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International Clinical Trials
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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.
PILOTING A BUSINESS
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 BSC: SETTING A STRATEGY
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.
GAUGING SUCCESS
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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