Taking Command of Strategy Execution

Eleven years ago, Pharmaceutical Executive Europe published an article called “Taking Command”. ^[1] It explored how a military approach to setting direction and executing strategy known as ‘mission command’ could be used in the pharmaceutical industry to address the rising costs and complexity of drug development, and drew on work done with project teams in Pfizer’s development organization.

The current authors have since applied the principles of mission command in other pharma companies and developed the techniques further.  Here, we update you on the experiences and effects achieved. The bottom line is: it works.

What is mission command?

The principles and practices of mission command and how to apply them in business are described in detail in Stephen Bungay’s book The Art of Action published in 2011.^[2]The book addresses the problem of strategy execution in complex, volatile, fast-changing environments and summarizes the environmental challenges in terms of three critical gaps that have to be closed to enable effective execution; the Knowledge Gap, the Alignment Gap, and the Effects Gap:

Figure 1. The Three Gaps Model

The most common response to the three gaps is to collect more information, issue more instructions and exert tighter control that can make the problem worse.

The mission command approach, in contrast, requires top leaders to avoid going into detail, but instead to be very clear about their “intent”, defined as “what” to achieve and “why”; then working hard to align the distributed leaders in the organization around that intent; and instead of exercising tight control over their actions, granting them a high level of autonomy in deciding on “how” to achieve it. It replaces high control with a strong sense of accountability.

By using a disciplined technique called “strategy briefing”, the implications of the intent at each level are unpacked and understood. This results in clarity and alignment across the organization as well as up and down the hierarchy. 

Using mission command combines unity of effort and agility. In the business world, we call this approach “leading through intent”, “strategy in action” or indeed “Art of Action”.

The first trials at Pfizer

The approach was used with eight volunteer teams at Pfizer’s Global Research and Development site at Sandwich between 2005 and 2008.

The results showed some recurring patterns. The two most significant were faster decision-making in development teams and improved productivity. On one occasion a decision was made to close a project early, saving an estimated $750m, and in another a filing deadline which had already been stretched was beaten by another three months. Some productivity improvements were dramatic. For example, one formal project evaluation identified a return on investment of 50:1. The team did not only file early, but had the smoothest passage through NDA approval in the company’s history and, having built up strong relationships with KOL’s during the trials, spent very little of its marketing budget. 18 months later it was exceeding budgeted revenue by 400%.

The environment, then and now

Back in 2006, when the original article was written, the Journal of Health Economics estimated the cost of getting a new drug to market to be $800m, and average development time to be 15 years. Consolidation through mergers and acquisitions had already created massive organizations that brought scale and financial strength, but also organizational complexity.

By 2014 average development time was estimated by the Tufts Center for the Study of Drug Development (CSDD) to have reduced slightly to 13 years, but the cost of developing a new prescription drug had more than trebled to $2.6 bn. A report issued by Deloitte in December 2016 suggests that the return on R&D investment of the top 12 pharma companies has fallen to 3.7% and the downward trend continues. 

Things have actually got worse, and the consolidation of the industry has not helped. On the contrary, the Deloitte report also notes that returns correlate negatively with company size. Despite that, mergers and acquisitions continue to be a feature of the industry as the larger players shore up their R&D pipeline through licensing or acquisitions.^[3] Whilst being officially justified as a quest for further economies of scale, this activity is a tacit admission the big pharma companies’ own development processes have become so complex and stifling that getting new drugs to market has become almost impossible.

Others in the industry have gone the other way and created small biopharma companies. Data suggests that they are increasingly seen as a more effective route to drug discovery; according to the health care investment firm HBM Partners, 64% of drugs approved in recent years originated at smaller companies^[4] and the NASDAQ biotechnology index (NBI) has quadrupled in value since 2005. There is also evidence that the big players are less active in early scientific research and are leaving that to start-ups, with whom they later cut deals to acquire or license the drugs. According to the trade group BIO, in 2014 upfront licensing payments to small companies doubled to $5.6 bn.

Since the work at Pfizer, we have worked with business units in traditional large pharmaceutical companies, medium-sized pharmaceutical companies with a focus on particular therapeutic areas, biotechnology companies, a biomedical research institution, and a specialty chemicals business. This experience suggests that the changes in the structure of the pharmaceutical industry are masking something more fundamental, and that it is the way of working rather than company size which is the real driver of productivity.

Two case examples illustrate the point.

1. A Global Specialty PharmaCo

This Swiss specialty pharmaceuticals business was the market leader operating in over 100 countries. Tight control mechanisms had helped it manage complexity as it grew, but the side-effects included low levels of staff engagement and weak alignment around company goals at all levels. In order to drive further growth, the CEO decided to embark on a culture change to empower mid-level managers. An “Art of Action” program was designed and implemented from the executive team down through two further layers of management, in this case following functional lines rather than “must-win battles”.

