Magazine Article | April 1, 2015

Guiding Bayer's Global Innovation Engines To New Heights

Source: Life Science Leader
Rob Wright author page

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


For more insight from the interview with Kemal Malik, read: 
Are You Learning From Failure To Get Better At Innovation?
Do You Think Your CEO Meets With Your Customers Enough?

A little over a year ago, Kemal Malik received some really good news — he’d been promoted. The former head of global development and chief medical officer in the pharmaceuticals division at Bayer AG had been appointed to the company’s five-member board of management. If you have ever received similar news, you probably recall the initial feeling of euphoria. Then as you begin to settle in to your new role, if you’re not careful, this sensation can quickly be replaced by self-doubt, as you come to understand the full scope of your new responsibilities. Being a board of management member at Bayer means you are responsible for the day-to-day operations of this 118,000+ employee company. In his new role, Malik also has regional business responsibility for North and Latin America. But, during our interview he explained to me that he devotes nearly 70 percent of his time to leading the global innovation engines of the 150+ year-old company.

I was curious as to what exactly that role entails. After all, innovation means something different to everyone.

What Is Innovation?
“You know, it’s funny,” says Malik, upon being asked to define innovation. “It’s such a really hot topic in the industry. But when you ask people what innovation means to them or even just what innovation is, they get a confused look on their faces. They have a tough time explaining it.” Thus, Malik says after assigning a top executive to focus on innovation, thereby endorsing its importance from the very top of a company, the next step is to define this concept.

He describes asking how innovation should be defined by and for his organization. “It’s really simple,” he smiles. “Innovation at Bayer is about turning a new idea into something meaningful for customers that they would appreciate.” He stresses the customer piece is the fundamental component to innovation at Bayer. “Without connecting to the customer, you risk becoming too theoretical about innovation. It’s not about having really smart ideas. It’s about linking those ideas to insights gained from the customer.”

Having a formal definition in place, Malik then considers what levels of innovation, and how much of each, would be appropriate for Bayer. He says the company categorizes innovation into three types: game-changing, sustaining, and incremental.” Game-changing innovations are fundamentally new business models,” he explains. “While there are fewer of these types of innovations, they are important because they may be truly transformational to your business.

Sustaining innovation refers to new products and services and is critical to the continuity of any company. The third category is incremental innovation. “This involves process improvements, product life cycle management, and enhancing the features of our existing products,” he states.

Malik says Bayer spends about 70 percent of its R&D efforts and resources on the sustaining innovation category, with the remaining 30 percent of innovation resources fairly equally distributed between game-changing and incremental efforts. “Too much game-changing innovation is too risky and may challenge your sustainability,” Malik reminds. “Conversely, it can’t just all be incremental, because you may miss some huge move that can destroy your business.”

Guiding Innovation From The C-Suite
When it comes to guiding Bayer’s innovation engines, Malik approaches it via (1) leadership and strategy, (2) structure and processes, and (3) people, values, and culture. Leadership is responsible for demonstrating from the very top why innovation is important, ensuring the appropriate funding and metrics are in place, and making sure that people understand the innovation portfolio (i.e., game-changing, sustaining, and incremental). “Only then can you drive the specific initiatives,” Malik states. The second means to driving the innovation engine is to have the appropriate structure and processes (which we will get into a little bit later). But Malik cautions that too much process can be a bad thing. “You need process, because otherwise we have anarchy,” he attests. “But if you have too much process, people are spending all their time managing the process rather than coming up with good ideas.” The third piece is people, values, and culture, and for Malik, this is the most important. “It’s often said that culture eats strategy for breakfast,” he recalls. To create a culture in which people feel innovation deeply, Malik says you have to engender a culture where people want to try new things. “There needs to be a tolerance for failure and a willingness to experiment so people aren’t afraid to take a few risks.” Malik views innovation and failure as strange bedfellows. “If you never have any failure, you’re probably not innovating enough,” he affirms. “However, you should know how to learn from failure.” To learn from failure requires two things —conducting a lessons-learned exercise and using restraint on punishment. “If a team has failed on a project, punishing the people who worked on that project is a surefire way of stopping them from ever trying anything new again,” he says.

