Reference no: EM131263307 , Length:

Case Discussion

As Gretchen Jahn, cofounder and executive vice president of Corporate Development of Aegis Analytical Corporation, looked over the financial statements for the first half of 2003, she tried to muster the enthusiasm she had had the previous spring when Aegis entered into alliances with two leading pharmaceutical manufacturing distributors. Jahn had expected that the increased visibility in the market would buoy Aegis's lagging sales. Meanwhile, Justin Neway, cofounder of the company, carefully prepared a presentation to potential investors, as they both knew that this round of funding was needed to support Aegis's growth plan and achieve positive cash flow in late 2004.

Gretchen L. Jahn and Justin O. Neway formed Aegis Analytical Corporation in 1995 to provide process manufacturing software and consulting services to pharmaceutical and biotech manufacturers. The product, called "Discoverant" helped managers see what was happening during the manufacturing process. It allowed users to connect to multiple databases simultaneously-including electronic data formats and manual inputs taken from paper records-and assemble the data. The user could then develop models to evaluate the performance of specific manufacturing processes. The product greatly reduced the time and effort needed to identify problems in a company's manufacturing processes.

In March 2002, Aegis formed an alliance with Honeywell POMS that made POMS a reseller of the Aegis Discoverant product. As an add-on product to the POMS software that monitored manufacturing plant activities, Honeywell agreed to sell the product under the name "POMS Explorer, powered by Aegis" Jahn and Neway believed that combining the products would enhance the sales of each and that Honeywell's name recognition m the pharmaceutical market would help Aegis gain credibility and visibility.

Later that spring. Aegis entered into an agreement with Rockwell Automation to market Aegis's Discoverant with Rockwell's ProPack Data manufacturing software, designed to help companies monitor production operations. Again, because a customer could use the ProPack Data system with Discoverant, both companies hoped the collaboration would increase the sales of each product.

Neither relationship had yet produced a single sale, and Aegis began questioning the wisdom of this strategy. Strategic alliances were integral to the company's sales efforts, and after Jahn reflected upon the disappointments of the past year, she and Neway debated what actions the much smaller Aegis should take to improve these alliances with the larger companies.

In 1995, Jahn and Neway cofounded Aegis Analytical Corporation in Lafayette, Colorado. Jahn had 20 years of experience in information technology and integrated resources management prior to starting Aegis. She had recently sold her software consulting company and was working as an independent information technology and management consultant. Neway, a biochemist, had 20 years of experience in pharmaceutical and biotechnology manufacturing. He had moved to Colorado from California in 1990 and taken a job as director of manufacturing for Somatogen, a biotech research company. Both had worked closely with the regulatory, quality-control, and operational issues that plagued pharmaceutical manufacturing processes.

Jahn, a self-described "serial entrepreneur," had started Two companies before Aegis. She had experience with software development and implementation and understood the importance of manufacturing efficiencies and process improvements in getting drugs through the regulatory process. Neway's experiences in biotech and pharmaceutical manufacturing gave him an in-depth understanding of the difficulties in accessing data from a variety of sources and across many different products and then putting them into a unified format. Originally, Jahn and Neway had hoped to use Somatogen's name as a launching pad for their product. However, when Somatogen began negotiations for its eventual sale to the pharmaceutical company Baxter, they recognized they would need to find an alternative. Neway focused his efforts on courting potential development partners. Jahn recalled,

"We spent several years working out of our respective basements, using our own funds to make invited technical presentations. We made 23 presentations in the United States and Europe to major pharmaceutical companies to demonstrate our product and to get feedback to improve the product and also to see if we could find someone who would be an initial development partner. Eventually Aventis gave us a contract worth $1.3 million to jointly develop our software product with them. This was in 1999. In May and July of 1999, we received our first funding-seed investments of $400,000 and $500,000-from angel investors and Sandlot Capital. We were three people at that time.

So we built this first version and we got office space and then graduated to other office space once we were all sitting on top of each other. And we hired people and subcontracted all kinds of nifty stuff and then we went out for the next round of funding. We closed on that in 2000-right around 41/2 million-from GlaxoSmithKline's investment arm, SR One, and Aventis's investment arm, Future Capital, which is in Frankfurt, Germany, as well as Viscardi Ventures, a financial investment firm in Munich, Germany."