While making use of strategy briefing workshops, we designed and facilitated a “train the trainer” approach to sustain full scale implementation through the final tier of management. Our client eventually assumed responsibility for program delivery and the results were fully integrated with their business performance management framework. Two years after the work began, quantitative surveys indicated that 88% of senior managers and 73% of other managers understood the company’s strategy. The CEO described this as “a massive impact on the motivation and understanding of the participants”. Revenue enjoyed a CAGR of 28% in the three years following the program, resulting in record levels of sales in 2016. Increased trading profits also allowed a significant year on year increase in R&D spend, supporting greater investment in clinical trials on their lead programs.

2. A Small Biotech

A project still underway involves a small biotech company with two programs in Duchenne Muscular Dystrophy (DMD) and another for an antibiotic for the resistant superbug c difficile.

The company was founded in 2003, and despite a promising R&D program, by 2009 it was over-extended and short of cash. Restructuring brought focus to the portfolio and by the end of 2016 the company had delivered promising results in two early stage programs. A licensing deal brought investment to pursue them further and the Board endorsed a significant shift from research to late stage development without big pharma support.^[5]

To enable the complex changes required to deliver two programs concurrently, the incoming COO identified the need to make some radical changes to the operating and governance model as the company shifted to later phases of development. This is again being achieved by implementing an intent-based operating model and coaching teams and leaders to operate effectively with minimal central control. The classic organizational matrix has been re-designed so that it is weighted in favor of the project delivery teams with minimal central interference. Operational decision-making will take place at the lowest level of management with the company’s intent as a binding framework, and project team structures have been simplified to place accountability and control over resources with the project teams.

The impact

The effects of adopting a mission command approach have been overwhelmingly positive across all sizes and kinds of biopharma companies, but some have responded better than others. The best performers had senior leaders with real clarity of purpose and the discipline to hold course, and distributed leaders determined to “pull” in the techniques, rather than have them “pushed” down from the top.

A series of benefits have been observed across some half a dozen cases, which are consistent with the first experiences at Pfizer:

•  Increased speed of decision-making and shorter cycle time;

•  An improvement in productivity because of greater clarity and focus;

•  More creative problem solving and innovation throughout the organization;

•  Faster learning and improved ability to deal with complexity;

•  Higher employee engagement.

Unsurprisingly, these factors have resulted in an improvement to the bottom line. Survey results consistently show that a majority of people-over 90% in most cases-had greater clarity about their role in delivering strategic goals”, a greater sense of personal responsibility and more freedom to operate.

Evidence suggests that around 70% of the participants in these development programs continue to make active use of what they learned, irrespective of the parent company’s response. 

The journey is never completely smooth. The most common initial objection on the part of individuals was that it was nothing new and they were doing it already. This generally ceased once they took part in the programs.  When programs are not followed up some managers revert to more traditional models of hierarchical leadership. A few resisted changes to ways of working, some because they were uncomfortable with taking responsibility for achieving outcomes not fully under their control. Some had to be replaced, but by and large they did not seriously affect performance. As the new approach took hold, they decided to swim with the tide-often convincing themselves that they had supported it from the first.

The main challenges are cultural and behavioral.

The cultural phenotype of the organization is hard to change, but has a critical impact on the implementation and results. Some interesting research done in the military suggests possible reasons why. Writing in the Canadian Military Journal, K. Stewart defines two possible outcomes resulting from the implementation of mission command principles, noting that the degree of success depends on the pre-existing leadership philosophy and cultural programming of leaders. He characterizes the result as either “problem bounding” or “problem solving”. Habits are hard to break: more authoritarian leaders tend to adopt mission command principles to ‘problem solve” i.e. issue more detailed guidance on how to meet objectives. Those comfortable with less direct control and more trusting of subordinates will “problem bound”, i.e. issue less detailed directives and focus on understanding intent or the “effect” to be obtained.^[6]  Our experience is similar: mission command will generally make positive differences, but the extent of the difference depends on the extent to which culture can be changed to one of “problem bounding”.^[7]

Lessons for Practice

At its heart, new drug development is a human process. Like a treatment regimen for some complex conditions, “mission command” requires diligent application of the prescribed medicine plus rehabilitative exercise and regular check-ups. The initial intervention will have a short half-life without persistence. Success can be celebrated prematurely; the most common cause of “re-infection’ is that organizations assume, too early, that the techniques and behaviors are common sense and embedded when in fact they have barely become familiar.

Here are ten lessons we have been able to derive from our experience.

1.    The process should begin with a diagnosis to inform the design of a bespoke implementation plan. Organizations used to high levels of autonomy will follow a different change path to one used to high levels of centralized decision-making.

2.    Most organizations have some form of matrix structure where functional resources support multiple projects. Effective execution depends on clear roles and responsibilities and some matrix structures make accountability so diffuse that they have to be modified before progress can be made. A lack of clear accountability, low perceived empowerment and a fear of taking risks can result in negative belief patterns.

Nevertheless, changing structure is always disruptive and should be a last resort. Instead, we try to clarify how the organization is intended to work, build individual capabilities and motivate them to respond cooperatively to a complicated and dynamic environment. Mission command is, at its core, more about beliefs and effective leadership behaviors than processes and systems.^[8]

3.    The simplicity of the concepts and language enables people at all levels to relate to it. Creating a common language using simple concepts like “intent”, “what and why” and “main effort” is of value in itself. 