In 2013 (before Malik was appointed to his current role), Bayer began working with innovation thought leaders at London and Harvard business schools. The result of these discussions was a series of two-day workshops on the topic of innovation that were mandatory for about 400 of the most senior people at Bayer. The program included employees from various divisions/departments (e.g., manufacturing, finance, legal, R&D). “We wanted to send a message from the boardroom that no matter where you work, no matter how busy you are, as the most senior leaders in our organization, you need to attend these workshops. This is how important everyone is in driving innovation at Bayer,” says Malik.

Beyond sending a message, Bayer came away with a number of tangible outcomes from these workshops. “We developed something called the systematic innovation toolkit, which we utilize across the organization,” he shares. For people who have spent the majority of their careers in R&D, a toolkit on how to encourage innovation probably seems silly. But what Bayer and Malik learned from the workshop was that in different parts of the organization outside of R&D, when people wanted to try new and innovative things, they often struggled with how to get started. The innovation toolkit provides the structure necessary to allow the unsaid to be said. “The worst thing for driving innovation is a person who says, ‘You know what? I’ve been here 20 years. We tried that in 1996. It didn’t work. Forget that, and move on,’” Malik attests. The toolkit provides the structure on how to manage these types of idea killers as well as ways to start the innovation process.

In addition to the toolkit, the company also developed an internal platform called “We Solve” that allows Bayer employees to post a challenge, perhaps something they are struggling with in their jobs. Some examples include questions such as, “How do you take ideas generated, move them forward, and then convert them into action in order to maximize their value?” “What decision-making do you need day to day? How are you going to fund it? How can you ensure that you get the most out of that idea?” Bayer employees worldwide can help to come up with solutions to these kinds of questions.

Another outcome from the innovation workshops was the development of the Bayer Open Innovation Center in Japan (ICJ). Launched on June 1, 2014, the ICJ is focused on identifying potential collaborative research projects in Japan (e.g., the two-year collaboration agreement between Bayer and Kyoto University’s Office of Society-Academia Collaboration for Innovation [KU-SACI]).

Bayer’s Innovation Structures
At Bayer, there exists a number of structures to facilitate innovation, such as communities and committees. Malik describes innovation communities as being less formalized, providing the opportunity for people who work in broadly different Bayer businesses but with functionally similar responsibilities to network and share best business practices. “Different parts of our businesses inevitably have different levels of maturity, sometimes different degrees of customer intimacy, for example,” he explains. “Our consumer care OTC business has been dealing directly with the end purchaser of our products for a long time. As patients are becoming increasingly important in driving decisions in pharma, our pharma people have been spending a lot of time with our consumer people.” This innovation community is helping to facilitate the knowledge transfer of how the consumer business captures insights from the end user, so the pharma business can incorporate into how it engages with patients and thus, improve Bayer’s R&D activities. While these innovation communities conduct a lot of activities virtually, Malik says they do usually meet in person at least twice a year.

Innovation committees at Bayer are more formalized and bring a slightly different group of people together. Consisting of about eight people, these groups meet once a quarter for an entire day to discuss common issues they face. One of the groups is an innovation research committee with senior people from pharma, crop science, and material science research. “These are not the heads of research but people a level below,” Malik explains. The committee has a rotating chair facilitating the meetings. Ideas gathered from these get-togethers are passed on to Malik through an innovation strategy group which reports to him directly and for which he serves as chair. One of the best practices resulting from the innovation research committee involves the use of interdisciplinary project teams. “One of the fundamentals of how we run R&D activities in our pharmaceutical business was the interdisciplinary project team, which typically consisted of someone from all the various disciplines — research, development, clinical, medical, toxicology,” Malik explains. He says since learning of this approach from this committee, crop sciences has begun integrating interdisciplinary project teams into its R&D programs. “We’re finding that one part of our organization has a lot of specialized experience which can help other parts of our organization do things differently,” Malik affirms. “We’re making better decisions because various people from different disciplines are discussing the same issue.”

Malik subscribes to the notion that great ideas can come from anywhere. “Innovation isn’t the domain of internal R&D,” he says. “Our obligation to our company, to our shareholders, to society, is to get those ideas into our company and then see if we can convert them into something meaningful for our customers. That’s what I really want to push in our organization when it comes to innovation.”