Aegis had been successful in getting enough financing to develop and test its manufacturing software product and set up a team of applications and technical specialists, a management team, and an advisory board of industry and regulatory experts. It had organized research seminars and conferences with leaders in biotech research and application and successfully sold and implemented its first product in July 2000. Jahn continued,

"Our next funding in 2001 just about destroyed me. We brought in $14.5 million in October 2001, after the bubble had burst. What's funny is that Aegis is not a dot-com. So during the boom we were discounted because we weren't a dot-com. After the boom, we were discounted because every software company was. The Friday before September 11 (2001), I turned down $4 million because our valuation was so low. Then September 11th happened. We were supposed to have a board meeting on the 14th over in Munich, which we ended up having over the phone, and I said, "Look guys, we don t know what is going to happen ...we just better get through this" We were one of the few people whose funding got bigger. Everybody else that I talked to that was raising money at that time had their investors dry up and go away."

By 2002.the company had grown to 35 employees. Aegis had entered into sales agreements with eight corporate customers and had 25 sales in the pipeline by the end of that year. Also in 2002, Jahn hired John M. Darcy, former Avis CEO, as president and CEO to reposition the company with a sales and marketing focus rather than a development focus. Jahn moved into a corporate development role to pursue new markets for the product and develop alliances and market awareness. Because of its small size. Aegis was able to share information within the organization quickly and did not need to spend a lot of time making decisions. Aegis also prided itself on having an organization that emphasized precision in its work as well as honesty and integrity when dealing with others. Management believed that understanding and concern for customers would be a key to Aegis's success.

Aegis positioned Discoverant as a manufacturing performance management software system that fulfilled three critical requirements: practical data access, useful data analysis, and ability to communicate results to no experts. Aegis's Discoverant enabled manufacturing employees and managers to analyze specific manufacturing processes that crossed database boundaries. The software did not require that every piece of corporate data be stored and controlled in a single location. In developing Discoverant, Aegis's developers had incorporated existing software engines, both as a cost savings and implementation aid, building only those parts of the product that were needed to fill the gap and integrate the various systems. Jahn and Neway explained that "companies without Aegis's product would have to go through a lot of time and effort to get the same information. Without Discoverant, it was common for a company's information technology (IT) department to spend two to four weeks to get appropriate data from multiple systems. After company employees collected the data, it would take them another week to interpret and analyze the data. Discoverant took minutes to perform the same steps. The cost savings became significant when a company that manufactured a defective product or ran invalid experiments searched for the errors in the manufacturing process.

The company emphasized Discover ant's ability to "easily access millions of data values from diverse sources, drill down on any operation, make informed proactive decisions by identifying critical process parameters, and enable manufacturing enterprise compliance strategies". A simple point-and-click feature allowed the user to select the relevant data and produce desired statistical analyses, charts or graphs. A major advantage was the fact that the person running the analyses and reports did not have to have a programming background. Aegis would help the company install the system and develop the data models. Aegis's implementation process required staff from the client company to be active participants. Aegis provided a two-day user-training session for its customers so that they understood the product's basic functions and tools and how to use it to evaluate the various manufacturing systems. That included a basic course on statistics so non-statisticians could use the software. Post-implementation customer support was provided via phone, fax, e-mail, and internet. Aegis wanted to make sure that everyone in the company who used the software had a complete understanding of Discoverant.

Aegis also offered additional consulting services, including follow-up, validation, and advanced technical and user training. These services were offered to companies who needed more assistance or wanted additional advice for improving their manufacturing systems.

The keys to selling such a sophisticated product were having a simple way to communicate the benefits of the product, a knowledgeable sales force, and skilled consultants to implement the software for the client. Neway understood that his audience-research scientists who used mathematics and statistics but were not programmers themselves-needed an image of the numeric processes. He worked to put together a visual representation that showed the manufacturing data in a three-dimensional image. This eventually became Aegis's "visual process signature" used for both sales presentations and actual data tracking.

