Building internal consulting alliances: A case study · Alliances are specialized arrangements that...

April 4, 2002

Building internal consulting alliances: A case study

©2002 Vantage Partners, LLC. All rights reserved

Presentation overview

n Who we are: About BCBS Florida & Vantage Partners

n Context: BCBS Florida needed to build alliance management capability

n Approach: The BCBS Florida Alliance Group & Vantage Partners form an alliance

n Key lessons: Challenges we encountered and how we addressed them

n Q&A


About BCBSF

n Provide members with practical, caring solutions by focusing on choice and affordability• Independent, tax-paying mutual company • Major market share in Florida (+6 Million individual

covered)• 13 consecutive years of positive financial performance and

enrollment gains• Continuously working with our members and other

consumers to ensure that America’s health care system evolves in a positive direction


n Harvard Negotiation Project

n Expertise in building corporate negotiation and relationship management capability

n Over twenty years of experience

n Recognized thought leaders• Three-year study on Alliance Management• Partnering Handbook• Harvard Business Review• Getting to YES, Difficult Conversations

n Conflict Management Group• South Africa• El Salvador• Former Soviet States

About Vantage Partners


What is BCBS Florida trying to achieve through our alliance strategy?

n Build close, collaborative relationships between companies in order to share the risk and rewards of pursuing mutually compatible goals that are difficult to achieve alone.• Reduced costs • Increased revenue by creating new products and services• Preserved and enhanced capital by sharing the cost of R&D• Accelerated introduction of innovative solutions and services• Enhanced continuous learning• Increased support within the Blue system for local, community focus

and non-investor owned status


Alliances are specialized arrangements that require unique organizational capabilities

• Generally work best when one party is dominant

• Integration is a discrete, one-time transaction

• Post integration, management reverts to normal operating systems and procedures

• Most conflict occurs during integration, and diminishes over time

• Do not require renegotiation, and are usually permanent (dis-acquisitions and spin-offs are relatively rare)

• Generally work best when neither partner is dominant

• Integration is partial, dynamic, and ongoing

• On-going collaboration between two or more independent organizations requires specialized management systems

• Minimal (visible) conflict occurs during initial honeymoon period, but usually becomes more pervasive and severe over time

• Usually require periodic renegotiation, and are rarely permanent (termination/unwinding is standard)

AlliancesMergers & Acquisitions


Most alliances fail

6 0 %6 1 %

5 0 %

7 0 %

6 0 %

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

Spekmen, et al. KPMG PWC Andersen Larriane(1996) (1996) (1998) Consulting Segil

(1999) (2000)

Sources of Partnership Research

Obs

erve

d Fa

ilure

Rat

e (%

)

Partnership Failure Rate


Alliances most often fail because partners are unable to work together

Poor or Damaged Relationships Between

Firms

Foremost Cause of Alliance Failure

Bad Legal and Financial Terms and Conditions

Poor Strategyand Business Planning

37%

11%

52%30%

6%

64%Poor or Damaged

Relationships Between Firms

Foremost cause of alliance failure among companies that have participated in more than 20 alliances

Bad Legal and Financial Terms and Conditions

Poor Strategyand Business Planning

“As the word spreads and more companies seek alliances as a growth

vehicle, the differentiator will shift from being able to

form an alliance to being able to manage one.”

Harbison, et al., “The AlliancedEnterprise: Breakout Strategy for the

New Millennium” Booz-Allen & Hamilton, 2000

Ertel, Weiss & Visioni. “Managing Alliance Relationships: Ten Key Corporate Capabilities” Vantage Partners, 2001.


Relationship issues need as much attention as substantive ones

Strategic

Competitive positioning

Business targets, plans and strategies

Financial

Prices, fees and rates

Financing and equity

Legal

Technology transfer & licensing terms

Consequences of default

Relationship IssuesSubstantive Issues

• Degree of trust

• Ease of working together

• Capacity for joint problem-solving

• Ability to leverage and learn from differences

• Capacity to resolve conflicts

• Openness and quality of communication

• Capacity for taking a “what is best for the venture” perspective

Companies often invest heavily on the substance...

…but many don’t take the time to focus on the relationship


A common assumption about relationships

Substance

Relationship


Successful alliances require a way to solve problems without damaging relationships

Classic Positional Bargaining Joint Problem–Solving

If “Yes”If “No”

AlternativesAlternatives CommitmentCommitment

InterestsInterests

OptionsOptions

LegitimacyLegitimacy

CommunicationCommunicationRelationshipRelationship

“That’s my bottom line”“That’s my bottom line”

“Final” Offer“Final” Offer

No Deal(Go to BATNA)

Extreme Offer (Commitment)Extreme Offer (Commitment)

Fallback (Concession)Fallback (Concession)

“ A reasonable price of…”“ A reasonable price of…”

Threat

Counter–Threat

“Just for you…” (Relationship) “Just for you…” (Relationship)

“Last” Final Offer“Last” Final Offer

“Take it or leave it”“Take it or leave it”

No Deal(Go to BATNA)

Split-the-differenceSplit-the-differencecompromisecompromise

Collaborative and joint-gainAdversarial and zero-sum

Two models of interaction


Challenge #1

How to institutionalize news ways of doing business across myriad internal groups


