PharmaX, the CEO’s Dilemma and Open Innovation – Part 3

In Parts 1 & 2, Gordon, newly appointed CEO of PharmaX, is confronted with a serious innovation gap in the next 5 years. His pipeline of projects is quality but high risk. From an arm’s length point of view, he sees that he has 3 options: business as usual, R&D budget cutting or rethink the way PharmaX assets are being used to redefine a new strategy. In Part 3 we will see how Gordon draws on his experience in customer needs driven innovation and managing his team, to carve out a daring innovation program.

When Gordon sat down a few days later to dissect the innovation plan it was with all his management team. He had not intended to involve everyone but he can thank Carlos for this decision. PharmaX is a technology driven company and Carlos has spent the last 5 years battling against this, trying to make it driven by user needs, but with little success. He knew very well that it would be of no use to discuss innovation without the scientific and clinical people and he made this very clear to Gordon, in fact he warned him seriously against it, but then he was not willing to risk his job – at least not yet.

A few things had been bothering Gordon since his last meeting. He turns to Jean: “You made some remarks last meeting that I would like you to clarify. You mentioned that Open innovation is impossible to apply in the core pharma innovation model. What did you mean by that?”

Jean is not intimidated “What I meant was that OI is for problems you can’t solve internally, basically failures. Sorry Jim. Once a drug has moved into clinical trials the technology has to be very stable, all the options have to be taken. If you start giving people OI tools and encourage them to find new things then it could cost us significant cash… for costly mistakes. So let’s keep OI out of our core business.”

“Jim, I would expect that you would like to give your opinion. Have you failed? Why is it that you have to build a program exclusively on external partnering? Does our discovery team not have the talent to innovate?”

Jim is less confident “Jean has her point of view and I don’t want to enter into any debate or contest today. There are more things at stake. It’s not that we’ve failed – our people are good, but they can’t do everything and if we were to focus our resources in a few programs then we would concentrate the risk. Remember what I said about this being a portfolio strategy. I heard what you said about OI. I thought we were doing it, and I was convinced that we were doing it well, but I can see that OI is more than just keeping a pipeline full. It’s much more about increasing options and inspiring people to go beyond their biases. I would be very interested to hear from you how OI was applied in the automotive industry… and even hear of some successes.”

Gordon knows that this last request has a double meaning. He sees that Jim is threatened and wants to protect his position. “Henry Ford said that anyone can have the colour of the car they want, as long as it’s black. It’s funny thought, in this day and age. But then what people needed when Ford said that, were cars, not colours… and at a price they could afford. Today it’s not so much needs but wants, and wants are different. The customer wants choice. You probably remember that the auto industry almost went bust. Any idea why?”

“It was because we were not addressing the customer needs let alone wants. We were still making black cars. Once we realized this mistake and started thinking about what the customer wanted, then it started to make the difference. But how do you know what they want? And how can you reply to this efficiently and competitively? Because if you don’t, your competition will. We were forced, and I can tell you it was a very painful experience, to connect our marketing to our R&D and supply chain and then, if we saw that we did not have the means to solve a challenge internally, then we used OI to source technology options to solve these challenges.”

“This didn’t happen overnight. It took a determined program, with training and communication, in fact a profound culture change. I think I’m seeing the same story here. What are we addressing? Looks like we’re addressing an industry rather than the client needs? We need to look at our business model: is it working? is it sustainable? I am not so sure. I have asked Carlos to take the leadership of an innovation committee and to formulate 5 innovation propositions to fill the 5 year innovation gap that we have. Carlos has suggested that we call this the 5/5 program. I will be sending each member of staff a letter to this effect explaining the objectives of OI and why this is a program that is critical and that I will be supporting and following closely. So, Carlos, if you want to take over…”

Firstly, Carlos dissects the innovation strategy, focusing into the most promising programs and challenging the highest risk ones. Jim and Jean have a hard time in defending their positions. Carlos then opens a new innovation route, going on the show that by focusing exclusively onto the core pharma business PharmaX is missing many opportunities. He opens and provokes a lively discussion on what he terms “innovation beyond the pill”, involving new challenging business models in approaches such as “patientslikeme.com” where he sees a shift from healthcare consumers to healthcare controllers, with patients taking control of their destiny. He demonstrates that there is a wealth of opportunity in taking existing assets and developing services, products, new formulations, new delivery modes, user communities, data mining… The list was long.