4.    The role of the top management is to walk the talk by writing briefings themselves and requesting back briefs, and to constantly reinforce. In one case, a series of briefing workshops was put on hold for six months whilst some restructuring was done.  This provoked the reaction in some that it was not being taken seriously and “they will be on to something else next year”. When the program re-started, we had to spend some time convincing the organization that we were indeed serious. It is now mentioned every year in the annual message to staff.

5.    Making focused choices at all levels is critical to success. In each of our case studies projects not directly supporting the overall intent were dropped and people had to decide not to pursue some options in order to make sure that others were a success.

6.    The workshops at the heart of the process have to be conducted face-to-face. In these, bringing together multiple functions is particularly valuable. E-learning programs have a role as reinforcement and providing people who have attended workshops with a refresher. However, single workshops are not enough. Strong follow-up is needed and systems like objective setting, budgeting and performance management must be aligned to create an integrated operating rhythm of reviews.

7.    Internal facilitators and champions play a vital role, the former as support to the line and the latter as senior sponsors. Nobody can build the skills required in a single workshop, no matter how intense.  The ultimate aim is full internal ownership, and the most successful cases followed a journey from a “new initiative’ to “the way we do things round here”.

8.    When the prevailing culture is one of central control there is likely to be resistance from those that perceive a loss of influence or authority. We are not alone in observing that a top-down control culture is also “demand driven”^[9]-over time people may become groomed to prefer to receive detailed direction, especially when the stakes are high. Leaders have to actively encourage initiative and limit their own direction to “no more than necessary”. Leaders must ‘bound” people’s problems but resist the temptation to solve them, instead providing staff with coaching, support and encouragement to use all the freedoms available. This shift from learned behavior is a challenge and some people will struggle.  At Pfizer’s Sandwich R&D site an “Empowerment Code” that helped staff evaluate their own behaviors.  It can be a painful process but the risk is low and rewards are high.^[10]

9.    In order to really take root, it cannot be pushed, but must be pulled in. There is only so much central functions can do, and at some point the line must take the initiative. That is why in the original work at Pfizer we only worked with volunteer teams. 

10. Getting first results takes longer than most people expect, and they will fade unless there is persistence. Distractions are constant. Do not launch new initiatives without reinforcing the fact that this one has not gone away. What has been gained can also be lost. Never give up. 

The intent-based leadership model of mission command has enabled pharma companies of all kinds to deal with the challenges of increasing complexity, higher costs and scale. The cost and complexity of developing drugs is unlikely to reduce any time soon. The pharma industry will not be saved by external forces. It has its fate in its own hands. It also has the means to master it.

About the Authors

Mark Bouch (mark.bouch@leadingchangeuk.com) is a strategy execution specialist and Managing Director of Leading Change Limited. Stephen Bungay (mail@stephenbungay.com) is an author, historian, strategist and Director of the Ashridge Strategic Management Centre. David Roblin (david.roblin@crick.ac.uk), FMedSci, is President of Pharmaceuticals, Summit Therapeutics plc.

References

^[1] Stephen Bungay, David Roblin and David Slavin “Taking Command”, Pharmaceutical Executive Europe, Nov/Dec 2006.

^[2] Stephen Bungay, The Art of Action, Nicholas Brealey Publishing, 2011.

^[3] Deloitte press release, “Pharma’s productivity challenge: R&D returns continue to fall”, December 13, 2016

^[4] HBM Partners, Trends in US New Drug Approvals. 2016 FDA New Drug Approvals (and Multi-Year Trends), January 2017. HBM research defines “smaller” biopharma companies as companies outside the 30 largest biopharma firms.

^[5] This is of particular interest because 10 years ago Taking Command identified limits to the biotech approach because at the time the costs of late development and launch invariably meant that they required large pharma support to get new medicines licensed and available to patients.

^[6] K. Stewart “Mission Command: Problem Bounding or Problem Solving”, Canadian Military Journal, Vol 9, No 4, 2009.

^[7] See also Eitan Shamir, Transforming Command, Stanford University Press, 2011, which compares the results of introducing mission command to the US, British and Israeli armies.

^[8] The UK military understands this and changes the “command status” of force elements depending on the mission. Resources can be readily assigned and re-assigned depending on the demands of the situation and everyone uses a common language to express the relationship between ‘missions’ (e.g. strategic projects) and supporting arms (e.g. functions). Both have a role to play. The key is creating common intent to unify effort and absolute clarity about who makes decisions about what. This makes it easy to change command states depending on the situation. It creates a flexibility that rarely exists in commercial organizations.

^[9]   K. Stewart “Mission Command: Problem Bounding or Problem Solving”, Canadian Military Journal, Vol 9, No 4, 2009.

^[10] For a compelling account of how the behaviour of an individual leader can begin a process which turns followers into leaders see L. David Marquet, Turn the Ship Around, Penguin, 2012.