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Hindsight can be a great teacher – but only if you have the self-awareness needed to adapt those learnings to the next business challenge, whose rough edges are by definition almost always “non-recurring.”
Hindsight can be a great teacher – but only if you have the self-awareness needed to adapt those learnings to the next business challenge, whose rough edges are by definition almost always “non-recurring.” In other words, because the circumstances of any setback are unique, the astute manager knows that recovery depends on recognizing that the learning never stops.
This was one of the many observations made by Warburg Pincus managing director Fred Hassan, one of big Pharma’s premier turnaround specialists, at an Executive Summit hosted jointly by PharmExec and the investment advisory firm, Young and Partners, on December 11 in New York. Hassan participated in a “fireside chat” as part of a series of engagements to promote his book, “Reinvent: A Leader’s Playbook for Serial Success,” which since its publication in February has moved steadily up the ranks in Amazon’s listings of new management titles.
Hassan believes learnings only take root in fertile soil, and that depends on three essential nutrients: people, culture and execution. “People will follow you only if you do what you say,” he told the group. “And in a turnaround situation you don’t get a second chance.”
Hassan asserts that the one area where many CEOs trip up is failing to understand the essential role of communication skills in bonding and building trust among warring executives, skittish workers and skeptical outside stakeholders. “This is a talent that the CEO must develop individually; too often it’s seen as a task that can be delegated to someone else from outside the company or the industry. Ultimately, we have no credibility if we cannot make our own case for what we do and how we contribute to society.”
The other point Hassan emphasized was the necessity to boost the efficiency of the research enterprise. He cited recent IMS Health Informatics Institute data on US drug spending that showed only 46% of outlays consisted of sales of medicines introduced to the market within the last 10 years. The threshold for reinventing the product portfolio is 70% to offset exclusivity expiries. Hassan contended this mediocre track record on innovation is unsustainable, given the scale of investment in new drug candidates. “It is also largely responsible for the 300,000 jobs lost in the US industry over the past 10 years.“
“Laboratories have no choice but to recognize that more early kills of clinical candidates are needed to raise overall productivity. Portfolio and product decisions should never be taken solely by the R&D team. We’ve all heard about the inclusion of a commercial team perspective. But it is less understood that we must incorporate a medical voice at each stage of development. The voice of a science or lab executive never rings true for regulators and patients in the way it does when a practicing clinician intervenes,” Hassan said.
A spate of new science unleashed by the mapping of the human genome makes the former Schering- Plough CEO optimistic that the 46 per cent performance on this “freshness index” will eventually improve. The obstacle is short-term financial thinking and organizational distractions linked to internal politics, of which the overt sign is frequent shifts in management. “One of the more ridiculous things I am observing is the killing of clinically strong compound candidates just because commercial leaders move on and their teams lose interest.”
Finally, in light of his current role in advising on the deployment of investment capital in health care, Hassan took a neutral stance on the ongoing debate on whether diversification has run its course as an asset strategy for Big Pharma. “Dependence on one product or a single product line carries significant risk, but it is equally true that diversification can lead to the ownership of businesses where others might have better potential in delivering returns to shareholders. What matters most is the ability to build and grow the value of a business over time, appealing to the interests of multiple stakeholders, including benefits to the patient standard of care. Diversification based on a purely financial rationale is not the best way to succeed.”
For a fuller exploration of Hassan’s management views, please visit this link to our interview featured in the May 2013 print edition of PharmExec.