Magazine Article | March 9, 2010

Impact Of Innovation On Pharma Business Sustainability

Source: Life Science Leader

By Eddy Azad

Every business must have clearly defined goals to remain relevant, responsible, progressive, competitive, profitable, and thus sustainable. Even for the most successful companies, business viability and continued prosperity often represent significant challenges — challenges which require continuous innovation to address.

For the pharmaceutical industry, these challenges are further magnified, in part, due to stringent regulatory mandates and compliance requirements. Consequently, concern for noncompliance plays a major role in the business process decision making. At times it appears that the saying, “if it’s not broken, don’t fix it,” is the unbreakable law. It even appears that this axiom becomes the excuse for maintaining the status quo — even if it means substantially lowered expectations and returns on investment.

The lack of desire for — or fear of — change has other prominent side effects. When a problem is identified but not resolved (again because of noncompliance fear), before long it becomes an acceptable part of the process, so much so that it may no longer be considered a problem. It becomes just the way things are and just the way things are done.

In the past, burgeoning profitability for many pharmaceutical companies was sufficient to validate this less-than-ideal approach to running the business. After all, why jeopardize the goose that was laying golden eggs? Today the economic conditions call for a methodical consideration of innovation in its many forms to keep businesses responsible and profitable. This is especially true for those companies facing major revenue loss due to expiring patents.

There is a direct correlation between innovation and business viability, as there is between managing costs and profitability. Clearly, businesses that can produce higher quality products at lower cost have a significant advantage over their competitors. Among other factors, lower cost and higher quality result from a commitment to continuous improvement, better trained and informed personnel, less waste, and shorter manufacturing lead times. Intuitively, this statement seems obvious. However, achieving such results often proves quite challenging. One of the main culprits is the expectation of getting immediate results without making the due investment in the process.

Misunderstanding Innovation
So, how can innovation help? Most people associate innovation with technology, and, as a result, it is perceived that innovation typically has a high price tag. However, innovation is not uniquely tied to technology. In fact, innovation must start with the thought process, as it is innovative thinking that will lead the way to better business performance. Technology is directly impacted by innovative thinking, and in return, technology influences the thought process. There are many documented instances of investment in technology — without the prerequisite sustaining culture — that have led to major disappointment, a disappointment that often creates unreasonable bias even against correct and justified use of technology.

One of the major goals of innovation is (or certainly should be) to reduce complexities inherent in various facets of pharmaceutical business. Simple is truly elegant. Innovative ideas are sometimes dismissed because of their simplicity, which we equate with lack of sophistication, which we then interpret as ineffective and not worth trying. Complexity is actually the enemy of any improvement initiative. Complexity affects inspiration, commitment, cost, and results. Without trivializing complexities, innovation must lead to ideas and solutions that simplify the process of improvement and empower the stakeholders to be truly involved and committed to achieving the business goals.

Innovation also has to do with identifying the means to use existing assets and resources as effectively as possible. For example, can changes in policies and procedures lead to improved performance? Can better trained personnel significantly reduce costly errors and omissions? Can recognition of ideas leading to better productivity inspire employees to take a more involved and active role in achieving clearly defined business objectives?

The innovative use of existing assets and resources could pay significant dividends. Consider whether certain assets may be used differently or for modified purposes as compared to their original function. This innovative thinking process has been responsible for many of today’s technological advances. Today your personal computer is significantly more than the word processing appliance that replaced the typewriter. Innovative thinkers asked, “Why not use it to do more: deliver content; use it to collaborate; use it for entertainment, shopping, staying in touch, and so much more?” Not surprisingly, the same thinking process may be applied to pharmaceutical business.

One of the most important aspects of innovative thinking is problem solving. While faced with especially tough problems, instead of enumerating the multitude of reasons why a solution cannot be found — without ignoring the challenges — ask, “What needs to be done to solve the problem?” Problem solving often brings various forms of innovation together: critical thinking and managing the priorities, people, assets, and tools. When looking at the tools needed to support problem solving, there is no doubt that technology (and specifically information technology) will play a significant role.

The Challenge Of Expiring Patents
Let’s revisit the challenge of expiring patents. There is no question that there are legitimate reasons to be concerned when faced with such prospects — especially if a particular product was responsible for a significant portion of the company’s revenue. But worrying about the situation doesn’t change it. Here’s a real problem that needs a real innovative solution. Assuming that attempts to change the patent laws aren’t practical, what else can be done? Let’s look at this from a different angle. Between the original drug maker and a generics manufacturer, who has the edge? It must clearly be the original drug maker (if not, there must be other major problems at hand). The original drug maker already has the brand recognition, market share, distribution channels, and manufacturing operations and know-how for the drug. It is reasonable to conclude, therefore, that the original drug maker should be the lower cost/higher quality manufacturer.

If this is not the case, then the implementation of an effective continuous improvement program must be high on the list. Here’s where innovation will take center stage to help deliver results that can literally save the business.

The Blueprint:

  • Innovative culture and thinking — understand the needed commitment
  • Innovative use of resources and assets — get more out of what you already have
  • Innovative use of technology and actionable information — foundation of effective decision making
  • Using the actionable information to improve performance — set the right expectations and achieve them

With improved performance comes:

  • Increased efficiency
  • Reduced waste (labor, materials, resources, etc.)
  • Reduced lead time
  • Reduced energy usage
  • Increased profitability (business viability and sustainability)

The words “actionable information” are significant. Having the right information at the right time will lead to better decisions, resulting in productivity improvement, which will drive business viability and sustainability. Exploring innovative ways to gather the needed data for creation of actionable business intelligence is a critical process that must be taken seriously.

All businesses must be committed to learning how to thrive rather than merely survive. Innovation MUST become “business as usual.” Continuous improvement through innovation makes good business sense regardless of the economic climate.

About The Author
Eddy Azad is CEO of Parsec Automation Corp., which produces TrakSYS, a real-time performance management (RPM) and enterprise manufacturing intelligence (EMI) software. Azad speaks worldwide to industry forums on subjects such as lean manufacturing, Six Sigma, overall equipment effectiveness (OEE), RPM, and EMI.