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positions in multiple competitive arenas. In pharmaceuticals, it could mean establishing a separate organization to broadly serve the needs of a given therapeutic customer base. Or it could mean setting up a focused drug development organization free to sell its new products at Phase II or Phase III on the open market, to the highest bidder. |
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2. Design and implement a new operating model in support of the chosen value discipline. |
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Use the chosen value discipline as the standard to question every activity, investment, organization structure, technology investment, performance measure, compensation scheme, and cultural norm that defines today's business model. Strong and courageous leadership must step forward at this stage to force hard choices about what we must stop doing as well as what we must start to do. Every aspect of operations, organization, and culture must be lined up with the need to excel in one dimension. Unsuccessful competitors fail to make clear choices and fail to successfully adapt. |
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For most drug companies, even those that continue to compete in the product leadership arena, change will be wrenching. Discovery and development organizations will be under siege, forced to cut development portfolio from an average of 40+ compounds to 10 or fewer and dropping to one or two therapeutic areas. In order to make the right downsizing choices, Ph.D.s, MDs and MBAs will have to learn to listen to each other in a truly collaborative way when, traditionally, they neither understand nor particularly respect each other's viewpoints. |
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3. Scare the organization into making it happen. |
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It would have been almost impossible for the pharmaceutical industry to have contemplated fundamental change like this in the late 1980s, even though a thoughtful analysis of the obvious forces in place thenDRGs, the rise of buying networks, the lessening influence of physicians in prescribing, a diminishing number of attractive candidates for licensing-inwould have raised serious doubts about the industry's ability to carry astronomical R & D and marketing costs on future revenue streams. Agreeing that there is a problem is particularly difficult when we are making tons of money and the future is not clearly known. |
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Today the external threat is obvious. Now the issue for top leaders of pharmaceutical companies is to put the magnitude of the threat into sufficient perspective so that the organization agrees on the right problem to solve. We fear that the series of tactical initiatives most companies have begun to plug the earnings gap will not be a sufficient response, but will be sufficiently distracting until it is almost too late for effective change. Efforts aimed at improving work-flow design in one development function will not be successful when the real need is to redesign cross-functionally and structure for multidisciplinary collaboration. Budget squeezing and |
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