(NEW VISION TECHNOLOGIES INC / GETTY IMAGES STEPHANIE DALTON COWAN / GETTY IMAGES)

For example, GlaxoSmithKline Bio, applied the concept of "one roof" development from carmaker Renault to its vaccines business by centralizing development in one location. The results were less waste and faster cycle time for decision-making, resulting in the launch of its HPV vaccine, Cervarix, 18 months earlier than the original projection. Other big pharmas are also using Lean to get leaner—though the tendency so far has been toward greater emphasis on manufacturing processes. Last month, the Financial Times reported that AstraZeneca had hired two experts from Jaguar Land Rover to increase efficiency at one of its main factories. Nor are drugmakers the only healthcare industry looking to Lean principles and techniques. According to a September USA Today report, hospital CEOs nationwide are adopting the Toyota Production System concepts and Six Sigma to identify and eliminate waste—initiatives that are likely to expand to meet the cost-cutting requirements of healthcare reform over the next decade.

The drug industry's need to transform its business model, operations, and culture is acute. With challenges on all sides—R&D productivity, rising costs, increasingly complex technologies and product portfolios, competition from generics, and growing regulatory scrutiny—industry market capitalization has declined by two-thirds of a trillion dollars since 2000. Unlike Toyota, which developed its Lean production system over a period of 50 years, pharma doesn't have much time. With an unprecedented number of products going off-patent within the next three years and few blockbusters waiting in the wings, companies are under the gun as never before. If they hope to achieve breakthrough change through the Lean approach, current efforts will have to accelerate and expand.

Case Study: Early DRUG Development

Could Lean be what the ailing drug industry needs? As pharma executives increasingly recognize the imperative to fundamentally rethink their operations and culture, they look to other industries for new models. Lean has the power to deliver this high degree of transformation. It can streamline core processes, cut cycle times and costs, reduce waste and complexity, and engage the culture in pursuit of continuous improvement, while preserving the innovative spirit that drives the industry.

Yet Lean's basic principles fly in the face of much of pharma's culture. For one thing, pharma has only recently come to appreciate the values of productivity and efficiency. Years of high margins and large budgets engendered a less cost-conscious culture. Another problem is pharma's fiercely independent functions, divisions, and geographic units. The silo mentality remains deeply entrenched at most drug companies. Yet Lean is all about teams, process thinking, and cross-functional collaboration. What's more, Lean's "just in time" principle is at odds with pharma's historical "just in case" culture.

Success requires understanding and managing these challenges. For companies that are up to the task, the potential payoff is sizeable. Well-executed Lean programs in manufacturing can shorten cycle times by 60 to 90 percent, reduce inventory by 40 percent, and cut costs by 10 to 30 percent. New product development, sales force productivity, and marketing effectiveness can also improve.