How To Create An Innovative Culture In A Pharma Company

By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL

Deirdre BeVard, VP development operations at Endo Pharmaceuticals, explains what it takes to boost innovation in a pharma company.

Endo Pharmaceuticals’ (NASDAQ: ENDP) history dates back to the early 1920s. But having a lengthy history is no guarantee to a company’s future success. In the pharmaceutical world of today, companies are seeking innovation — in spades. For some, the answer is outsourcing, while for others, the process involves creating centers of innovation and placing people in positions whose titles actually include the words disruptive and innovation. For Endo, the answer was to take a deep look into its corporate culture. Could a company that had a  very traditional business model of developing 505(b)(2) or specialty generic drugs shift its culture to one of innovation, and if so, how?

In 2010, Endo achieved total revenue of $1.7 billion, a 17.5% increase over 2009, earning shareholders $3.48 adjusted diluted earnings per share (EPS) — a 22.5% increase over the previous year. How does that compare in the industry? Well, the company is achieving EPS above the likes of Pfizer (NYSE: PFE) and Merck (NYSE: MRK),  and its P/E ratio of 18.67 falls in between the likes of such powerhouses as GlaxoSmithKline (NYSE: GSK) and Novartis (NYSE: NVS). One of Endo’s 4,900 employees, Deirdre BeVard, VP development operations, has some useful advice — don’t focus on innovation or the innovative process. Rather, focus on eliminating the roadblocks that impede innovation, and then create an environment with the necessary infrastructure where innovation can thrive. And it all starts with leadership.

Leaders Of Leaders
One of the tenets of successful leadership is to give credit to others for success, which BeVard readily does. She credits the Endo culture change initiative and its early success to CEO David Holveck, who joined the company in 2008 — just one year prior to BeVard. When Holveck arrived, his goal was to redefine how Endo approached healthcare by making the company more diversified. Since 2008, the company’s diversification strategy has been achieved through a series of acquisitions, including Indevus Pharmaceuticals, HealthTronics, Penwest Pharmaceuticals, Qualitest, and American Medical Systems (AMS). The company once focused on pain management now has two additional therapeutic categories, urology/oncology and endocrinology. But this acqusition strategy also brought with it a hodgepodge of cultures, presenting the challenge of how best to integrate them all into a cohesive enterprise. So, the first step in Endo’s innovation culture change initiative was to determine the leadership attributes it values and wants to see in each and every employee. “Everyone in their role has some leadership responsibility, whether it is as a senior leader, a people leader, or an individual leader,” BeVard says. With the help of HR, executive management  landed on four key attributes — accountability, breakthrough thinking, collaboration, and customer focus — and developed descriptions for what those attributes look like at the various leadership levels.

The next step was the creation of a strategic alignment team, of which BeVard was a member. “Our role,” she explains, “was to take these attributes and decide what behaviors we would want people to model.” From there, the creation of criteria for screening new candidates began, as well as for evaluating the performance of current employees. By building leadership attributes into the performance management program, employees understand the importance of demonstrating expected behaviors.

To create culture change and gain employee buy in, Endo utilizes three R’s — recognize, reinforce, and reward. Tying the leadership attributes to employee performance evaluations is one example of this concept. The second part is a quarterly recognition program whereby employees can be nominated for consistently demonstrating any of the four attributes. Nominations are reviewed by a committee, and each one is assessed according to how the person met a specific business need — consistently — not just someone having a really good day. Winners are recognized at a special event. “Winners become, quite literally, the poster child for that attribute,” states BeVard. Following the event, posters with the employee’s picture are put up throughout the organization, noting the attribute the employee exhibits. All of this has combined to create what BeVard refers to as a “shared language” in the organization. “When we first started, if you walked down the hall and randomly asked people to describe Endo’s culture, you would have gotten wildly variable responses,” she affirms. “Today, if you do the same thing, you will hear the four attributes coming out of everyone’s mouth. The leadership concept has gotten infused into the fabric of the organization.”

Accelerating Culture Change Through Leadership
One of the leadership attributes identified, breakthrough thinking, is at the core of innovation. BeVard explains, “Regarding innovation, we are advancing on a business strategy that is unique. We cannot read somebody’s memoirs on how they led their organization in this manner. We have to create the future.”

Therefore, Endo initiated an accelerated leadership development program, which included 23 participants selected by the executive committee as high-potential leaders. BeVard was one of the participants. They were broken up into three project teams, all tasked to scope out, develop, and implement projects under short time constraints for specific company needs. “Every project was focused on advancing and unifying the culture of the organization,” says BeVard. For example, one group was tasked with connecting people across the enterprise — internal communication. “That group came up with an internal video that profiles employees from all different parts of the company,” she explains. The theme is “I am Endo.” Another group was tasked with the cultural element of customer focus — external communication. “Their goal was to look at our customer service process and make sure we were sending a unified message,” she states.