Malik’s Non-Negotiables For Reviewing A Game-Changing Innovation Proposal

As Bayer is a $47 billion+ company that annually invests around $4 billion in R&D, innovation leader Kemal Malik admits that not every innovation proposal comes across his desk, and those that do, are usually of the game-changing, high-risk variety. “It's difficult always to find these potentially gamechanging, high-risk things fitting into the normal structure processes and funding mechanisms one uses for sustaining and incrementally improving innovation,” he says. “A board needs to be open to hearing about these kinds of game-changing innovations, even though probably 90 percent of them may not transpire.” To determine if your “game changer” needs board-level review, first determine the elements of risk associated with the investment required. “If it has high risk but requires very little money, they probably won't bring it to my attention,” he says. “Conversely, if it’s very low risk but requires a lot of money, it may well come across my desk. However, low risk signifies it is most likely not a game-changing innovation, so make sure you are classifying your innovation appropriately. “Game-changing innovations typically involve a lot of risk and require a significant investment [e.g., $10 million to $100 million],” he says.

So what “non-negotiables” does Malik look for when reviewing game-changing proposals? “First, what's the value for the customer?” he asks. “I always insist the teams go through the discipline of explaining this. It sounds easy, but sometimes people get too caught up in the excitement of the science, process, or technology as being so cool and cutting-edge that they lose sight of how this change will be valued by the customer.” According to Malik, if the customer doesn't value it, then it isn't actually true innovation by Bayer’s definition. “That’s non-negotiable for me. It’s not about the cost, resources, or the time frame, but have you really thought through what this means for the customer, and can you explain that to me in a few sentences?” For example, Malik recalls the company coming up with what it thought was a cool technology system to improve oral contraceptive compliance for women. “We really didn't spend enough time talking to ladies about how this would fit into their handbags, their lifestyles, because we got so excited about the compliance benefit,” he admits. Although Bayer did some customer testing, Malik believes it was probably not enough, because customer acceptance wasn't as high as they thought it would be when the product came out.

On the other end of the spectrum, Bayer developed a new blood thinning drug, Xarelto, which has become one of the company’s most successful compounds. “We knew we were entering a very competitive space,” Malik states. “We spent a lot of time talking to doctors asking what they would look for in an ideal blood thinner.” He says what doctors were clearly looking for was a requisite degree of efficacy and safety in the prime indication where the drug would be used (i.e., prevention of strokes in patients with atrial fibrillation). They also said these patients are typically older, and a once-daily formulation would be great. “Oh, and another thing, we want to get used to using one drug in all the indications where we want to use blood thinners and anti-coagulants,” he continues. “If you developed this for a patient undergoing orthopedic procedures to prevent a blood clot, in a patient who's got an existing blood clot, and in stroke prevention in atrial fibrillation, we would have a wide range of indications where the drug can be prescribed at the time of launch, which would be very meaningful.” Given the drug’s success thus far, Xarelto serves as a great example of the value of not only speaking to your customers but also of being prepared to figure out ways to do what it is they are asking for.

When Leading Innovation, Actions Speak Louder Than Words

Being responsible for global innovation at Bayer, Kemal Malik realizes the importance of consistently communicating the value of innovation, not just with words, but actions. For example, in early February, Bayer conducts Innovation Day. The board of management goes offsite and is joined by the heads of the various Bayer businesses (e.g., healthcare, crop science, etc.). ”We spend a day just talking about innovation,” Malik shares. “While this informs the board of current innovationrelated activities, it also reinforces the message of how important our leaders’ actions are in relation to furthering our focus on innovation.” He says many leaders underestimate the power of their behavior to send signals throughout the organization. “The way you do things, the way you act, the things you say as a senior leader, influence the organization,” he affirms.

As an example — and also as a warning regarding the importance of managing your time appropriately when it comes to innovation and leadership — Malik shared that Bayer has created an area where start-up companies can come in and use Bayer facilities free of charge. When he visited the area recently, he was intent on being there for only an hour, but he ended up staying for more than three hours. “Smart kids in their jeans and long hair who have these start-ups for digital and healthcare apps — they were just so fun to talk to about their ideas and what they wanted to do,” he confides. “Yes, as a leader you have to manage your time effectively, but you’ve also got to allow yourself the time to do these sorts of things.” His rationale as to why is twofold. First, it invigorates you personally about your own job. Second, and to his earlier point, don’t underestimate the power of your behavior to signal and influence people throughout your organization.

More from the interview: 
Are You Learning From Failure To Get Better At Innovation?
Do You Think Your CEO Meets With Your Customers Enough?