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Smart lean in pharma - the simple way to reduce sales, marketing and medical costs

Linus Larsson
April 2010

Shrinking your pharma organisation in an attempt to drive efficiency and liberate
headcount is potentially putting it in jeopardy. Linus Larsson, PA Consulting
Group, offers Smart Lean as a simple and more effective alternative.

Pharma companies are playing a dangerous game. Their answer to the current industry challenges substantial patent expires on major brands, an increasing pressure on pricing and the dwindling pipelines — is to reduce costs by cutting staff, restructuring their organisations and outsourcing non-core activities, particularly in the mature European and US markets. Furthermore, many have gone through several rounds of cutting the organisation, which may have included downsizing the sales force, de-layering management levels and re-organising along business unit lines. The ‘safer’ back-office costs, such as outsourcing finance-shared services or off-shoring IT support have already been tackled by most. The focus is on reducing front-line costs and right-sizing the organisation in sales, marketing and medical ready for the future. But if companies just keep hacking away at the headcount, they will only succeed in breaking the organisation.

Breaking the Organisation
As parts of an organisation shrink it can fall below critical mass in key functions, potentially throwing away some core ‘nuggets’ — market intelligence, high-calibre first-line sales managers and building strong relationships with medical health authorities that have driven competitive advantage. Retaining great talent with a shrinking business is difficult; growing future talent is harder still.

To expect fewer people to continue to work in the same way as before is unrealistic. So, how do you change the ways of working as you shrink your organisation to drive efficiency and liberate headcount? By selectively applying good lean administration techniques to the front-office world of sales, marketing and medical, pharmaceutical companies can change the ‘What’, ‘How’ and ‘Why’ of work, to deliver substantial cost benefits.

Smart Lean in the Pharmaceutical Industry
Inefficient and bureaucratic administrative working practices characterise many front offices. To find a leaner way to work often requires staff to stop doing things — or at least the way they do them.

Lean is a much-abused word. Too often, it is used as a euphemism for a straightforward cost-cutting programme. Furthermore, the bad press it receives when it is badly applied in business doesn’t help either. Many pharmaceutical companies have ‘Corporate Lean’ groups comprising ex-manufacturing personnel who believe that by applying the 101 lean techniques used in production to any office environment, they will dramatically improve business efficiency.

This approach is confusing for the business managers in sales and marketing; lean techniques applied to office processes are very different to those applied
to in manufacturing. Only a few, carefully applied techniques can lead to success. By combining our in-depth and experience of the pharmaceuticals industry with lean techniques, we have devised ‘Smart Lean.’

Keeping Things Simple
The key to lean success is to keep things simple by focusing on the following:
• What? challenge the demand for the services that have always been provided.
• How? change the method of work across the business.
• Why? create a capability for challenging why you do things, thereby enabling continuous improvement within your organisation.

Our experience shows that only by challenging business processes from end-to-end in this way will real benefit be released from the business.

Case Study Examples
What? Challenge the Services
Few pharmaceutical companies have tackled successfully efficiency in the front offices of the sales and marketing country organisations or the front-line medical functions. Many companies cull their sales forces, but few change the ways of working between head offices, regional sales offices, commercial operations and the field force. For example, just because a detailed analysis of all expense items has always been provided to the first-line sales managers for all sales reps every week, this doesn’t make it a valid reason to continue to do so. Is that level of detail really required? Which decisions would be unable to be made if that information were unavailable? Would the business really suffer? Evaluate also customer services provision — prioritise them and stop doing some of them.

In one case, we discovered that 75% of the sales administration support group’s effort was spent on services outside the Top 10 list of priorities for their internal business customers. Simply publishing a re-prioritised services catalogue changed the game for this group and released 50% of the effort (and headcount). It also increased morale and motivation by refocusing their effort on what the business truly valued.

How? Change the Way of Work
It is often difficult to see front-office inefficiencies, but they are there, eating up significant and precious time. The office worker, whose job is to process information, is often caught up in a series of inefficient activities, the most common of which include
• Searching for information.
• Waiting for someone else to provide information, such as an approval.
• Reworking content because of new, updated or corrected information received from someone else.
• Duplication in reporting or basic data entry.
• Numerous hand-offs between people, where errors can occur.

To change the way of working first requires a real understanding of how time is spent — by establishing the base-line of the current business operations. For example, one client of ours was sending out good quality, timely reports each month across the sales, marketing and medical organisation. The service and quality were good, but, on investigation, it was discovered that 45% of the work involved to produce and prepare that information was spent on ‘wasteful’ activities — looking for information in different places, reworking reports each time new information emerged or manually effort and cost.

Understanding exactly how our processes work and identifying waste is the next step in the improvement curve. For another client, we identified that a lack of information standards was reducing sales and marketing compliance, and driving inefficiencies and unnecessary costs in speaker programmes. The organisation and booking process were radically redesigned to address these issues. Standard information, such as pre-approved speaker candidate lists and standard payment schedules for services were made available to the sales organisation, which led to significant efficiency improvements in commercial operations and sales support.

Effective procedures are usually required to deliver further improvements. One common cause of high cost (and frustration) is slow decision-making. For example, one client found that the majority of time to approve product-marketing literature was spent simply waiting during the review and approvals process: first, waiting for the product manager, followed by the medical department, then the pharmacist and finally the legal team. Whenever any of these reviews resulted in a change to the wording or literature, the process was repeated from the beginning. Simple changes to the decision-making process were made and collaboration software enabled the same documents to be shared and on-line changes made together. These changes transformed the job and cut the time by two-thirds, thereby reducing dramatically the effort and lead-time to produce marketing material.

Why? Create Capability
During our lean projects we engage teams in redesigning their processes and support them in implementation. We train the teams in appropriate lean techniques, and help them to challenge what their customers need, the process they undertake and the waste in the system. Along the way, we teach them problem-solving techniques and how they can continually improve the ways of working. These activities will gain their commitment to, and ownership of, the new process.

As change is implemented, we engage managers to encouraging their staff to make improvements to the process, support them in a different way of communicating and teach them methods of visual and active management. By behaving in a different way in the new process, personnel are further engaged in improvement.

Much of this advice is common sense, yet few organisations practice it. These examples represent changes that are made by applying lean techniques in a smarter way and leveraging deep knowledge of the pharmaceutical industry. They are all pragmatic changes to our clients’ ways of working, roles and organisations that released significant value, and with it, the opportunity to reduce headcount and cost in a manner that is sustainable in the future.

None of these examples could have been delivered by simply studying the organisation chart and cutting out layers of management or reducing headcount in line with reducing sales as patents expire. They all required a sharp focus on identifying which services and processes add the most customer value, and redesigning the way of work to reduce waste and effort, thereby liberating cost.

Our Smart Lean approach for pharmaceuticals sales, marketing and medical, and their associated support functions, is about keeping things simple. Most importantly, Smart Lean is sustainable inside your organisation by teaching your teams some simple techniques to sustain a continuous improvement approach, long after the consultants have left.

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