Bruce Booth (of Atlas Venture Capital) has a provocative post up at Forbes on what he would do if he were the R&D head of a big drug company. He runs up his flag pretty quickly:
I don’t believe that we will cure the Pharma industry of its productivity ills through smarter “operational excellence” approaches. Tweaking the stage gates, subtly changing attrition curves, prioritizing projects more effectively, reinvigorating phenotypic screens, doing more of X and less of Y – these are all fine and good, and important levers, but they don’t hit the key issue – which is the ossified, risk-avoiding, “analysis-paralysis” culture of the modern Pharma R&D organization.
He notes that the big companies have all been experimenting with ways to get more new thinking and innovation into their R&D (alliances with academia, moving people to the magic environs of Cambridge (US or UK), and so on). But he's pretty skeptical about any of this working, because all of this tends to take place out on the edges. And what's in the middle? The big corporate campus, which he says "has become necrotic in many companies". What to do with it? He has several suggestions, but here's a big one. Instead of spending five or ten per cent of the R&D budget on out-there collaborations, why not, he says, go for broke:
Taken further, bringing the periphery right into the core is worth considering. This is just a thought experiment, and certainly difficult to do in practice, but imagine turning a 5000-person R&D campus into a vibrant biotech park. Disaggregate the research portfolio to create a couple dozen therapeutically-focused “biotech” firms, with their own CEOs, responsible for a 3-5 year plan and with a budget that maps to that plan. Each could have its own Board and internal/external advisors, and flexibility to engage free market service providers outside the biotech park. Invite new venture-backed biotechs and CROs to move into the newly rebranded biotech park, incentivized with free lab space, discounted leases, access to subsidized research capabilities, or even unencumbered matching grants. Put some of the new spin-outs from their direct academic initiatives into the mix. But don’t put strings on those new externally-derived companies like the typical Pharma incubator; these will constrain the growth of these new companies. Focus this big initiative on one simple benefit: strategic proximity to a different culture.
His second big recommendation is "Get the rest of the company out of research's way". And by that, he especially means the commercial part of the organization:
One immediate solution would be to kick Commercial input out of decision-making in Research. Or, more practically, at least reduce it dramatically. Let them know that Research will hand them high quality post-PoC Phase 3-ready programs addressing important medical needs. Remove the market research gates and project NPV assessment models from critical decision-making points. Ignore the commercially-defined “in” vs “out” disease states that limit Research teams’ degrees of freedom. Let the science and medicine guide early program identification and progress. . .If you don’t trust the intellect of your Research leaders, then replace them. But second-guessing, micro-managing, and over-analyzing doesn’t aid in the exploration of innovation.
His last suggestion is to shake up the Board of Directors, and whatever Scientific Advisory Board the company has:
Too often Pharma defaults to not engaging the outside because “they know their programs best” or for fear of sharing confidential information that might leak to its competition. Reality is the latter is the least of their worries, and I’ve yet to hear this as being a source of profound competitive intelligence leakage. A far worse outcome is unchallenged “group think” about the merits (or demerits) of a program and its development strategy. Importantly, I’m not talking about specific Key Opinion Leader engagement on projects, as most Pharma companies do this effectively already. I’m referring to a senior, strategic, experienced advisory function from true practitioners in the field to help the R&D leadership team get a fresh perspective.
This is part of the "get some outside thinking" that is the thrust of his whole article. I can certainly see where he's coming from, and I think that this sort of thing might be exactly what some companies need. But what are the odds of (a) their realizing that and (b) anything substantial being done about it? I'm not all that optimistic - and, to be sure, Booth's article also mentions that some of these ideas might well be unworkable in practice.
I think that's because there's another effect that all of Bruce's recommendations have: they decrease the power and influence of upper management. Break up your R&D department, let in outside thinking, get your people to strike out pursuing their own ideas. . .all of those cut into the duties of Senior Executive Vice Presidents of Strategic Portfolio Planning, you know. Those are the sorts of people who will have to sign off on such changes, or who will have a chance to block them or slow their implementation. You'll have to sneak up on them, and there might not be enough time to do that in some of the more critical cases.
Another problem is what the investors would do if you tried some of the more radical ideas. As the last part of the post points out, we have a real problem in this business with our relationship with Wall Street. The sorts of people who want quarter-by-quarter earnings forecasts would absolutely freak if you told them that you were tearing the company up into a pile of biotechs. (And by that, I mean tearing it up for real, not created centers-of-innovation-excellence or whatever the latest re-org chart might call it). It's hard to think of a good way out of that one, too, for a large public company.
Now, there are people out there who have enough nerve and enough vision to try some things in this line, and once in a while you see it happen. But inertial forces are very strong indeed. With some organizations, it might be less work to just start over, rather than to spend all that effort tearing down the things you want to get rid of. For all I know, this is what (say) AstraZeneca has in mind with its shakeup and moving everyone to Cambridge. But what systems and attitudes are going to be packed up and moved over along with all the boxes of lab equipment?