To help convey the Discoverant product, Aegis developed a short video clip based on a case study. Aegis management made the video available to potential customers via a CD-ROM and posted it on the company's Website. The scenario depicted a manager preparing for a meeting the next day where she would need to explain to her superiors why there were batch failures in a drug's tablet dissolution rate. Even though she had all the data she had requested on the manufacturing processes, she did not have weeks to analyze the data and expected that she would have to spend more time collecting additional data. What she needed was immediate access to all of the company's manufacturing data and a program that would help with the analysis. A colleague introduces her to Discoverant. With this program, she has direct access to the raw data stored in the various databases (e.g. Laboratory Information Management Systems [LIMS] enterprise resource planning [ERP]) and can begin analyzing the manufacturing conditions associated with the batch failures. Discoverant revealed that the failures appeared to be related to the drying process-particularly, to lower dryer air temperature. Through Discoverant's statistical tools, she is able to analyze the relationship and reveal that it is highly significant. Discoverant's reporting tools- including the visual process signature-then enable her to illustrate the relationship between temperature variations and batch variations. Within minutes she has her answer and feels very prepared for the next day's meeting.

Beyond these promotional efforts. Aegis set up sales teams to provide long-term consultative relationships that would help customize the product for each customer. A sales account manager led a specialized team of applications and technical specialists organized for each sales and market effort and was responsible for the relationship with each customer. Full installation and implementation of the product was expected to take between six and nine months. The standard purchase cycle for enterprise software within the pharmaceutical industry started with an evaluation in one facility or production lie followed by expansion to other facilities on a global scale. A contract often was negotiated for the full expansion up front in the purchase process. Specific sites were identified and a timeline established. This enabled Aegis to understand the total potential value of a customer at the time of initial phase.

The sales cycle itself varied from seven months to more than two years. The delay was due to the multiple sales cycles involved in selling the product. In its initial efforts. Aegis sales teams quickly found that there were really three selling cycles, each requiring multiple visits. Aegis thought it would only have to make the first sale, to the individuals in the company who would actually use the product. The sales team typically started with the head of manufacturing but also spoke with the head of quality and process scientists. Although this effort often took from three to nine months, the product was generally well received, particularly by the IT departments, because it eliminated their having to write numerous queries. After getting commitment by these users, however, Aegis discovered two more cycles. First, Aegis had to help convince upper management to purchase the software. Aegis found that upper management would spend as much time conducting due diligence on the decision to spend an estimated $0.5 to 1.5 million on Discoverant as they would on a $15 million software instillation. This This cycle typically took between three months and a year. After §getting approval from upper management, Aegis would then have to work with the purchasing and legal departments to complete the sale, which could take another one to six months. This lengthy three-tier sales cycle process increased the amount of time and effort required by Aegis's sale team.

Aegis planned to set up direct sales teams in key geographic areas where there were high concentrations of potential customers. Aegis had already set up a team in Frankfurt, Germany, to provide sales and marketing support for the European market. In geographic areas of lower customer concentration, Aegis planned to use sales agents and alliances to leverage the direct sales force and to provide local coverage and first-line support. Strategic partners would help expand sales and implementation capabilities.

To succeed in a global context, pharmaceutical companies continually needed to reduce costs while increasing efficiency, responsiveness, and customer satisfaction. Improving profitability in the manufacturing process depended on reducing the cost of raw materials, energy, and capital and on increasing the yield from their assets. Profitability also depended upon demonstrating that they could meet quality standards in producing the drug. To meet such regulations, manufacturers made significant investments in software systems to collect information that revealed where, if any, manufacturing problems existed and, after correcting the problems, demonstrated compliance to the regulators. Initially, production processes were automated through distributed control systems (DCS) that used hardware, software, and industrial instruments to measure, record, and automatically control process variables. More recently, process manufacturers had begun to automate key business processes by implementing ERP and manufacturing execution system (MES) software solutions to enhance the flow of business information across the enterprise, as well as other software programs such as LIMS.

