Leading R&D Innovation Through Operational Excellence
Posted: 06/03/2010 12:00:00 AM EDT
R&D has played a leading role in the pharmaceutical industry since its inception. It is an industry that lives for innovation. The challenges facing the industry today, however, are of no secret and certainly not unique to any one particular company. With rising R&D costs, expiring patents, challenges from generics and the inherent difficulty and time to discover and develop new medicines, there has never been a better time for the pharmaceutical industry, in particular R&D, to take a renewed approach to how it operates.
Even with the advancement, leveraging and vast importance of new technologies, operational effectiveness and efficiency is the real key to longevity and success of the pharmaceutical industry. Now is the time for R&D to lead not just product innovation (what we produce) but also process innovation (how we develop and deliver new products).
For the last decade, the manufacturing divisions and functions of almost all pharmaceutical companies have adopted a more structured and systematic approach to driving change and improvement in operational efficiency and effectiveness. These, often in the form of Lean Sigma programmes, have yielded huge and significant benefits to the tune of hundreds, if not billions, of dollars.
Like their manufacturing and operations counterparts, the truly progressive R&D leaders will seize the opportunity to create innovative business models and ways of working. Operational Excellence offers R&D a proven set of principles, methods and tools for those that are willing to lead the way.
Of course it would be natural to think that R&D is about science, creativity and innovation than it is about operational efficiency and effectiveness. This paper aims to discuss this point, amongst others, and argues that R&D could lead Operational Excellence implementation.
Operational Excellence and Lean Six Sigma
Operational Excellence is a philosophy of leadership, teamwork and problem solving resulting in continuous improvement throughout the organisation by focusing on the needs of the customer, empowering employees, and optimising existing activities in the process.
Lean Six Sigma is a well defined methodology that focuses on improving speed and quality and is a fundamental part of Operational Excellence. It is typically seen and used as a framework and set of tools that help to define, measure, analyse, improve and control problems and issues within business processes and operating and working environments.
Science, Creativity, Innovation and Process
One of the many paradigms that impacts on the ability to deliver effective operational changes within R&D is the notion that ‘R&D is all about science, creativity and innovation’ and that ‘process kills creativity’. I contend that bad process kills creativity or that the lack of the right processes inhibits scientists from having more time for science.
Innovation is the repeatable continuous process of successfully implementing ideas to create value. This may be in part just a definition, but in many ways articulates the exact essence of R&D. Therefore, process is very much at the heart of what R&D does, and needs to do effectively. By having and achieving ‘good’ process R&D can successfully facilitate the implementation of creative ideas (i.e. new medicines) and develop a truly innovative environment. In fact by delivering efficiency gains through ‘good’ process, extra capacity will be created for science, creativity and innovation. Ask any research scientist how much time they currently have for these activities versus managing and executing bad process.
Speed, Quality and Cost
If the key business drivers were to be examined across all pharmaceutical companies, it would be likely that some would focus on speed to market, others on the quality, whilst in the current economic climate cost would certainly rank high on the agenda for many others. In deed some companies may be trying to achieve all three. The question is how much success is being achieved against these? When the ultimate goal is to get new and effective medicines to patients as quickly and as profitably as possible, why is there so much variation in achieving these business goals and objectives?
Whilst there is no prescribed starting point in terms of business focus for Operational Excellence, a consideration would be to tackle something that is more tangible and less emotive than quality and cost. Experience shows that looking to improve speed across areas of R&D initially is more readily accepted, whilst also leading to significant benefits in both quality and cost.
R&D is in essence a process of testing a series of assumptions, hypotheses and concepts. The quicker the process of doing this, the quicker the information gained is fed back to where the decisions are made that drive the next set of activities. The more decisions are based on real and timely data and information, the better the quality of the decisions made and therefore the overall quality. This will improve the right-first-time rate across all processes which will lead to less rework, lower costs and more effective innovation.
The benefits from a focus on speed are potentially substantial. Taking one year off development times would lead to
• Less work
– $1 billion cost of drug to market over a period of 10-12 years -> $100 million savings per drug
• Extended sales
– Assume $1 million sales per drug per day -> $365 million extra sales
• Ethical Advantage
– Treating patients sooner
• Increased economies of scale
– more viable to treat diseases with smaller patient populations as cost to market reduces/ROI increases
• Higher Productivity
– creating more value with the same resource
Since innovation is at the heart of today’s pharmaceutical business model. There are significant benefits for nearly every stakeholder in becoming better operationally.
Management Competencies and Employee Motivation
Even though the described benefits seem to sit very much at a strategic and organisational level, there are a number of other key opportunities and benefits that are realised through the implementation of Operational Excellence.
Operational Excellence brings scientific methods to process improvement. It also provides a structure for engaging others in setting and achieving team goals, a core managerial competence that is often lacking in many R&D environments. In addition to this and the significant improvements that are realised, a transformation in employee motivation and engagement becomes evident. Things that took months to do are taking weeks; things that took weeks to do are taking days. Employees begin to feel liberated and less frustrated; that they are more in control of what they are doing and able to see the fruits of their labour.
R&D employees usually accept the application of Operational Excellence tools as they play to their rationale nature and thought processes. However, frameworks and tools on their own do not deliver sustainable change. Change is driven more by how we feel about what is happening, rather than if it makes sense, therefore, particular attention to change leadership and the development of ‘soft skills’ is the key to sustainability.
Support, coaching, mentoring and training needs to be given at the right levels to managers, sponsors, stakeholders and champions to ensure the right habits and behaviours are engendered throughout the whole organisation. It is the engagement of leaders and members that in the long term will drive continuous and sustainable improvement in R&D performance. By increasing R&D productivity through Operational Excellence, you get managerial development for free.
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