When Two Heads are Better

The Jobs Of R&D Presidents Are Hard, and getting harder by the day. To guide their labs toward the most promising avenues of research, they have to keep up with the rapid pace of scientific progress. At the same time, as the chief executives of complex, technology-driven (and frequently international) organizations, they are involved in many non-scientific operational and organizational issues. R&D presidents—and frequently the leaders of discovery, pre-clinical, and development—wear two hats. They're chief science officers (CSO) and chief operating officers (COO).

Senior R&D leaders face the unenviable choice of either dividing their time and attention between these two areas, or focusing on one to the detriment of the other. Most have rightfully prioritized science ahead of operations. As a result, scientific issues are well defined in most R&D organizations— although far from resolved. (See "In the Eye of the Storm" Pharm Exec, April 2003.) Operational issues, on the other hand, have received significantly less attention.

Two Facets of R&D

The situation is exacerbated by the fact that, in many biopharmaceutical R&D organizations, responsibility for operations is fragmented among many executives. This makes it difficult to conceive and implement comprehensive solutions. Yet, given the unrelenting pressure to bring new therapies to market rapidly and at reasonable prices, R&D organizations can no longer afford to focus on science to the exclusion of operations. To launch new therapies ahead of competitors, they need to excel at both.

Managing Operations

Several factors make R&D operationally complex. One is R&D's intense use of technology. Today's labs are permeated with high-throughput screening, interactive voice response systems, electronic data capture, computational chemistry, compound library management systems, laboratory information systems, and many other similar tools. The future promises even greater use of technology, including biomarkers, dynamic simulation tools for modeling human physiology, and predictive toxicology assays.

A second factor is the increasingly stringent regulatory climate. Clinical trials have become significantly larger and more complex over the last decade, and regulatory considerations have been a major contributor to the trend. New regulatory requirements, such as Part 11 compliance, also have had a direct impact on operations.

Third, as biopharmaceutical companies have worked to reduce costs by moving operations, such as data management or lead optimization, to faraway places, they have expanded their R&D footprints. They also have significantly increased the number of countries in which they conduct clinical trials, in order to gain access to investigators and patients.

Finally, the movement away from traditional blockbuster drugs to more personalized medicine means that R&D portfolios include a larger number of drugs.

It would be quite unusual for an R&D head, however smart and industrious, to excel at both the CSO's job and the COO's. For many companies, the best way to improve performance would be to appoint a COO of R&D to manage operations in discovery, pre-clinical, and development, and take responsibility for support functions such as informatics, finance, and human resources. (See "From Old to New") The president, meanwhile, can focus on scientific matters.

From Old to New

Large, global labs may consider replicating this structure one level down and appoint COOs for discovery, pre-clinical, and development to support the COO of R&D. Labs that look to significantly improve their performance, or that are experiencing rapid growth, will benefit the most from this approach.

This division of responsibilities is new to biopharmaceutical R&D, but is well established in the business world. Many successful companies in a variety of industries have concluded that setting the direction on the one hand, and managing day-to-day operations on the other, entail too diverse a range of activities, and are too time consuming for a single individual to excel at both. Examples of well-known organizations that have separated the responsibilities of CEO and COO include Medtronic, Boston Scientific, Sun Microsystems, United Airlines, and Ford Motor Company. Among pharma R&D organizations, the newly established Novartis Institutes for BioMedical Research is one of the few to have a senior executive with a COO title.

The COO's Job

The COO should assume responsibility for five areas:

• Operations

• Management of external parties

• Portfolio-Project-Resource Management (PPRM)

• Management of initiatives

• Support functions.

Operations Operations deals with how teams manage projects, how efficiently functions perform their tasks, and how well discovery, pre-clinical, and development work together. Interactions between R&D and commercial operations also fall in this area. The COO will assume responsibility for areas that have a significant operations element and a correspondingly lesser scientific element. These areas are characterized by repetition and lend themselves to some level of standardization. Examples of such activities include clinical operations, compound library management, clinical supplies, preparation of regulatory filings, and so forth.

The COO's mandate is to reduce time to market and improve efficiency. The primary causes of operational inefficiency and delay in R&D are: ill-defined and poorly integrated processes, inadequate tools, poorly integrated systems, and inadequate staffing. To improve operational performance, the COO must address these issues systematically, implementing performance metrics to help identify opportunities for improvement. In addition, the COO will seek to address broader issues proactively, such as how the organization can best compete for clinical investigators and patients, or how it can accelerate patient enrollment. As the organization continues to expand its footprint across the globe, the COO will ensure that operations remain tightly integrated.

The interaction between R&D and commercial is another area with significant potential for improvement. The emerging consensus among pharma executives is that R&D projects require more and earlier input from commercial, to set priorities on which indications to pursue and which product attributes to emphasize. In addition, though commercial and R&D both interact regularly with physicians—in their roles as prescribers and clinical investigators—they often do so with little or no coordination. The COO will implement new processes and manage the ongoing R&D-commercial interaction.

