Provides high level
supoort and oversight

Reponsilbility
centers

Alliance Leader
• Technical Leader or
Alliance Manager
Project Manager • Represents OAM
• Day to day management • Business integrator
of alliance and line between the partners
budget responsibilities

Key metrics

Key measurements constitute another critical element in Lilly's alliance-management process. These
measurements often take the form of various surveys of the alliance participants – surveys that are
professionally administered and fully anonymous to encourage frank responses. Lilly conduct voice of the
alliance (VOA) surveys. The VOA represents one of Lilly's primary standards of alliance measurement.

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Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company
Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)

leadership

commitment strategy

trust and
flexibility
fairness

knowledge
management VOA communicatio
n

team conflict
coordination management

performance decision-
measurement making

skills and
competence

The three-dimensional fit analysis

Lilly has developed a “three-dimensional fit” analysis that helps us to identify elements of strategic fit,
cultural fit and operational fit between Lilly and their partner company. And the results of this careful
analysis can be amazingly accurate in helping us predict – and, therefore, often prevent – conflicts that
might otherwise potentially cripple an alliance and make it virtually impossible to succeed.

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Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company
Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)

• strategic alignment between their companies

Strategic • level of commitment to the alliance
• trust or fairness with our partner

• All parameter of VOA survey

Operational • communication,conflict management,
decision-making, leadership, etc.

• flexibility
Cultural • knowledge management.

Maintaining a good fit requires that in both partners of the alliance, well-placed champions must genuinely
have the ear of upper management. Without that kind of high-level commitment on the parts of both
alliance partners, the long-term chances of success are significantly diminished.

Keeping a good fit also requires that everybody involved in the alliance understands the decision-
making process – and that everyone's opinion will be thoroughly considered.

Eli Lilly’s Alliances

Lilly- Alpha Partnership: A Research
Alliance
•Alpha Biotechnology Co was started in 1987.
•It had leadership in gene transcription
technology and had developed several
mechanisms to regulate gene activity and
enhance safety profiles of drugs.
•Alliance was formed in late 1990’s for
discovery and development of products based
on Alpha’s gene splicing technology.
•Lilly provided for $100 mn in upfront
payments ( included a minority stock in Alpha)
, $50 mn in R&D over 5 yearsand $75 mn in
milestone payments over several products.
•Agreement was for two parallel activities- (a)
development of last stage molecule and (b) 5
year research agreement through which Lilly
funded 50 scientists at Alpha.
•Scott Fishman, an endocrinology scientist with
more than 24 years experience at Lilly was
made the alliance manager.His role was to
engage different functions that made up the
governance structure in talks with each other.
Lilly – Beta Partnership: A Marketing
Alliance
•Beta Pharmaceuticals – largest in Japan and
among the top 15 gloal firms.
•It manufactured array of drugs for ulcer,
prostate cancer, hypertension and diabetes.
•The agreement was signed in 1998.
•It was done to co-promote a novel drug for
diabetes treatment.
•Beta wanted to establish presence in US
wheras Lilly wanted to complete its portfolio
through the oral diabetes market.
•Both the companies shared the costs and
revenues in the manner in the contract.
•The drug got rapid review, was launched
within 9 months of date of signing.
•Problems arose in operationalizing the alliance
– Beta wanted to build its organization while
Lilly wanted to maximize the new product
sales
•Michael Ransom, an organic chemist was
made the alliance manager for this project.
Lilly – Gamma: A Manufacturing
Alliance
•Gamma manufacturing - one of the largest
employee-owned companies in the United
States.
•It designed, manufactured and supplied parts
for corporate customers.
•Lilly had a Pharmaceutical Delivery Systems
(PDS) which focuses on devices needed to
deliver drugs. It worked with external vendors.
•Alliance formed in 2000.
•Design and development jointly done by Lilly
and Gamma team but final production and
packaging was done by Gamma. Through this
alliance, Lilly could enhance its manufacturing
capability.
•Dave Haase, a manager at PDS with more than
20 years of experiencewas the alliance
manager.
•His role required him to oversee all
manufacturing alliances.
•He put together a steering committee thus
providing central point of contact between
Lilly and Gamma and also provided alliance
management training to various units.

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Case Analysis Note - Innovation without walls: Alliance Management at Eli Lilly and Company
Group 8: Aman (66), Anuj (75),Gesu(85),Isha(86),Karan(90),Shruti (120)
Recommendations
1. Eli Lilly should identify executives from within the organization as well from outside who have the
requisite skills for becoming future alliance managers. A mentorship program can be devised
whereby they are put under mentorship of existing alliance managers.
Also successful alliance managers can document their experiences and best practices in different
countries to give a holistic view to the new alliance managers.
Timely training and development programs can be arranged by the organization to disseminate
knowledge about different cultures and intercultural practices that are to be followed in different
geographies.
2. Lilly should extend the OAM structure of alliance management to other geographies and functions
by acquiring and building skills and competencies in these areas. Also, it should create regional
or subsidiary OAM that will report to the corporate OAM of the parent company.
3. Lilly should adopt a balanced approach towards alliances emphasizing sufficient focus on
relationship building, operations and capability generation. An integrated approach should be
encouraged and applied.
4. Lily should adopt a conservative and cautious approach towards forming alliances with
companies operating in geographies having weak intellectual property regime. It should ensure
clear processes and codes are defined in the agreements to prevent future tensions and conflicts.

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