Building successful long term customer relationships. • Defining the nature of the relationship and setting mutual expectations for the future • The role of governance structures and KPIs in effective relationship management • Building a “banking mentality” and dealing with “service challenges” using formal escalation mechanisms • Practical ways of creating long term value for both parties • Establishing open relationships where honesty, integrity and straight talking can thrive

1. Building successful long
term customer relationships
Paul Overton, PhD
Group Director, Corporate Development
Outsourcing Preclinical Development
Berlin 2nd December 2010

2. Presentation overview:
 Defining value
 Defining the relationship
 Factors for creating successful relationships
 Setting mutual expectations
 Governance structures
 Utilising KPIs effectively
 Open relationships
 Building a “banking mentality”
 Creating long term value for both parties

3. Defining value:
What is value?

4. Defining value:
Value = benefits – costs
(Neil Rackham, Malcolm MacDonald and other
gurus)

5. Defining the relationship:
 Do all long term business relationships
need to be consultative or strategic?
 Should we all be aiming at creating strategic
partnerships?
 Most strategic deals have a tactical
component element to them
 Templates, unit costs, FTE rates etc
 There is a need to understand the dynamic
of the relationship

6. The value pyramid:
Co created
Value
Solution
Value
Offer (packages)
Component or
Transactional

7. Value in suppler relationships:
High
Strategic
. .. .
... .
Strategic Value
. . . .. ..
... ..
Consultative
Low
. .
Transactional
Low Supplier Dependency High

8. Value in suppler relationships:
High
Strategic
Current Market
.
conditions .. .
... .
Strategic Value
. . . .. ..
... ..
Consultative
Low
. .
Transactional
Low Supplier Dependency High

9. Defining the relationship:
 Objectively review the status of the
relationship
 Is the approach fit for purpose?
 Tactical, consultative, strategic
 Relationships “evolve”
 Need to ensure that both parties have
full visibility and understanding
 Cross functions, sites, services
 Risk management
 Defining the roles and responsibilities
 Who does what…
 The buck stops where?

10. Defining the relationship:
 Effective resource management
 Sharing of key “information” components
 Studies, schedules, resource limitations
 Harmonisation of processes
 This drives speed, quality and cost
containment
 Each relationship is unique
 A deep understanding of each others
processes drives
 Efficiency, quality and cost reduction

11. Successful relationships require:
 Excellent communication
 Timely, open and honest
 Multi-level communication
 Multi-disciplinary
 Study specific
 Administrative and financial
 Engagement of senior management
 Both parties understand and agree what
success looks like
 Intercompanyunderstanding
 Commitment to help each other achieve it

12. Successful relationships require:
 Investment in time…
 Relationships take time and effort
 High level of commitment from both
parties
 Focus on continual improvement
(evolution)

13. Governance structures:
Executive
leadership
team
Joint
operational
team
Study
management
team

14. Governance structures:
Executive
leadership
team
Annual Meetings
Joint •Top level direction and
future plans for both
operational
parties
team •Discussion of future
needs
•Aim at long term
direction of relationship
Study • High level changes in
management steerage or focus
team

15. Governance structures:
Executive
leadership
team
Regular meetings
Joint (quarterly)
operational
team •Business review meetings
•Ensure ensuring
compliance and delivery
•KPI reporting and
Study evaluation
management •Process improvements
team •Challenge resolution

16. Governance structures:
Executive
leadership
team
High level
communication
•Hands on at the “coal
Joint face”
operational •Ensuring adherence to
team specific KPIs
•Milestones
•Real time management of
study challenges
Study •Feedback on a study by
management study basis
team

17. Creating open relationships:
 Create a “banking mentality”
 100% satisfaction…....nice in theory
 Allrelationships are built on people
 People are the strongest and weakest link
 Work towards an open and blame free
culture
 Formally recognise good service (both
ways)
 Deal with the challenges and learn from
them

18. Creating open relationships:
 Escalation procedures
 Ensure a formal process is created to
escalate service/delivery challenges
 Team education…
 Educate one another
 Different departments sometimes have
different priorities
 Challenges and implications dealt with
at the right level
 Small challenges can quickly spiral if not
handled professionally

19. Effective utilisation of KPIs:
 Demonstration that the relationship is
working
 Effective metrics can be incisive and help
drive the relationship forward
 Metrics should be useful to both parties
 KPIs can be used to assess:
 Timings (study start, reporting etc)
 Quality compliance
 Study costs and work scope changes
 Number of iterations of report
 Adherence to partnership goals

20. Example 1: KPIs linked to
costs
 Library of defined study designs with fixed
delivery times mutually agreed
 Study prices negotiated annually and fixed
 Study modifications or amendments are
recorded, priced and fed back to
procurement
 Work scope changes expressed as a
percentage of benchmark study design
cost

21. KPIs linked to costs:
 Successfully used to reduce costs of “SD
individualism”
 Templates showing consistent high
variance to original design were
reviewed and modified as appropriate

22. Example 2: KPIs linked to
report delivery
 Formal timelines were established for a
library of standard template study designs
 Initial metrics focussed on study start date,
draft and final reports only
 Review showed high level of delays........why?
 Jointly established key milestones set to
monitor critical phases from start to finish
 Initially all milestones locked against study
start
 Updated against milestone delivery times
 Additional metric established for complete
study timing against plan

23. KPI: report delivery metrics

24. Example 3: KPIs linked to on
time payment
 MSA agreement had a volume discount
built in that rewarded on time payment
of invoices
 Work was outsourced form 4 locations with
differing approaches to invoicing
 Metrics were collected for on time payment
and were expressed as percentage

25. KPIs: On-time payment
% Timely payments
(based on MSA)
Site Q3 08 Q4 08 Q1 09 Q2 09 Q3 09
A 43 17 44 88 95
B 100 100 100 100 100
C 89 85 91 85 97
D 86 79 94 100 100

26. Creating value:
Value = benefits – cost
 Creating value.....
 Tactical relationships...focus on streamlining
costs and process
 Strategic relationships...look for mutual
benefits and working for a co-developed
solution

27. Creating value:
 Cost reduction
 Make the buying and selling process efficient
and clear
 Standardise, standardise and harmonise
 Study designs, terminology, report formats
 Ensure all studies are visible and readily
identifiable in scheduling
 Reduce re-processing and re-scheduling
 Delays cost money

28. Creating value:
 Increasing mutual benefits
 Rewarding performance based on KPIs
 Report quality, on time delivery etc
 Link to the volume discount
 Sharing best scientific practice
 UtiliseCRO expertise and approach study
challenges
 Joint scientific workshops to share
experience and best practice
 Joint R&D projects
 Creating dedicated teams of “customer
educated” staff to keep corporate learning

29. Creating value:
 Sharing the benefits of process
improvements
 LEAN and 6 sigma
 CROs and the pharmaceutical industry
 Joint process mapping
 KPIs on continual process improvement
 Joint “value chain mapping”
 Question the unquestionable
 Pathology peer review...
 Bioanalytical peer review
 In-house v external
 Integration rather than “Lego building
blocks approach”

30. Summary:
 Establish and define the relationship
 both parties expectations
 define roles and responsibilities
 Ensure that service and delivery is
measureable and honest
 Establish and utilise KPIs
 Collect real time feedback
 Manage the relationship openly
 share your outsourcing plans and schedules
 share the sales plan and capacity challenges

31. Summary
 Long term non-clinical partnering is
becoming a critical component in
successful drug development strategies
 Always look ways to improve the
relationship
 It just takes teamwork and commitment

32. Many thanks for your listening!

33. Expectations of a CRO!