Use of Allies in R&D Protection

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Plausible deniability. It’s your only defense. Nasty things happen to other people and you can call to offer regrets. R&D must maintain an ongoing relationship with the rest of the corporation. Yet we make it clear R&D will be defended, vigorously and personally, in case of an insult. Sorry about that little leak to the scandal press.

You cannot protect R&D without allies. The corporation wields orders of magnitude more power and resources than R&D. Many defensive measures (i.e., holding product back) can be just as exhausting to R&D as they are to the corporation. The corporation has the staying power and the institutional memory to extract revenge long after the dust has settled from any particular turf battle. Allies, on the other hand, do not need to maintain the pretense of a cordial relationship: with them it’s a cold arms-length+ calculation. The disinterest of our allies can be our best weapon.

Here’s the equation: Corporate misbehavior = Our pain becomes the allies’ pain = Allies extract retribution from the corporation.

Action – Reaction Illustrations
Corporate Disruption of R&D
  • Withdrawal of funding or resources, commandeering of R&D resources, meddling, etc.
Disruption Affects Allies
  • Ally gets or gives something of value in its relationship with R&D, and corporate actions are disruptive of this relationship
Allies Take Retribution on the Corporation (or its allies)
  • Ally threatens to withdrawal contributions to the corporation
  • Ally threatens penalties, lawsuits, loss of market share, loss of certification, personal retribution, etc. to the corporation or its officers

The details of this equation are unique for every external alliance. In general, we inventory possible negative corporate actions, line up potential allies, look at the interests of our allies, and align our interests with theirs in a way that allows them to help us offset the negative actions. Financial interests are the easiest, and partners in research (i.e., business investors and research partners) are natural allies. But regulators seek the public good, interest groups seek the good of their members, the media seeks a good story and board member allies seek power. We can and will entangle the interests of many diverse allies in many creative ways, with those of our research units.

We can and will create an artificial ally: the Franchise Oversight Committee+. This is an entity separate from and funded by the franchisees, charged with protecting the interests of the franchise. These interests are financial, legal, structural and reputational. This committee provides both direct protection (i.e., the legal war chest+) and coordinates protections from the allies. This is our forward-watch capability: looking for corporate insults before they happen and lining up proportional and coordinated responses. This is our central command for protection against the buffeting winds of the corporation.

Exhibit 1. Potential Allies of the Franchisees. Chart showing potential allies of the franchisees in their struggle to ensure a continuous supply of funding in the face of the often irrational investment behaviors on the part of their corporate (or other) sponsors. This is a preliminary list of allies and how their interests can be aligned with those of the franchisee.

Allies bring the additional advantage of being able to retaliate in areas disconnected from the insult at hand. Blanket de-certification of the corporation by regulators goes beyond an insult to any one R&D product. We take a single insult and generalize it into an overall distrust of the corporation. We help c-level miscreants think twice about the supposed limited damage that will be caused by their intended peccadillo.

Franchisees are not powerless. Independent franchisees simply vote with their feet. In the event of major breaches (shirking) they take their contributions and leave, to the long-term detriment of corporate vitality. Corporate franchisees have escape clauses built into their contracts. Meddling by the corporation can forfeit their right of first refusal to franchisee products. Franchisees are independently owned and operated, and in this sense behave like allies. They are in a relation with the corporation solely for cold, calculated business reasons.

Direct lawsuits and other legal actions can help, but recourse to these remedies often offer Pyrrhic victories. You obtain remedies, but the ongoing relationship with the corporation is damaged. Who wants to do business with someone who has successfully sued them? Instead we seek protections that salvage the relationship, yet send a clear signal to the corporation of the intent of R&D to protect itself. We structure our external relationships so independent allies are legitimately wronged, and are legitimate in their demands for redress of that wrong. Their redress redounds to the benefit of the franchise.

Home Page August 2010