Management of external parties R&D organizations outsource many activities to external service providers. Frequently outsourced activities include clinical monitoring and data management, laboratory services, electronic data capture, interactive voice response systems, animal trials, and lead optimization. Traditionally, pharmaceutical R&D organizations have not done a good job of deciding which activities to outsource—or of managing them once outsourced. (See "R&D Outsourcing That Works" Pharm Exec, March 2000.) Outsourcing is becoming further complicated by the emergence of offshore service providers. A business-minded COO can help the organization determine which activities to outsource, how to evaluate and select service providers, and how best to manage them.

R&D partnerships and co-development efforts present similar challenges. R&D labs involved in collaborations with external partners need to resolve many operational issues, such as who will perform which activities, whose processes will be used, how data will be captured and consolidated, and so forth. The active involvement of a senior executive will ensure that these and other issues are resolved in a timely manner, enabling project teams to proceed along well-defined paths.

Portfolio-Project-Resource Management (PPRM) Most R&D organizations put a high priority on optimizing the value of the R&D portfolio within the constraint of limited resources. Optimization requires the organization to follow well-defined processes and to collect appropriate, timely, accurate data. (See "The Path to Smart R&D" Pharm Exec, November 2003.)

Given the importance—and cross-functional nature—of this effort, responsibility for it should rest in the hands of a senior executive. As members of the management team assess portfolio and resource allocation, the COO will help ensure that their decisions are internally consistent and aligned with the organization's strategy and willingness to tolerate risk. The COO will also ensure that all compound/drug projects across the R&D continuum use appropriate project management techniques. To facilitate this, the combined portfolio-project-resource management organization should report to the COO.

Management of initiatives R&D organizations are always engaged in a gamut of improvement activities. The biggest challenge they face is choosing among the many potential initiatives they could pursue, and the second-biggest is ensuring that approved initiatives are appropriately staffed and deliver promised benefits. The COO can aid in meeting both of those challenges. A key advantage of centralizing oversight authority this way is that a COO can ensure that interdependencies between initiatives are identified and appropriately managed. To that end, he or she will need the support of a small but dedicated initiative project management organization.

Support functions There are two principal reasons why the support functions (finance, informatics, human resources, facilities, and purchasing) should all report to the COO. The first is to relieve the CSO of the responsibility of dealing with the plethora of issues that the support functions cover. The second is that the COO needs to enlist and leverage these functions in a coordinated manner to improve operational performance.

Getting the Job Done

The COO's job is to continuously improve operational performance in a challenging environment, characterized by unpredictability, complexity, and multiple interdependencies. To that end, it is essential to ensure that the four design elements—structure, process, systems, and people—are aligned at all times.

Structure deals with the governance of the organization and the assignment of responsibility and authority to decision makers and decision-making bodies.

Processes pertains to definition, standardization, and documentation of activities and workflows, as well as the standardization of templates and forms—CRFs and data clarification forms, for example. Process must be linked to roles and responsibilities. Each process step and deliverable must be linked to a specific job role. Aligning these elements is not a small task, but unless all four elements are aligned and mutually reinforced, work will not be done effectively and efficiently, and the changes will not stick.

Companies, both within and outside of pharma, are frequently unsuccessful in their efforts to redesign processes and implement systems. The cause generally is a failure to align all the elements in a timely manner. The sub-optimal performance of many project-management organizations is a case in point. While the stated expectation is that project managers will manage projects, frequently, the organization gives them neither the appropriate tools nor the authority to succeed. The fact that both the support functions and the combined portfolio-project-resource management organization will report to the COO will facilitate alignment.

Systems refers to tools that are appropriate, efficient, and configured to fully support the organization's processes. It also includes the capture and retrieval of information needed for decision-making, as well as performance metrics for tracking process performance and identifying improvement opportunities.

People Organizations interested in appointing one or multiple COOs will face the challenge of finding suitable candidates. The question of which qualifications and background are appropriate will generate significant debate and anxiety. Should the COO be a PhD, an MD, or an MBA? A company insider or an outsider? From within pharma or from some other industry? There is, of course, no single right answer, but there are some useful guideposts.

First, the COO needn't be a bench scientist or clinician, but must understand that simplistic, linear approaches that ignore the complexity, unpredictability and many interdependencies of R&D will fail. Second, a COO must have broad experience with process, systems, people and organizational structure issues, possibly including experience from outside the pharmaceutical industry. Finally, the candidate must have a burning desire to systematically improve performance, and the ability to enlist the support of others.

Conclusions

The scale and complexity of today's R&D enterprises exceed the capability of a single individual to determine the scientific direction and make key operational decisions. To continuously improve operational performance, R&D organizations need to create a COO position, and give the COO the mandate to manage operations across all of R&D in an integrated manner. Large R&D organizations also may consider appointing COOs of discovery, pre-clinical and development to support the COO.

These changes—like any significant change—will encounter skepticism and initial resistance. But R&D labs can no longer afford to ignore operational issues if they are to meaningfully reduce the time and cost of bringing new therapies to market. By appointing COOs for R&D with broad operational mandates, biotech and pharmaceutical companies can ensure that operational issues get the attention they urgently require.

Jan Malek is a leader in PA Consulting's life science practice. He can be reached at [617] 460-0200.