The implementation of each of these systems led to an accumulation of large amounts of raw data that recorded in detail the performance of each manufacturing process at full commercial scale over extended periods of time. The proliferation of software products resulted in companies having mountains of data scattered across numerous disparate data sources. Collectively, these held a great deal of information about how to improve manufacturing performance. Prior to 2000, there was no simple way to access all the data and extract the big picture about the manufacturing process. Aegis wanted to become the recognized leader in process manufacturing technology by providing software that could be used to integrate all major functions and provide system-wide information.

The demand for Aegis's product was not driven solely by pharmaceutical companies' interest in reducing costs. Increasing pressure from consumer groups and the federal government's Food and Drug Administration (FDA) led Aegis to believe that this market would be highly receptive to any product that shortened and improved the product-to-market cycle time. In 2002 alone, the FDA had issued 755 warning letters about product quality- an increase of more than 40 percent from 1998. The FDA had also increased the number and severity of penalties levied against pharmaceutical manufacturers, including criminal convictions and fines as high as $500 million.

Discoverant had no direct competitors. Other companies had products that performed parts of what Discoverant did, but no one besides Aegis had a product that did it all. In 2003, there were several commercial vendors of general statistical and visualization tools such as Mathsoft, Statistica, MatLab, IMSL, SAS, Visual Numerics, and AVS. These tools permitted the analysis of already collected data but did not help in accessing the various databases. Other software companies, such as Aspen Technology, OSI, and Lighthammer, provided process manufacturing software that captured shop floor data for process control and data management, but typically the data had to be inside a single database. These products could not combine data from dissimilar databases. Finally, Spotfire and Aspen Technology had recently announced an alliance to develop data analysis capabilities for manufacturing systems, but the product was not yet available. Although some large pharmaceutical and food production companies had custom in-house systems developed by internal IT departments or third-party consultants, most companies' systems were limited in use and required a team of experts to interpret the disparate data that the systems generated. Someone who was not a programmer could use Discoverant.

Aegis had identified a number of pharmaceutical manufacturing companies that would benefit by an integrated manufacturing information system. Though many pharmaceutical manufacturing companies in 2002 were quite small, with annual revenues of less than $250 million, targeting only those pharmaceutical companies with annual revenues of more than $250 million would give Aegis access to a potential market of $604 million in license, service, and maintenance fees. Pharmaceutical manufacturers with annual revenues in excess of $1billion had the largest IT budget and were therefore most likely to implement manufacturing enterprise software solutions like Discoverant. Importantly, companies of this size accounted for approximately 77 percent, or $464 million, of the total potential market for Aegis's products.

Jahn and Neway understood the power of brand recognition and company reputation in reaching their target market. They developed research partnerships with top-tier pharmaceutical manufacturing companies such as Merck, Genentech and Aventis and invited representatives from Abbott, Amgen, Aventis, Merck, Novartis, GlaxoSmithKline, Eli Lilly, Roche, and Wyeth to join discussions at Aegis-hosted conferences in Colorado. Contacts at the University of Newcastle and University College London, two of the top universities in the world known for software technology applicable to manufacturing processes, joined Aegis's Scientific Advisory Board. These relationships fostered an exchange of technical information and ideas and gave Aegis professional connections and sales leads.

In their initial efforts to sell Discoverant, Neway and a small team of sales and technical people made direct calls to large pharmaceutical and biotech manufacturers. Believing that alliances with well-known service providers would give them credibility and visibility in the marketplace and also permit them to reach more companies than they could alone, they focused Aegis's growth strategy on finding partners. Aegis's first partners were client-investors, pharmaceutical companies like Merck and GlaxoSmithKline in California and Hoechst Marion Roussel in Kansas City. Having big company names as successful users of Aegis's Discoverant product provided important testimonials for Discoverant's features. This networking helped form the research and technical partnerships that Aegis used to get its first contracts and secure venture funding.

The focus in 2002 was on creating alliances that would enhance sales. Although Aegis had made some sales of Discovcrant, as top managers began to understand that the three-part sales process was the norm, they realized they did not have enough internal resources. Their sales staff could continue to pursue direct sales, but sales might benefit from partners who could help persuade top management to purchase DiscoverantThese alliances were considered an integral part of the sales force. In choosing sales partners, then. Aegis sought out companies that had complementary products and would agree to promote the Discoverant brand using the Aegis name to distinguish it from perceived competition. While it had started screening potential candidates, in 2002, Aegis was approached by two companies that seemed to be the best candidates with which to partner. In that year. Aegis formed a relationship with Honeywell POMS and another with Rockwell Automation.