Negotiate Structure Manage

§ Examine alliance opportunity in light of corporate strategy

§ Define alliance objectives

§ Build understanding and commitment

§ Execute day-to-day operations

§ Manage conflict

§ Monitor performance

§ Engage in regular joint planning§ Identify and evaluate

potential partners

§ Select best partner

§ Create business plan

§ Build internal support

§ Identify negotiation team

§ Prepare for negotiations

§ Conduct negotiations

§ Refine business plan

§ Craft implementation plan

§ Design business processes to support critical capabilities

§ Agree on distribution of costs and resource contributions

§ Detail individual roles and responsibilities

§ Create governance structure

§ Agree to performance metrics

Plan

Evaluate and Select

Unwind

§ Form internal termination team

§ Negotiate and finalize termination agreements collaboratively

§ Manage final commitments

BCBSF alliance management process and key activities


Negotiate Structure Manage

Plan

Evaluate and Select

Unwind

• 4 Cs of strategic positioning

• Strategic questions and drivers

• Value-migration maps

• Alliance-stratagem models

• Breakthrough value proposition

• Preconditions for success checklist

• Due diligence checklist

• 3 Dimensional fit

• Business case analysis

• Risk analysis

• 7 Element Framework

• Negotiating team model

• Memorandum of Understanding and Principles (MOUP)

• Legal guidelines

• Operational business planning framework

• Detailed operational fit

• Responsibility chart

• 120-day launch plan

• Board structure model

• Governance and control systems

• Resource planning checklist

• Win-win business case analysis

• Operational team model

• Role and skill descriptions

• Governance roles

• Performance metrics

• Alliance shift checklist

• Alliance-management issues checklist

• Alliance relationship management tools

• Commitment management framework

• Decision making buckets tool

• Four-step problem solving tool

BCBSF alliance management process tools and frameworks


Enterprise Alliance Group functions

Knowledge management

• Capture learning about alliance deals and partners

• Identify and disseminate alliance management best practices

• Capture and disseminate strategic organizational lessons gained through alliances

Coordinated alliance portfolio management

• Coordinate portfolio governance

• Identify and exploit synergies across alliances

• Help avoid/manage conflicts across alliances

• Analyze portfolio performance

Alignment of corporate strategy & alliance portfolio

• Identify opportunities for partnering

• Work with CSC, Corp Dev, and M&A to determine best vehicles for strategy execution

• Assist with partner evaluation

In house expertise

• Coach and advise BU alliance teams

• Conduct joint launches & relationship audits

• Help fix broken relationships

• Update alliance mgmt methodology & tools


Challenge #2

Measuring the value of alliances and

demonstrating the value of the alliance group


The 3D performance framework

Level of commitment

Dimensions of Value

Strategic Operational Relationship

Financial Business Process

Market position

Competitive

Learning

Innovation

Revenue

Profitability

Direct and indirect costs

Processing efficiency

Customer satisfaction

Achievement of milestones

Ability to manage conflict & change

Quality & efficiency of interactions


Recommended approach to implementing performance metrics

Our Goals

Their Goals

Shared Goals

Enterprise Scorecard

Performance of a relationship in terms of value delivered to the

enterprise

Joint Relationship Scorecard

Performance and success of a relationship as a

shared endeavor

Individual Team Member Scorecard

For evaluation of dedicated staff or

individuals who work with key stakeholders

Sector Scorecard

Performance and success of a relationship in terms

of value delivered to a particular sector


Challenge #3

Building organizational buy-in


A community of practice

Learning Mode(internal & external sources)

Teaching Mode

Practitioner has a problem but doesn’t know who can helpPractitioner has a problem but doesn’t know who can help Practitioner has a novel solution but doesn’t know who might benefitPractitioner has a novel solution but doesn’t know who might benefit

n Improving day-to-day work productivity by making experts easier to locaten Creating larger personal networks (social capital)n Providing career development opportunities and exposure to senior executivesn Creating additional opportunities to learn new skills n Transferring best practices through anecdotes and personal relationships, live

coaching sessions, and teaching storiesn Creating opportunities for skill development by connecting people to coaches and

mentors n Receiving real time advice from other practitioners


Challenge #4

Balancing decision-making inclusiveness with efficiency


Clarifying consultation and decision-making roles enables governance that is inclusive and efficient

InformConsultNegotiateDriverDecision/Activity

Complex issues, actions, or decisions that have been disaggregated into specific sub-issues that are likely to require consulting and/or negotiating with different parties to determine what to do.

Person to manage the process of getting to the decision and ensure that the decision gets made.

The decision-makers: those people who have formal authority to actually make the decision.

The parties who may act as advisors to the decision-maker(s) and whose views ought to be considered before taking action, but who do not have authority to vote on the decision or reject whatever decision is made.

The interested and/or affected parties: those who need to be informed about the decision (often because they will need to implement it or will be impacted by it).


Other lessons for building internal consulting alliances

n Make sure you have a committed, executive sponsor for any major change efforts.

n If you use external consultants, create clear expectations and aplan for knowledge and skill transfer.

n Gain alignment at the outset around goals and clear measures of value and success.

n Be wary of “selling” your services or new ideas to internal clients or partners. • Involve internal partners or clients in design and development efforts. • Make an efforts to understand any resistance before trying to

persuade.

Building internal consulting alliances: A case study · Alliances are specialized arrangements that...

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