BeVard’s group had to determine how to create an innovative culture. “For benchmarking, we started by looking outside the company,” she states. The group began researching other companies known for being innovative, such as Southwest Airlines, Netflix, Virgin, and Google. They read the book Nuts, which is about Southwest. They reviewed innovation articles in Harvard Business Review. They sought inspiration from Innovations Daily and a number of different websites, including the99percent.com. They watched presentations by Tony Hsieh, CEO of Zappos, and Clay Christensen, one of the world’s foremost authorities on disruptive innovation. They met with the innovation consulting team. They even had a member of Google’s creative lab in New York City, David Bryant, come to Endo (he was not paid, and he did this at his own expense) and explain the Google model. According to BeVard,  Bryant provided her team firsthand insight about the fundamental elements of innovation that can be applied to nearly any organization. The team then “pressure tested” these elements by surveying Endo employees, asking questions such as: Where do you think innovation lives? How does it show up? Do you have any obstacles to it? “We discovered that people who are going to innovate, do so naturally,” says BeVard. “You don’t really have to do much for them other than get out of their way. You don’t even have to set up special programs and special rewards, as the innovative process is an intrinsic reward for these folks.” BeVard’s team uncovered that most of the people who innovate are often willing to do it on their own time. But they also uncovered the things that pose  potential roadblocks to creating an innovative culture — fear, environment, communication, and time.

Want Innovation? Eliminate Roadblocks
Fear can take many forms and needs to be removed to stimulate idea generation. “Sometimes people are not comfortable putting themselves out there and sharing ideas,” says BeVard. “For others, it is fear that their manager will reject an idea, or if their idea fails, it will reflect poorly on them.”

With regard to environment, she says people often underestimate its importance in the innovation process. “We are not talking about building an office playground-like atmosphere,” says BeVard. Instead, they created innovation stations — physical locations in a couple of the buildings that are equipped differently from your typical office. There is more vibrancy to the décor, and these stations include whiteboards, sticky notes, crayons, Think Pads, markers, and other tools to foster and facilitate the creative process. “People can just walk into one of these rooms, and there are things to help stimulate them,” she explains. “It takes them out of their normal structured environment.” These collaborative spaces are not to be reserved, so anyone can use them at any time to bounce ideas off each other.

Another roadblock to innovation is communication or, more precisely, the ability to capture and share ideas. How do you get the idea out there, past a gatekeeper, so it can be heard and expanded upon? Answer: Create an online collaboration tool  designed to capture ideas. “This platform allows anyone in our company, just through access to our intranet, to submit an idea for a business solution,” explains BeVard. “If they have an idea for a cost-saving solution or something else, they put their idea into this collaborative tool, even if it is not fully formulated.” The idea submission triggers a process, assigning the idea to an advisor whose job is to guide them all the way through the process. This tool also facilitates online collaboration. For example, everyone within Endo has an online profile identifying their particular skillset. This allows people to search for folks across the organization who may have skills they think would be helpful in pursuing an idea, solicit them for feedback, or ask them to join the project. “It provides an opportunity — cross-enterprise collaboration — we didn’t have before,” says BeVard. “And they don’t all have to be sitting in the same building.” It also prevents an idea from being shot down by just one person (e.g. someone’s direct supervisor).

Another roadblock to innovation is time. According to BeVard, people need to be given the time to innovate. “There have been a lot of things written about Google providing its employees 20% of their working time to be used for innovation on noncore businesses,” she says. For example, Gmail is one of the Google products that evolved from the 20% time concept. “Not that we are sitting in a pharmaceutical company and somebody is going to try to create the next Bose stereo,” states BeVard. “It involves using 20% of one’s time on things related to their core responsibilities.” Endo is creating an environment where folks can actually carve out time for innovation and is removing the fear of management looking over their shoulder. “With that said,” she clarifies, “if there is a critical business deliverable, obviously that takes priority. You have to use good judgment, but you also have to allow people time to get outside of their heads.”
One of the last roadblocks to innovation is the word itself. When speaking with employees, BeVard found the word innovation to be quite intimidating to some. “We found that people thought that if an idea is not game-changing, then it is not innovative,” she says. Her  project team believed the process of innovation to rest on a continuum, from creative thinking on one end, breakthrough thinking near the middle, and innovation on the other end. “The reason we did this is because we wanted to make sure everyone in the organization could relate,” explains BeVard. “An administrative coordinator in a department might hear that we are trying to be more innovative and think, this is not me, that is the scientific group, or that is the commercial team.” The team defined these various forms to improve employee understanding. For example, creative thinking is a way of approaching a problem in a new way. Breakthrough thinking is more of a radical new approach that overcomes constraints or disregards perceived constraints. Innovation takes it to the level of coming up with a process or an invention that results in a good service offering of some sort that has value to the customer. “That perception of value by the customer is what really defines it more as innovation,” she affirms. “It has to be actionable and very much change their value proposition.”

