The lifeblood of the life sciences industry is continuous innovation—it is not a business that can survive by standing still.
Keeping innovation moving ahead at a steady, productive pace is becoming much more difficult, due to constricting margins,
policy changes, and an abrupt redefinition of the traditional roles of patients, payers, and providers. Responding to this
challenge requires moving toward an industry design where innovating beyond the product R&D cycle becomes ingrained and commonplace,
a standard practice throughout the entire organization. And the best way to make that transition is to look at precedents
and best practices in an industry that has confronted similar structural issues and come out ahead: financial services. As
one who has experienced the effort to build a new innovation mindset in the office canyons of Wall Street, I'd like to share
with Pharm Exec some of the lessons learned.
What drove successful innovation in financial services is the understanding that there is not one but many platforms for advancing
it. There are multiple types of innovation, each requiring a set of correlated, comprehensive—and carefully coordinated—structural
changes to the underlying organization. These changes go far beyond conventional innovation-building tactics such as that
open employee brainstorming jam every Friday. Instead, they impact the heart of how companies are organized. In fact, moving
forward often requires a leap of faith, being difficult to define, test, perfect, and install.
A simple way to think about innovation types is in the construct of a 2X2 matrix, mapping "outside-in" versus "inside-out"
innovations, and "evolutionary" versus "revolutionary" innovations. Since this matrix is not named, let's call it the c-level
four quadrant (C4Q) innovation matrix (table below).
Mapping innovation types triggers attention to the processes needed to capture and/or cultivate each innovation type. What
operating model, organizational design, and incentive model changes may be needed? What kinds of partnerships are required
to cultivate each innovation type? The C4Q Innovation Matrix is also illustrative in demonstrating that, in the financial
industry, thinking and acting to foster innovation is not just a job for the CIO or CTO but requires the other "c suite" functions,
including CEO, COO, CFO, and CMO, to make material contributions as well.
Whatever the model, experience in the financial sector shows that companies must avoid a situation where good ideas are trapped
in the traditional command and control organizational structure, in which case the structure will dictate the strategy. Instead,
a true innovation redesign requires the reverse: that the strategy will determine the organization's structure, and that rewards
and incentives will follow that strategy rather than being guided by the notion that the larger a leader's proverbial ship,
the larger the said leader's compensation.
In other words, the biggest challenges are internal. First and foremost is the negative incentive that employees confront
when asked to innovate, best expressed in the simple question: what does it mean to me and my job? The hard reality is that
when inside-out innovations create better work streams and enhanced efficiencies, the result can lead to the elimination of
entire departments, product lines, and the individual career paths associated with them.
One key lesson in tackling this implicit barrier to innovation is to introduce a new organizational design, one where employees
are encouraged to innovate themselves out of a role. This example of encouraging leaders to cannibalize themselves to achieve
something innovative confronts the elephant in the room. It changes the conventional thinking from "if I don't have anything
to do, then what is my value" to "I can't wait to innovate away everything I do, so I can deliver new value." This creative
manner of thinking about the implications of organizational change is easier realized when innovation is thought of in types,
instead of as a single entity.