Lean Comes to Pharma - Pharmaceutical Executive


Lean Comes to Pharma

Pharmaceutical Executive

Focus on the customer Drug companies have a complex mix of customers—patients, physicians, hospitals, payers, and regulators—and the needs of each are increasingly segmented and variable. For instance, many pharma companies are serving developed economies and emerging markets from the same central organizations. Moreover, product portfolios typically are composed of both on- and off-patent drugs, even though the competitive dynamics of branded and generic markets are vastly different. Know who your key customers are, what they need, and, most important, what they'll pay for. Encourage employees to question the status quo in order to find new ways to add customer value.

Look beyond the silo Too often, drug companies limit the impact of their improvement efforts by staying within the boundaries of organizational silos. Greater gains can be made through cross-functional thinking and cross-enterprise efforts. Seek to understand the business system as a whole before optimizing the pieces. This broader perspective will help people see the effect their decisions have on other areas of the organization and overall profitability. Train and motivate people to do what's best for the system, not the silo.

Change mind sets with metrics and incentives Transforming old ways of thinking and behaving is the toughest challenge. To drive sustained change, performance metrics should be tied to the overall goals of the new business system. Develop new incentives and salary structures that promote teamwork and system-wide thinking. This will require looking closely at the mechanisms that reinforce the current silos and counter-productive behavior. Without addressing these fundamental issues, any gains will be short lived. For example, a "fail fast" philosophy in R&D aimed at quickly weeding out products with low potential won't survive if the culture continues to reward progress through stage gates rather than hypothesis-driven decision-making.

Lean can help drug companies do far more with fewer resources. It can also engage and transform the pharma culture in far-reaching ways. These changes won't happen overnight, though—it took Toyota 50 years to refine its Lean production system. Pharma doesn't have that luxury of time, but ambitious, persistent companies with a clearly defined business system can get it right a lot faster than that—and the payoff will be worth the pain.

Adam Farber is a partner and managing director in BCG's Boston office; he can be reached at
. Ulrik Schulze is a partner and managing director in BCG's Zurich office; he can be reached at
. Kim Wagner is a senior partner and managing director in BCG's New Jersey office; she can be reached at


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