BeVard says that Endo is not trying to turn every employee into the world’s most creative inventor. The company is trying to cultivate an environment that allows those with ideas to have their voices heard. It is tough to put a dollar figure on the cost of this initiative, which is viewed as ongoing and taking place in concert with other projects. The real question is: What is the cost of failing to try such an initiative? “There is so much potential and talent throughout the organization,” she concludes. “The only way we can leverage it is to give it space and shine a light on it. This is best achieved in an environment supportive of experimentation.”

BeVard On Endo’s Culture Change Initiative
What have you discovered from being involved in this process? You have to prepare an organization for culture change, not just jump into it. The culture of an organization lives within its people, so the desire to change and the belief in that change has to come from the people doing the work every day. I constantly had reaffirmed that people just need the support, encouragement, and opportunity to meet their full potential. Most times, they surprise themselves with what they are capable of. There is creativity in everyone; we just need to create the environment where they can safely explore and then express that creativity. 

What advice do you have for other executives attempting to implement a culture change? Find your zealots, get senior-level support, and then just get on with it. Culture change is hard and not really tangible. Most people want simple, straightforward solutions — things they can measure — but it’s not that easy, and it can be uncomfortable. That’s why you need zealots, i.e. people who are passionate about it and are not easily discouraged. They also need to be people who suspend judgment and give ideas a chance to grow before judging them as right/wrong, good/bad, or relevant/not. Since the change has to be adopted from all levels and supported at the top, you also need at least one (if not more) executive-level sponsor. This change will call for an investment of time, money, and resources, so you need to get the support of someone who can access those things or remove obstacles. You also need to be able to articulate and show how this change benefits the company and supports the company’s business strategy. Many of the efforts have to be ingrained into the fabric of the organization, and that has to be modeled by the top levels of management. Then, just go.  Just start to do things, and let go of previous expectations, so you can pull value from the things that work and the things that don’t. Live what you talk about — reach outside your normal circle and comfort zone to other parts of the company in order to get new perspectives and others who want to help achieve the change. Be fearless, passionate, and persistent!

How did you go about preparing for your role in the process? I read, researched, and talked to many people inside and out of our industry. I viewed talks on TED (a nonprofit website devoted to the spreading of ideas and a repository for a wide variety of free video presentations) and from the World Innovation Conference, as well as subscribed to listservs from a number of different sites on innovation. One significant influence for me was Daniel Pink, author of A Whole New Mind. I use a lot of his concepts, tools, and techniques. It all resonated with me, and I love the idea of still relying on the left-brain side of what I do, but bringing in a right-brained approach. In his book he describes a notion of six senses, and there are two that really hit home with me:  symphony and play.  Symphony speaks to bringing things together. This is what we are doing at Endo — integrating pieces into an even more valuable whole. It also means crossing boundaries, connecting things that, on the surface, appear not to be related. It opens up so many possibilities. Play, well, who doesn’t love to play? We work in a serious industry and under some pretty tight regulations and other constraints. We are in the business of improving people’s health and improving their lives. That’s serious stuff, so we must go about it seriously. However, we don’t have to be so serious about ourselves. We can have fun while doing it. We can lighten up and still be taken seriously. I have noticed that when you add levity and playfulness it changes the mood and the environment. It allows more openness and freedom, and relaxed people interact more freely and offer up their ideas more readily.

Lesson Learned The Hard Way
Deidre BeVard, VP development operations at Endo Pharmaceuticals, is part of an advanced leadership development team involved in creating a culture of innovation. During the process, her team learned a valuable lesson the hard way. “My project team was focused on innovation and approaching things in a new way,” she says. The team had embraced the concept of innovation with such vigor that they decided to take a vastly different approach when conducting a midpoint presentation to the executive management. Rather than doing a traditional PowerPoint presentation, the team used flip charts. Instead of standing at the front of the room, members of the team were dispersed throughout the room. The idea was to engage executive management by making them have to turn and focus on what the team was talking about. “It didn’t work out so well for us,” she states. The audience anticipated a more traditional presentation approach, which provided BeVard’s team with two lessons — one, change is often resisted, and two, if you are going to do something different from the norm, let the audience know what to expect, to improve buy in.

Prep Your Audience
BeVard’s advice from the above experience: If you intend to take a different approach to something, be sure to prepare the audience so they are not surprised. “You have to lay some groundwork and introduce the concept gradually,” she says. “We didn’t do that with our executive team. We just came out with this whole new creative approach, rather than telling them what we were going to do. We got a brutal critique, in front of the entire group. It was tough. It was uncomfortable.” BeVard’s team had to learn the very thing they were trying to teach — how to take critical feedback without personalizing it. “This was hard for a group of high-potential people used to succeeding,” she admits.

Executive management also learned a lesson. “They had to learn to wait and not judge immediately,” she elaborates. In the group’s final presentation, they did revert to using a PowerPoint presentation, although it consisted solely of black slides with white words.