Honeywell POM5 Alliance

In 1999, Honeywell acquired the POMS Corporation, a leader in providing manufacturing execution systems (MES) for the pharmaceutical as well as for other industries. PONIS had sold more than 70 systems to nine of the top 10 pharmaceutical companies in the world. POMS employed 150 people and was headquartered in Herndon, Virginia. Prior to the acquisition, POMS was strictly a reseller of software and, according to an Aegis manager, had a spotty record of implementing and supporting its software offerings.

On March 13, 2002, Aegis formed an alliance with Honeywell POMS that made it a reseller of the Aegis Discoverant product in combination with POMS's manufacturing system. Honeywell approached Aegis after a potential customer asked if POMS was compatible with Discoverant. This interest helped Aegis during negotiations. Although Honeywell initially requested an exclusive relationship, Aegis thought that it was not in the company's best interests. Eventually the two sides did come to an agreement that Aegis's product would be packaged and resold under the name "POMS Explorer, powered by Aegis."

Both companies recognized the mutual benefits from the alliance. Aegis believed this alliance was a significant step toward gaining both credibility and visibility within the Life Sciences market. With Honeywell, Aegis aligned itself with an organization that had $24 billion in sales, more than 120,000 employees, and operations in 95 countries throughout the world.

Aegis was banking on POMS's name recognition and reputation to build market awareness for Aegis and Discoverant. Honeywell POMS, located in the Automation and Control Solutions division, one of four major strategic business units in Honeywell (besides Aerospace, Specialty Materials and Transportation, and Power Systems), viewed Discoverant as an additional software offering that would expand the capability of its MES product. The Aegis software provided POMS customers with the software needed to visually see and analyze the manufacturing data. To help reach these expectations, the two companies put together a relatively standard contract that included the following:

- Honeywell POMS had a nonexclusive, nontransferable, non-sub-licensable license to resell Aegis's product.

- The agreement would initially run for two years with an additional one-year automatic renewal, unless either party wished to terminate the agreement at least 90 days before the end of the two-year period.

- Aegis and Honeywell POMS agreed to appoint one sales professional to act as the primary representative to the other. The agreement specified that the representatives shall meet in person at least once per calendar quarter to discuss the status of the sales effort and other questions about selling the software. These meetings will alternate between Aegis's and Honeywell POMS's facilities, unless both parties agree to talk telephonically or at another location.

- Aegis would provide training sessions for Honeywell POMS sales personnel within 90 days of the start date of the contract.

- Honeywell POMS was responsible for the point-of contact sales support for users. If Honeywell POMS was not able to solve the problem, it would contact Aegis for support. Provisions were provided for the time by which Aegis had to respond.

- The parties agreed to prepare mutually agreed press releases to promote the relationship. They also agreed to collaborate on marketing events, on distributing promotional materials, and on promotion of the other's product on their Web sites.

- Honeywell POMS would receive a discount on the licensing fees Aegis charged. This was a reduced price on what Aegis would charge Honeywell POMS to resell Discoverant. The more sales Honeywell POMS recorded, the greater the discount.

- Termination clauses permitted each party to end the relationship if the other went out of business or if there was a breach of any provisions within the agreement

In considering the agreement, Jahn acknowledged that it had provisions for Honeywell to "make sure that their sales reps would get enough of a commission so that they would be motivated to sell it and also that our sales reps would not be disadvantaged by selling through our partner instead of selling direct... There are lots of ways of arranging [sales incentives plans] and we had lots of conversation with Honeywell to determine what would work best in this particular environment." Aegis's VP of sales also was involved in making sure both sides were aware of the selling message and pricing structures and were present at the training sessions. He had numerous face-to-face meetings with his Honeywell counterparts to discuss the product. They focused on building a relationship first and did that successfully. Further, the Honeywell relationships benefited from Jahn having personal contact with Honeywell's director of business development.