He showed how needs can be gathered, patient needs, user needs, industrial needs, and how these can be exploited to create increased revenues, defend markets, protect off patent drugs and give a second life to aging blockbusters. But more importantly, he showed how the experience of the team could be federated and put to use to accelerate this program and how each would benefit from it. He insists that this can only be realized by opening up to source solutions through open innovation practices such as challenge management or technology competitions.

That to enter these new areas pharma they must find partners with different skills and expertises, in adjacent industries, to help develop new products, services and business models, to go beyond the boundaries of traditional pharma partnering. He shows the organization that will be necessary and how the HR department has been briefed on this change in culture. And lastly, he gives each member of the team the opportunity to ask questions and carve out their space and territory within the program.

So in the end, the 5 innovation propositions did not endup as expected, looking for a technology, a device or even a web based service. The propositions were big picture business cases driven by market potential and user needs, built of centers of excellence within the company exploiting platform assets that PharmaX have always been shown to excel in. Where does open innovation fit in in this? By identifying the technology bottlenecks and reaching out through open innovation crowdsourcing, PharmaX is able to generate a critical mass of divers options that can be evaluated, tested and absorbed to rapidly fill the needs and gain market share.

The open approach drew in Jim, who saw that his team has developed exceptional skills in identifying and evaluating partnerships and that this was a critical factor in OI. Jean found a new life in being creative in identifying new ways to add value to existing products and to renovate and innovate in aging blockbusters. Critical to the success of the program was for each player to identify where they could contribute and this was a key factor in the role that Gordon had empowered Carlos to do.

Has Gordon made the right decision? As CEO one of his main tasks is risk management. His experience from the car industry taught him the hard way that a short sighted, technology driven strategy can be attractive but it is very dangerous if played alone. By turning the innovation model on its head and addressing user needs rather than technology applications, it is possible to open new untapped sources by integrating innovations from adjacent industries, to inspire all innovation players to be creative and to embrace all ideas, no matter where they come from. In the end he sees his role as taking the business from a healthcare industry to a wellbeing industry providing quality of life at an acceptable cost to the community. A vast, if not daring, program.

Any resemblance to any company or person is coincidental. The company, characters and story are meant only to illustrate a fictious business case.

By Campbell Lockhart and Rick Wielens

Join us on October 1 to learn more!

NineSigma Europe is hosting a Webinar at 15 H on the 1st October, dedicated to the challenges involved in applying open innovation in the pharmaceutical industry. NineSigma Europe believes that Open Innovation practices can have a significant and transforming impact on an industry that is notorious for being an innovation citadel. Join the webinar to hear how pharmaceutical open innovation champions address this hot topic.

About the authors

Rick Wielens,CEO, NineSigma Europe. Rick Wielens joined NineSigma in 2010 and is responsible for NineSigma Europe. Previously, Rick worked with his own company in open innovation and expert services mainly in the High Tech area in the Netherlands and Germany. Rick brings international experience working in Germany for SAP and in the Netherlands for Royal Philips Electronics in various roles and industries. Rick holds a M.Sc. in Transport Planning and Management from the Westminster University in London and a BA in Traffic Engineering from the University of Applied Science in Tilburg.

Dr. Campbell Lockhart, is Senior Delivery Director at NineSigma Europe. He has over 20 years medical device industry experience and 10 years in the investment industry as a venture investor.

 

Photo: Assorted pills from shutterstock.com

Ad

STAY CONNECTED

 
Ad