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
Boost the utilization of your HCL environment by reevaluating use cases and f...
Building successful long term customer relationships
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
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
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