However, from her experience in larger companies.Jahn was concerned about Honeywell's commitment to promoting the Discoverant product, and the VP of sales spent much of his time convincing his counterparts of the value of this add-on product. "Per Honeywell, we're a line item in their sales catalogue," Jahn later observed. "When the market fell out, their sales reps were concentrating on how to get people to buy their own products, much less other things in the catalogue."

Rockwell Automation Agreement

Rockwell Automation purchased ProPack Data in April 2002. ProPack Data, a German company established in 1984, was a market leader of MES and electronic batch record systems (EBRS) for the pharmaceutical and other regulated industries. The company employed 230 people and became a part of Rockwell's Process Solutions business. Rockwell Automation had revenues of $4.3 billion, employed 23,000 individuals, and had operations in 80 different countries.

Aegis had been approached by ProPack-and had already begun negotiations with them-before the Rockwell acquisition. The ProPack Data manufacturing execution system PMX was designed to help customers reduce operating costs, shorten cycle times, and improve product quality in production operations. The software solution provided by Aegis provided connectivity and - visibility to the manufacturing processes that PMX was managing.

As with the Honeywell alliance, the relationship with ProPack was designed to make Aegis visible to much larger organizations. The addition of Rockwell into the ProPack equation was a double-edged sword for Aegis's managers. On one hand, they were excited by the large size of Rockwell and the possibility to leverage that size to their advantage. However, Jahn was concerned that those advantages might be offset by increased bureaucracy and added delays.

Aegis and ProPack Data set up a sales and marketing agreement for lead generation that was simpler than the Honeywell POMS agreement. If a company's referral led to a sale for the partner, the company would receive a finder's fee. The agreement's primary function was to increase access to new sales territory. Aegis hoped to increase Ac number of sales leads, thus generating a higher number of sales opportunities.

Each company intended to use the partner's strengths to build interest in its own products and services and committed its sales representatives to prospect for the partner. Once opportunities were identified, various strategies would be employed to close the sale. The sales opportunity itself would dictate how the two companies would work together and who would take the dominant role in the sales process. Each sale would be governed by a separate agreement, which would include a finder's fee for the partner that developed the sale. Additional highlights of the agreement included:
- The agreement committed both Aegis and Propack Data to explore mutually beneficial ways in which they could complement one another's sales and marketing activities.
- Both Aegis and Prepack Data agreed this was an important relationship and would seek to communicate ideas for improving the relationship.
- Each party would assign a person to act as the primary liaison to the other party.
- Each party would independently market its respective products and services, but the two companies would prepare mutually agreed press releases to promote the relationship, provide marketing and sales support to each other, and spread the word about the relationship within their respective organizations.
- The liaisons were to attend quarterly meetings to discuss co-marketing of their products and customer leads. The location of the meetings would alternate between Aegis and Propack Data facilities.
- Unless there was a sale, there would be no commissions or other type of remuneration owed by one party to the other.
- Upon request, each party agreed to provide on-site product training to the other party's employees up to once a year.
- A separate agreement would be written up when both parties decided to pursue jointly a product installation and implementation.
- The agreement could be terminated at any time without cause with 90 days' written notification.

When, by 2003, neither the Honeywell nor Rockwell relationship had produced a single sale, Jahn began to question the value of these alliances. With sales as the major focus in the alliances and the primary criterion for evaluating the success of the alliance, Jahn tried to understand possible reasons for the lack of sales. It was easy to blame lagging sales on the struggling economy. With the drug manufacturing industry not experiencing consistent growth, companies were not able to spend money on improving their processes, upgrading software, or revamping production. Budgets cuts and purchasing managers following orders to red lice expenses led to a shrinking market. Unfortunately, the products that Aegis and its alliance partners were selling fell into the category of items that were not essential to current operations. In fact, Honeywell's POMS division, while having some success with other software products, overall had low sales and had recently laid off 25 percent of its sales force, including individuals with whom Aegis had worked. Aegis had also lost some its original sales team. During lean times, the companies that normally would be interested in purchasing Aegis software solutions were looking internally to make incremental improvements.

