Managing Alliances with the Balanced Scorecard

In the first Harvard Business Review of 2010, Robert S. Kaplan and David P. Norton, the original developers of the balanced scorecard, are back with an article (co-authored with Bjarne Rugelsjoen) on Managing Alliances with the Balanced Scorecard. Quoting a recent study by McKinsey & Company that fond that half of all joint ventures fail to yield returns to each partner above the cost of capital, they argue that a methodology is needed that will dramatically improve the odds of success.

Not surprisingly, the authors are recommending the adoption of the balanced scorecard management system (BSC), a technique that can help companies switch their focus from operations and contractual obligations to strategy and commitment, which the authors argue is the key to success. Proper application of BSC techniques should clarify strategy, drive behavioural change, and provide a governance system for strategy execution. As an example, the authors presented a detailed case study based on Solvay, a top-40 pharmaceutical company, and Quintiles, a contract research company providing a wide range of clinical research and trial services for pharmaceuticals that Solvay selected in 2001 to manage all stages of its trial processes across all of its pharmaceuticals under development. After an initial five year partnership, which worked well (but not as well as each side felt it could), the companies wanted to move up to an alliance, but needed a way to accomplish it successfully. They chose a variation of the BSC process — that they called JSC, formed an alliance management team — led by an external impartial consultant, and got to work. And while it took some time to make things happen, the alliance based on the new JSC (BSC) approach reduced total cycle time for clinical trials by approximately 40% (which not only considerably reduces costs but accelerates profits as the products hit the market faster) and generated a new methodology for managing non-performing sites that halved the number of non-performing sites (which don’t recruit enough patients) and saved 25,000 to 35,000 Euros per site. (Considering that a study can have up to 150 sites, this new methodology can save up to 5.25M Euros per study. And while that might only be 5% of the cost of bringing a new pharmaceutical to market, it’s not pocket change!)

The methodology is based on the collaboration theme scorecard that captures metrics that allow you to track your progress on objectives under each theme. The general format for each scorecard is the definition of:

  • the process objective,
  • joint wins,
  • metrics, and
  • initiatives.

The scorecards are the tools of an alliance strategy map that defines the intended collaboration, business processes, and expected values. The article presents the strategy map used by Solvay Pharmaceuticals and Quintiles in the definition and execution of their alliance.

The article also mention’s Infosys’ success with its relationship scorecard and LagasseSweet’s success with its own modification of the balanced scorecard, which has helped it to identify 150M in new revenue opportunities. Thus, if you are willing to take the extra time required to jointly build the alliance strategy map and theme scorecards, you might just see a much bigger ROI than you might expect with your own implementation of the BCS.

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