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Measuring Success

Pharmaceuticals is a business different from all others. Firstly, it is dedicated to helping sick people, and improving health and well-being. This is a noble task and the fact that it is also a lucrative business only proves the value it has for individuals as well as for public institutions. Secondly, the discovery and development process for pharmaceutical products is long, expensive, uncertain and highly regulated. If you were a 40- year old scientist working on the discovery of new compounds in pharmaceuticals, there is a fair chance that you would be retired before your discoveries become marketed drugs. The full cycle from bench to bedside can easily exceed 20 years. And there is a substantial risk that none of your molecules, even the most promising ones, will ever become an actual drug. Indeed, less than one per cent of the drugs tested in man get registered, and the rate is one in thousands if we go back to the chemistry lab. Combining all these factors yields a gigantic bill for successfully developing and registering a drug, which is close to one billion dollars.

Finally, our marketing model is a unique combination where one party gives permission to market the product (health authorities), one party selects the product (prescribing physician), one party decides the price (government), one party uses it (patient), and one party pays for it (insurance). Still, our offices look like everyone else’s, our production plants are similar and our balance sheets are, well, normal balance sheets.


So how do you pilot a business that is like no other? How do you make sure that spending a billion dollars today will, in 20 years from now, produce a drug which will help people fight disease, will reimburse all its development costs – as well as the costs of all the other 99 unsuccessful drugs – create a profit for the shareholders, and make the company a place where people want to work and feel happy?

The answer came from the Harvard Business School where, in the mid-90s, two visionary professors, Robert Kaplan and David Norton, developed what came to be known as the balanced scorecard (BSC). They started from the realisation that short-term financial results are insufficient for describing the situation and driving the strategy of large corporations. One needs to look at other factors as well. Of course, the BSC was developed for all types of companies but it fits on like a glove to ours because of all the particularities described above.


The founders’ point was not to create complex dashboards where key performance indicators (KPIs) line up; it was to determine and track the few metrics that tell you if you are following your strategy and if this strategy is taking you where you want to go. Four strategic categories were defined for this purpose and our industry has a high stake in each and every one of these:
  • People: every company wants to attract and develop the best people, but this is critical in knowledge-based organisations where skills and education are key
  • Processes: to make good products in an efficient way, every company needs good processes in place. In the ultra-regulated pharmaceutical environment, this is a life-or-death matter
  • Customers: the most amazing product sitting in a warehouse is of little use to anyone. Products must get to the customers, address their needs and gain their approval. Nobody has a more complex customer situation than the pharma industry
  • Financials: of course, the whole exercise must be profitable in order to attract capital and we need heavy investments for many years. Investors’ trust is paramount to success
Inside each of the four strategic categories, the BSC defines objectives that derive from the company strategy and map to strategic initiatives. These strategic objectives will be pursued over the years. Each department, each team and each individual can contribute in some way.


Companies must then decide how to measure the contribution to these objectives. Obviously the metrics vary from one part of the organisation to another. What is important is to set and describe the measures that will be used in a precise and unambiguous way, as well as set long-term and short-term (yearly) targets. Now here comes the innovative part: rather than just comparing the actual values to the targets, the BSC has come up with a smart way of determining if the company is doing well or not. It uses minimum and maximum values to calculate performance:
  • A minimum value sets the threshold below which something must be done to correct the way of working. It is the ‘red zone’
  • Between the minimum and target, it is a question of effort. The company is doing the right thing, but may need to go the ‘extra mile’ to get to their target
  • From target to maximum, the company is doing a great job, exceeding expectation in a predictable rate
  • Performance above maximum indicates either an exceptional event or inadequate target setting. Again something may need to be done to correct this
The BSC is set at the corporate level and can be cascaded down the organisation structure. In all cases, it is important to understand that a BSC is not a management control instrument; it is a smart tool that helps planning and managing strategy, gives everyone visibility on the company roadmap and provides a way of defining and measuring contribution to the implementation of that strategy.

Some companies keep it high level and others deploy it down to the level of individuals. Some link it to bonus payment and some don’t. But they all have one thing in common: once they adopt the BSC, they do not go back.

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Dimitri Stamatiadis, PhD, has more than 15 years’ experience in the pharmaceutical industry, working for both CROs and industrial corporations such as Boehringer Ingelheim, Lederle and Aventis in Europe and the Schering-Plough Research Institute in the US. In 2005 he moved to Geneva, Switzerland, where he headed up the EDMS replacement project at Merck Serono. He was involved very early on with introducing technology in pharmaceutical R&D. He is an active member of the DIA, European Chair of the Document and Records Management SIAC and author of several articles on the introduction of digital technology in pharmaceutical R&D. He graduated from the University of Patras with a BSc in Biology and continued his MSc and PhD at the University of Paris Pierre et Marie Curie. Subsequently, he obtained an MBA in Pharmaceutical Business from the University La Sorbonne, Paris. Email:
Dimitri Stamatiadis
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