The FT of today (couple of weeks ago now) published an article about many of the Worlds leading Pharmaceutical companies and their success in R&D. It turns out that all but one of the companies reviewed have a pipeline with an expected value less than their investment in R&D. All of them are in need – they all must improve the productivity of their R&D. The approach taken seems to be cost and risk reduction through outsourcing. Is this really a solution?Could the solution be to question common practice – if what we do is faulty there might be a chance. There might be a chance much more powerful than the cost and risk reduction described in the article.
Does Outsourcing Lower Cost?
It depends! Most companies have a cost accounting that allocates overheads to their R&D operations (overheads are allocated to practically all functions). When they outsource they may be able to reduce direct expenses, but in most cases overheads remain – they are simply spread over the other functions. On top of this the companies outsourced to all want to make a profit that must be paid for and they need management – someone to control what they are doing.It feels as though no or very minimal savings can be made – no matter how the actions might be reported.
Does Outsourcing Reduce Risk?
Well maybe – but only to the extent that risk is transferred to the company doing the actual work. The supplier’s risk is actually higher since he will have fewer developments (I assume) to spread their risk across. Major companies plan to simply transfer this risk to others and wash their hands of it. Well maybe not quite – it seems outsourcing brings risk with it –does the new supplier, who probably needs the business have the necessary relevant competency? If we squeeze the supplier too much, will he survive? If a supplier goes under who will finish the project?
Might there be a Better Way?
Project performance is notoriously poor in most, if not all, project environments. Even project environments that apparently do a good job (they deliver approximately on time) still take too long and cost too much. It is not the people, they are doing their best, given the situation. The bottom line is that project organisations are not delivering enough value the business needs. They take too long for the economic viability of the business. No wonder management seeks to reduce R&D cost. Reducing cost, though, does not solve the problem. It ensures the company will develop less since capacity is now less. Cost reduction cannot be the way. But, is there a better way?A better way would be a more effective project organisation. One that can reliably deliver more projects, reliably and more quickly is the magic we need. With the value of 1 extra day’s sales being (in Pharma) huge such a solution, if it is at all possible would bring enormous value.How could this dream be realized? Our people are already all working to their limit; so how much more effective can we become? If we want to improve significantly we must assume that more projects, reliably on time and more quickly is possible – our job is to find out how to do it!
Common Practice?
If Pharma (or any project environment) wants to improve then common practice must be questioned. Improvement can only be made through changes (I make the assumption that people will have optimized the present way of working already – so we cannot expect much improvement by simply doing what we have always done better. We must question today’s common practice, rules, policies and behaviours if we want to find the key.
Test the following statements – are they at least partially true?
Work in Process.
- A resource standing idle is a major waste. If some is not working make sure we give him or her something to do.
- Employees believe they must always be busy – otherwise their job may be in danger.
Task and Project Time Estimates
- Project task timings and project timings are estimated for management approval.
- There is pressure from management to deliver projects sooner.
- Once task and project timings are determined they become commitments – management measures project teams against these ‘commitments’. Estimates (subject to considerable uncertainty) are transformed into fixed commitments.
- Resources know that their estimates will be under pressure (to be cut) and their estimates will be transformed into commitments.
- Resources include enough time (safety buffers) to ensure their ‘commitments’ can be met – even after cuts.
- Because of points 3-7 here is a lot of safety time in all projects.
- Since most projects still take even more time than estimated, project teams must be wasting the time they have in some way … otherwise all projects should be delivered on time or earlier. At least this assumption must be true if an improvement is to be found.
Full Kit
- Since there is pressure for all resources to be busy working ‘all the time’ then tasks and projects are often started without ‘Full Kit’ – without all materials, information, authorisations etc. being available.
- Since there is pressure to finish as soon as possible projects are often started without ‘Full Kit’
If these statements are true, then on the one hand there will be a lot of work in process and all project plans must have plenty of safety – but its wasted.
Work in Process (WIP)
Professor John Little (of MIT) proved that the more WIP slows down your throughput. “The more patients in the waiting room, the longer the waiting time.” The same happens with projects – the more projects underway, the longer they will all take. All because resources are ‘forced’ to divide their time among all projects – all project managers want their elephant (project) to get through the gate ASAP. And yet we all know that our herd of elephants will get through the gate much quicker in single file – each elephant hold the tail of the elephant in front with his trunk!Work in process increases because there is always plenty of work available. Because it’s available it starts to get done slowing down the overall process. Some tasks or projects end up being late aided by Murphy (uncertainty) – Murphy will never die! The delayed tasks/projects cause projects to be released as soon as possible aggravating the situation. We have a negative spiral.Multi-tasking is part of this negative spiral. Generally speaking we know that multitasking is not a good idea, but we are not aware of how devastating the effect is. Simple experiments show that 50-100% lost capability is definitely in the realms of the possible or probable. Organisations that have been able to ban ‘bad multitasking’ have seen their capability jump by 50% or more.To reduce Work in Process requires just a very simple tactic – prioritize your projects and freeze the last 25 – 50% of the list. Flow, the number of projects completed per period, will immediately increase dramatically. Pharma companies may want to wait with implementing the tactic in order to put in place the proper formal process and maximize their benefits.
Task and Project Time Estimates
The 7 points above describe common practice and resources’ behaviour in order to protect themselves. The fact remains that every task will have significant safety in it that will be wasted – a resource will not finish early (certainly not by much) because he cannot admit to sandbagging his task times. This behaviour will even lead to late tasks (and projects) because when Murphy does attack (always in the worst possible moment) there will be too little task time left to recover.Why not remove safety from all tasks and bundle it at the end of the project – the safety buffer becomes the project manager’s and is used to protect the project and NOT the tasks. A late task is immaterial, it’s the project that counts. It is worth remembering that statistically we need less safety buffer if we bundle it in one place – at the end!
Full Kit
The pressures to start ASAP cause tasks and projects to start with inadequate preparation. Mountaineers do not climb Everest without ensuring all necessary authorisations; necessary equipment, maps etc. are in their kit. It would be dangerous to NOT have Full Kit. If mountaineers won’t start a climb without Full Kit why do we do it in projects? Its because of management and business pressures.Missing Full Kit is a source of rework, multi-tasking, poor quality and lots of lost time. Full Kit is an extremely simple concept that has been forgotten because the physical damage of an early start is so low … or its ‘invisible’ to us.To implement Full Kit is easy – just decide where it makes sense and make someone responsible for it.
Pharma Companies
They are no different from anyone else. Projects in this industry take much longer than in most others, so the benefit of 25% shorter projects will be even greater – probably can be counted in the many millions. All it takes is to decide to question common practice and start the process of implementation. We call the methodology Critical Chain – it is the way to manage projects in planning and during execution.The potential is surely there!
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