Pharma: Dumb & Dumber?

I talk to pharma executives every day. And recently, a large proportion of conversations have hinted at something similar to what Christina, an SVP I spoke to last week, told me:

“We want to work more like a startup. We’re looking at changing our culture, at growth hacking, at our digital consciousness and pushing agile development. It’s going to be a big change but we’re doing it.”

Like a startup? Yes, it’s official. Pharma, for better or worse, has caught the entrepreneurship bug. Agile training and digital maturity workshops are suddenly everywhere.

One GSK executive told me his entire department is now undergoing mandatory training in iterative development techniques. UCB is introducing design thinking across the board; in the defiant words of my friends Greg Miller and Bharat Tewarie: “We have no choice. We have to do this.” Several other companies are taking their first steps.

In general, I support this mindshift – we finally feel the flames licking at our feet and we’re motivated to do something about it. Whilst our safety-first approach is necessary in many areas, in others it could serve as our downfall. We have an opportunity to develop the type of integrated health solutions regulators are paving the way for.

But will we succeed? I'm afraid that, on current evidence, no, they won’t.

The desire is there. But the majority will fail comes down to a simple fact: our executives are scared. Scared to change the way we measure things.

They’re scared to do what startups do through necessity. Before a company has revenues, it still needs to attract investment. It must prove it is on a path to revenue. That means creating a learning-centric organisation. An organisation which prioritises knowledge over cash, in the short term.

But pharma companies can’t bear to look away from its short-term financial goals for even a few seconds. We have the most patient shareholders of any industry, yet outside R&D we aren't prepared to take the time to learn.

The difference is elementary

Imagine a typical pharma company as it prepares for a drug launch in two years’ time. A major launch, something special.

But, this is a novel indication. The market is undefined. As a minimum, the company requires a global medical education campaign, a comprehensive set of patient support programmes, a system for analysing real-time outcomes data internally, and co-ordination with health services to create a more holistic patient solution, on top of all the normal investments in sales reps and marketing campaigns.

The pharma company realises the scale of the opportunity, so it installs the best leadership talent it can find, asks some of the most capable existing managers to take on additional project duties alongside their current work, and sends out a missive from the CEO requesting company-wide support.

Budgets are allocated – a significant boost is provided to medical affairs, market access and launch marketing – and a new incentive plan created, one that provides additional bonus cash payments to reward a successful launch. After all, failure is not an option.

At this stage, you might think this sounds entirely normal and logical. But how would a smart startup consider the same problem?

The Startup Way

Firstly, there’s no budget, so hiring top talent is out of the question. We've got a basic skeleton team at most.

Instead, the first priority is to understand if customers want the initiative and will pay for it. After all, this is an inherently uncertain venture and most of the projections are assumptions, so need to be tested before any thought of scaling. Or to be more accurate, find out WHAT customers will pay for, because it could well be that our original plans are off-kilter.

So, the startup launch follows a very different plan – one based on testing hypotheses and finding proof/evidence via a different set of metrics (customer conversion rates and loyalty, not revenue). They quickly set about the creation of a minimum viable product (MVP) launched just two months from start date – even though it’s ugly and contains only one core feature, it provides vital data against those core hypotheses. Modern data-collection methods are used to quickly test customer traction, with pivot-or-persevere decisions every two weeks. Rapid iterations enable the generation of a second product a mere month later.

By continuously repeating this build-measure-learn loop, within a year their product has shifted sideways and is now returning excellent metrics, resonating with a majority of target customers, guaranteed to succeed when scaled up.

Did I just say ‘guaranteed to succeed’? You bet. And you don’t get there without prioritising learning, rather than revenues.

Turn up the contrast

Consider five major differences between the traditional model and the agile alternative:

1. The traditional approach isn’t suited to uncertain environments

Face it, the standard hierarchical model of most large companies is built for one thing – generating maximum returns from existing products. That’s why specialist departments exist – they hone their capabilities and produce economies of scale, but also become inflexible silos where people work in a set way. Those with ‘experience’ call the shots, rather than letting the market decide. Employees are encouraged to report success with ‘vanity metrics’ rather than the truth. However, uncertainty calls for different measures and an entirely different style of rapid experimentation from adaptable, cross-functional teams.

2. The traditional approach risks everything

It might be an era-defining project for your company but why commit so many resources before you know if it will work or if customers want it? Instead, start with the end in mind and build something that resembles a completed product quickly. If you can’t build a product, why not create a description of the product – a website, brochure or instruction manual – and launch that to see if you get take-up?

3. The traditional approach makes people unfocused and unhappy

Notice how the startup model eschews multitasking. People work on a single project so they can dedicate their energy without interference, contrary to the typical view of a young company where one person has several roles.

4. Investment is allocated, not metered

In traditional environments, projects are often chosen through an archaic, often-unwritten entitlement system. At Amazon and many startups, all projects have small budgets and only those that show signs of working are scaled up.

5. You say you embrace failure, but you don’t

Tell me truthfully; is your reward plan based on financial success, thereby punishing failure? How is failure managed to enable company-wide understanding of what to avoid next time?

The harsh lesson is, if you want innovation, you need to be prepared to break from a revenue-first incentive model. Most of you never will. 

Where pharma is going wrong

Take a look at this diagram; in my earlier example, we saw how traditional pharma companies (even those that think they’ve introduced entrepreneurship) tend to begin at the top of the pyramid and work downwards.

Adapted from Eric Ries, 2017

Traditional companies start by hiring a heavyweight with twenty years of experience, the person with the winning smile that makes the key decisions. Together with their management style, this defines the company culture, and middle managers then define the processes needed, which, in turn, drives the accountability and productivity of the organisation.

The smart startup, however, moves in the opposite direction – it has to. Accountability is baked-in from the outset by defining and measuring customer assumptions with the right metrics. Decisions are made from here, setting the ‘build-measure-learn’ process in motion, which, with frequent findings and rapid progress, gives rise to a can-do culture. This attracts the right people.

So, if you believe Darwin’s adage – that it’s not the strongest who survive but the most adaptable – then you may need to fix your company sharpish.

Forever dumb: Why learning requires courage

Last month, I ran a two-day off-site executive leadership meeting for a pharma company. The eleven leaders were taken step-by-step through the above reasoning, with various exercises along the way. Heads nodded. Hands clapped. Then, Amazon executives were brought into the room to demonstrate how a large company can follow this model and grow revenues. Everyone agreed this was the kind of company they would love to lead.

Then it came to the crunch point: are you ready and willing to become a true learning company?

Everybody froze.

This is not surprising. Deprioritizing metrics like market share and gross revenue is a difficult shift. Rewarding people based on the knowledge they generate – through success or failure – is harder.

It means staring into the abyss and realising there is nowhere else to go. It’s about smiling knowingly as you quickly change direction.

Figuring out how to bring a scientific, learning approach into our commercial organisations could be the only way to avoid our collective terminal decline. Those of us in sales, marketing, access and medical can no longer rely on R&D for innovation – it is our responsibility to find new non-drug opportunities, and fast.

We must be prepared to start with the customer, not the drug, work backwards and recognise this era of dumb pharma must end.