Coordination between alliance partners is essential for turning research and development efforts into valuable assets for both parties. While that may seem obvious, it often does not receive sufficient focus and effort when structuring collaborations. Coordination involves synchronizing tasks and communicating appropriate information at the right time across teams, organizations, management, and cultures. It requires organizations to build routines for interacting that are specific to the partnership and integrated with the other aspects of the collaboration.
In a recent article, Matthew Jennejohn (“The Private Order of Innovation Networks”, Stan. L. Rev. 2016, 68, 281- 365) identified coordination, which he refers to as entropy, and spillover as key risks that lead organizations to adopt governance mechanisms for alliances. Entropy costs arise when partners struggle to sync joint learning and activities across their organizations. Spillover risk results from inadequately defining and defending intellectual property rights and project scope to avoid conflicts. Effective governance serves as a jointly crafted process to realistically deal with known risks as well as uncertainties.
Entropy issues can become significant especially in complex alliances. I find it useful to think of three kinds of entropy—technical, expertise, and cultural. While interrelated, the distinct types aid in considering how entropy can inhibit appropriate information/knowledge flow, cause delays (costing time and resources), and in some cases halt the entire collaboration.
Technical entropy arises from lack of coordination between the actual research activities and their outcomes. Imagine the partners have executed a research plan where tasks are performed sequentially. One partner performs the first series of activities—for example, measuring expression levels of the target protein in human samples or synthesizing a series of compounds. When the tasks are complete, the data and compounds are transferred to the other partner who then proceeds with the second phase of the project. What happens if there is disagreement on whether the task is actually completed or a milestone is met? This type of situation is not uncommon. Even if the research plan provides clear criteria for meeting a milestone or transferring a project, issues can still arise.
Expertise entropy occurs when there is a lack of communication between people or teams across the partner organizations. One of the reasons for entering a collaboration is to gain access to novel technology and expertise. In spite of this, one partner may try to micromanage the other. In some cases, efforts become duplicative and strain the working relationship.
Cultural entropy can occur anytime two organizations form a relationship. Coordinating within the same organization can be challenging enough, even with shared culture, “language”, and processes yet individuals still have their own goals, responsibilities, and priorities. Cultural entropy occurs whether the partners are for profit/not for profit, small/large companies, or two companies of similar size and industry stature. Although cultural entropy cannot be eliminated, it can be managed so the outcome of the collaboration stays in clear focus.
Entropy risk can be managed by using the appropriate governance processes tailored to the specific alliance. Some organizations choose a central committee to deal with issues and decisions, while day-to-day operations are led by the project or alliance team. Other partnerships may have more involved processes with tiered decision making. When impasses are encountered by initial decision tiers they may be escalated to CEOs or outside experts. Still others may have specific committees and decision-making structures based on subject matter—e.g., a research committee for scientific and entropy issues.
The unique relationship partners form is reflected in the alliance design and contract. As Jennejohn noted, the purpose of the alliance contract is to structure a joint discovery process by which new technology is created. This point is easily lost and the contract becomes a separate process of its own, with implementation and working relationships developed afterwards. Instead, the contract should be part of the whole innovation process and a reflection of the dynamic partnership. The best way to keep entropy from increasing is to put in energy.