The Path to Smart R&D

It takes commitment from the top down to optimize portfolio project resource management.
Nov 01, 2003

One of pharma's thorniest challenges is how to optimize the potential value of its R&D portfolio with limited resources. To address that, many pharma and biotech companies have begun to enhance their capabilities in the new discipline of portfolio project resource management (PPRM). Those initiatives are beginning to bear fruit, but they face several common obstacles:

  • a concern that more disciplined and standardized business processes will hamper the creativeness and independence of scientific inquiry
  • apprehension that significant effort will be needed to reconcile process differences and information flow across the R&D enterprise
  • fear that enhanced PPRM capabilities will lead to drastic changes in how portfolio and resource decisions are made and who gets to make them.

The problem is exacerbated by the organizational challenges of implementing PPRM. To make the system work, companies must standardize their business practices, create highly explicit procedures, and exercise a high level of managerial discipline.Like most efforts for change, PPRM requires companies to address issues they previously ignored or devised "work arounds" for, and to eliminate the ambiguities that gave rise to those issues in the first place.

Although PPRM demands a significant change in mindset and although decisions made based on it ultimately affect the entire R&D enterprise, it actually changes the day-to-day jobs of relatively few people. Therefore, it is possible for companies to implement robust PPRM capabilities without negatively affecting the science or disrupting the organization.

This article explores some of the major issues that pharma and biotech companies may encounter in implementing PPRM and suggests how management can make it succeed.

Go/no-go decisions
Maximizing Value Most pharma R&D organizations operate within the confines of a fixed annual budget-largely determined by the number of people they employ-but they lack the ability to forecast the quantity of resources required to develop compounds in an optimal manner. Unwilling to regularly prune their portfolios, other than through natural attrition, they often wind up fragmenting their resources across a large number of projects.

Moreover, in the absence of companywide decisions to set priorities, department and functional heads make de facto portfolio prioritization decisions by allocating staff to projects. That approach has two significant drawbacks: it allows inconsistent resource allocation decisions and diminishes senior management's stewardship of the R&D portfolio.

PPRM enables companies to maximize the value of their pipeline portfolios within budgetary and resource constraints. But to do that, they must make consistent go/no-go, resource allocation, and project-timeline decisions based on the best available information about the risks, costs, and commercial potential of the compounds in the pipeline.

All that is not easy. Companies must have a core set of capabilities, including

  • up-to-date, standardized plans for all active projects
  • estimates of the human and key non-human resources required to complete each project
  • availability of human and key non-human resources
  • priority rankings of all active projects, from highest to lowest
  • "probability of success" estimates at key decision points and for each project as a whole.

Standardized project plans. These are the backbone of pipeline management. They establish interdependencies between R&D activities and functions and provide the basis for estimating resource requirements. To create them, the company must agree on standard project templates that include major activities, milestones, decision points, and interdependencies for the full project lifecycle, from early discovery to product launch.

How risky is your portfolio?
When developing templates, R&D managers must decide on the level of detail to include in these plans to meet the needs of the various constituencies. They also need to decide whether to use single- or multi-level plans, keeping in mind that, once developed, the plans must be updated regularly to reflect the latest project status and the team's latest thinking. Developing project templates and maintaining project plans require significant effort and extensive collaboration between the different functions.

Ability to estimate the resources needed to complete all projects. Companies can use standardized algorithms to estimate resource demand by resource type based on the project assumptions and deliverables-such as the development of a trials protocol or completion of a study report-defined in the project plans. The departments that will do the work need to be intimately involved in developing these resource algorithms. They also need to review, and when necessary adjust, the resource estimates that the algorithms generate for each project to correct for subtle variations between projects that the formulas may not take into account.