Another reason for the absence of sales might have been the characteristics of the relationships and the partner communication systems and performance metrics that were set up. Effective communication between alliance partners was essential. Was Aegis effectively communicating with either alliance partner? Although there were contractual specifications about how often they had to meet, communication appeared to be confined to situations when either side had a question or needed clarification on an issue. Communications between Honeywell POMS and ProPack Data had been cordial, but there was no evidence that the partners had a free flow of communication beyond the "need to know" when problems arose.

For Honeywell POMS, the Aegis director of business development handled all direct communications. The current agreement allowed the companies to set agendas and develop sales opportunities at a level that met the alliance's needs. Group phone calls, sales calls, and bi-yearly face-to-face meetings were designed to keep the companies in contact with each other. Though initially there was contact between engineers to make sure the technologies were compatible, most communication occurred between the companies' sales teams and corporate management. Communication between sales teams occurred when they were working the same sales together, which they had done on several occasions; then there was frequent communication. The loss of key personnel in both companies required the new managers to begin to rebuild the communication level and the overall interest in the relationship. At the corporate level, they communicated weekly. Though more frequent communication would perhaps be better, Jahn believed the current level allowed the companies to set agendas and develop sales opportunities at a level that met the alliance's needs. As the alliance developed, Aegis realized it had a good cultural fit with Honeywell POMS and noted very few communication problems. Aegis believed it could share information with Honeywell.

The Aegis and ProPack Data agreement was hindered when Aegis's primary contact left ProPack Data, handing off responsibility to someone who did not take an active role, thereby frustrating the Aegis team. On both sides, communication had not extended beyond the contact persons, and the relationship suffered. The two companies had been trying to move beyond these events and had taken steps to improve the channels of communication between the firms.

As Jahn reflected upon the development of the company and these relationships, she wondered about Aegis's alliance strategy and what actions to take. Perhaps it was too early to make changes-these were difficult economic times and Aegis might not have given the relationships enough time to produce sales. Jahn and Neway knew that communication and trust were important to keeping a relationship going through troubled times. Their comfort level and trust increased with each partner as time went on. On the other hand, one could argue that these relationships had already had sufficient time to prove themselves and it did not appear that either would be successful. If Aegis terminated one or both of these relationships, it would need to focus its time and energy on more productive sales options. But what would these be? Relationships with other partners large enough to get the attention of main pharmaceutical companies would likely have some of the same problems as these two relationships and would take time to develop. Rather than terminate these alliances, a more reasonable solution might be to restructure the relationships. nus could include changes in the contract with either Rockwell or Honeywell or in their interactions with one another. Believing they had put together contracts with appropriate incentives to encourage sales, their thoughts turned to improving the relationships with each company. But how would a company of fewer than 40 employees influence either of these large corporations? Further, as a small company between rounds of financing, Aegis did not have a lot of extra financial or staffing resources. Any solution would have to be a low-cost one. Each path was filled with risk and difficulties in implementation, but Jahn and Neway knew that for Aegis to attract investments and to succeed would require a quick but thoughtful decision.

Chapter Discussion Questions:

1. How did the alliance formed by Aegis with Honeywell and Rockwell affect the overall business of Aegis and its products?

2. How important were the specific expertise of both Jahn and Neway in the forming of Aegis? In other words, how did their prior work experience affect the roles they played in the formation of the company and the way it was run?

3. After reading the terms of the agreement for Honewell POMS as well as Rockwell Automation, do you believe they were laid out correctly? If so, explain why. If not, what would you have included in their agreements?

4. Do you think it was a good time for Aegis Analyitic Corp to form these Strategic Alliances or do you think they were better off alone?

5. How can forming a strategic alliance guide a company towards success? What are the risks in in forming a strategic alliance in the form of marketing and culture of the company?

6. Despite the crisis of 9/11 in the United States, why do you believe the funding continued to rise for Aegis Analytical Corp?

7. After forming a strategic alliance, how do you propose a company should go about marketing their products in a way in which they compliment each other meanwhile building the culture and name of the the newly formed company?

8. Why do you believe Discoverant was a one of a kind product without any known direct competitors?