By Rich Daly, chairman and CEO, Neuralstem
Transitions in pharma and biotech can take on many variations. However, experience offers guidance as to the key factors for success.
In my career, I’ve had the opportunity to work in just about every type of environment imaginable, starting with a growth company in my first life sciences job. That was followed by a startup; a large, mature pharma; a second startup; and three reorganizations (two large pharma and one biotech). Whether it’s moving from clinical to commercial stage, from one product to four, expanding the commercial footprint beyond the U.S., or leading a complete turnaround of a business, each required a transformational approach to ensure success at subsequent stages.
During the first transformational opportunity, I took on a senior leadership role in a turnaround situation — a $3 billion, 2,500-employee company — that had failed to achieve its sales and profit targets in each of the last four years. Within one year, we improved the bottom line and stabilized the workforce by reducing the employee turnover rate from 25 percent to an industry standard 8 percent.
The second transformational opportunity was with a large, U.S.-based business looking for an experienced professional to step in as president of a $1.5 billion, 3,000-person business with the largest, but poorest-performing U.S. portfolio in its therapeutic area. Nine months later, we consummated a major merger simultaneously with the launch of two new products and grew the bottom line without downsizing or layoffs, transforming the portfolio into the fastest growing in the United States.
The cumulative knowledge gained from these and other experiences provides me with insight into some of the key factors that drive success in a transformation as well as how to prioritize the factors in each situation to optimize the potential for success. Based on my experiences, there are four key elements necessary for success in transformational situations:
- Financial strength
While each is important to the success of the organization, frequently in a transformation we find ourselves short of time and unable to act on all four. Urgency forces us to quickly assess the situation, determine the areas of greatest need, and prioritize based on the unique elements in each situation. The limit of the most vital commodity — time — drives us to the most important one or two needs that matter most to the success of the company.
THE FINANCIAL STRENGTH REQUISITE
A transforming company can be a challenging financial entity. Whether it’s transitioning from clinical to commercial, experiencing a turnaround, or expanding its footprint beyond its home borders, there are likely daunting challenges.
Critical to success are talent, strategy, and execution. However, experience has taught me to dissect the financials first before progressing to the other elements. Understanding the financial structure and strength (weakness) of a company is the first step to success in a transformation, as it allows the leader to allocate and align resources for the journey.
Finance is a language unto itself, and to know it is to truly be bilingual. Beware though; there are traps. There’s an old accounting axiom that is insightful for the uninitiated:
- Income statement: all the lies a company tells.
- Balance sheet: where the company hides all the lies.
- Statement of cash flows: where the company is forced to tell the truth.
- Understanding all three as well as the historic budgeting process is essential.
THE STRATEGY IMPERATIVE
Naturally, a well-conceived and -executed strategy is critical to the success of every venture. Unfortunately, transformations oftentimes are not afforded the luxury of time to craft a detailed strategic position. It can often feel like we’re “building the plane while we’re flying it.” To rapidly uncover core strategic advantages, we concentrate our efforts on the concept of uncertain imitability, that is, what is it about us that is hard to copy. It’s a common-sense approach that recognizes that strategy arises from the combination of activities and can be revealed by three fundamental questions:
- What do we do that no one else does?
- What do we do that everyone else does, but we do differently?
- Is it sustainable?
These questions are simple, but they are not simplistic. By guiding an experienced internal team through this exercise, leaders can produce powerful, long-lasting results.
THE EXECUTION ESSENTIALS
Ideas are easy. Execution is hard. Two things matter most in this area:
First, we are all patients serving patients. This foundation should drive a consistency through a shared mission, vision, focus, messaging, and resources. We’re lucky that our industry has a built-in people mission — we help people to live better lives. By aligning around shared values, we can keep the silo walls low. Silos destroy our effectiveness and ability to execute. Break them down whenever and wherever you can through overt communication.
Second, make sure people know their job matters and, above all, make sure they are expected to act like it. The patient is waiting. What have we done today to deliver high-quality solutions to patients (and their families) in need?
THE TALENT ASSET
Greatness is found at the intersection of the common good. It’s about the people — internally and externally — your organization serves. If a transformation is a turnaround, the employees can easily be forgotten and left behind. There’s a school of thought that promotes cleaning house and starting from scratch on the people front. I am not enrolled in that school. The clear majority of people want to engage in a positive and productive manner. They want to contribute to a successful endeavor.
My experience has been that in a struggling organization, there are people inside who know things — people who see things. In fact, it’s often the middle managers, the people who own the “real estate” in the company, who can make things happen — or block you.
For a successful transformation, a leader needs converts. The balance comes in the form of patience. That is, even in large organizations, by picking the right people, winning over just one or two a day you can dramatically shift an organization. During a transformation, there may be a segment of employees aligned with you (say 20 percent), there are those who may disagree (20 percent), and those who are not sure (60 percent). Your role as a leader is to win over those on the fence. After all, those aligned with you are your champions. Those who disagree will be best swayed by momentum — not by you.
ALL GOOD IDEAS SEEM LATE
Urgency is everything in a transformation. There is pressure from above, below, and even outside the organization. Successful transformations are achievable with the proper mix of all four elements mentioned previously. Each transformation is unique and requires a thoughtful diagnostic to reveal the right mix of the elements for success. Time is never on your side, so you must triage carefully and pick the most urgent need and build from there. Eventually you must incorporate all four elements, but it is unlikely that you can be successful if you spread your efforts too thin.