Cultural sclerosis within pharma

According to a report from PWC entitled From Vision to Decision Pharma 2020, “The prevailing management culture, mental models and strategies on which the industry relies are the same ones it’s traditionally relied on, even though they’ve been eclipsed by new ways of doing business.” Those of us who have worked within the industry understand that this is very true and that change is needed to compete into the next decade.

More from the report..

Pharma’s business model has also altered almost beyond recognition. In the 1980s and 1990s, it made medicines for chronic diseases, marketed them to doctors and focused on turning them into blockbusters. These days, it’s concentrating on specialist medicines, which it markets to healthcare payers – who use different, and more rigorous, selection criteria.

But despite such seismic shifts, the organizational culture at many pharma companies has changed very little – or,
if it has changed, some people suggest, it’s only changed for the worse. “The Big Pharma culture has been homogenized, purified, sterilized, whipped, stirred, filtered, etc. and lost its ability to ferment the good stuff required to innovate,”life sciences venture capitalist Bruce Booth argues.

Booth isn’t alone in blaming the industry’s declining scientific productivity on cultural influences.  In one recent survey of 150 R&D executives, 54% cited lack of creativity as a key organisational issue, while 53% cited lack of coordination between the R&D and commercial functions.

Why this cultural sclerosis? One possible reason is the fact that most of the industry’s top executives learned their business while the blockbuster model reigned supreme. They were also promoted from within, or recruited from similar companies, and naturally tend to reinforce the existing culture because it’s the one in which they feel comfortable. 

Creating a more innovative culture

So what can the industry’s senior figures do? We believe there are a number of changes they can initiate to foster a more creative corporate culture and reinvigorate their companies.182

Bring fresh blood into the top team
Successful innovation requires strong leadership, commitment and solid decision-making. It also requires an open mind and the courage to experiment – both traits that are harder to find in companies where most of the management comes from the same mould.

There’s relatively little gender or racial diversity in the top echelons of most pharma companies, although the industry’s not unusual in this respect. Only 10.5% of the 3,933 pharma and biotech directors in the BoardEx global leadership database are women. Similarly, only 10.2% of the 1,500 who disclose their nationality come from countries outside North America and Europe. A mere 55 come from the BRIC economies. But, with globalisation and the rise of the growth markets, many pharma companies will need to recruit more widely.

Some organisations might also want to consider hiring first-class executives from other industries, although they’ll have to exercise considerable care. Pharma depends on specialist knowledge more heavily than most other industries, and bringing in outsiders hasn’t always proved a positive experience. That said, hiring from a broader talent pool gives a company access to new ideas and methods, which helps it thrive in periods of turmoil.

Set clear rules and stick to them

Both employees and shareholders need to know where they stand, so it’s crucial to set clear ground rules. Internally, senior management should specify the sort of innovation it wants, how it plans to measure innovation and the trade-offs it’s willing to make. It should also make sure the right resources are in the right places.

Externally, senior management should let investors know how much the company plans to spend on R&D over the next few years – and stick to its guns in the face of short-termism. Jeffrey Immelt, the highly respected head of General Electric, has long followed this policy. “Over a 10- or 20-year time period, the businesses that are hard to do had the best returns,” he says. “So the arithmetic works over time.”183

Lessen the layers

Too much bureaucracy stifles creativity – and big pharma companies tend to
be very bureaucratic. We recommend eliminating as many layers of middle management as possible, minimising the number of committees and creating autonomous R&D teams that report straight to the top. Locating these teams in biotech clusters can also stimulate innovation.

But the main point is to remove roadblocks. Every R&D team should be given a specific challenge, budget and timeframe, and then left to get on with the task without having to plough through vast quantities of paperwork, grapple with the latest management craze or worry about surviving the next cull. If a team doesn’t deliver, it should certainly be held accountable – but not before it’s had a chance to do its job. 

Sounds like a lot of what I have been eluding to in my posts over the last 3-5 years.  However business has a way of shaking the tree and eventually those companies that change will survive while those that remain stuck in old management models travel down the road to extinction.