PROVEN APPROACHES TO SYSTEMATIC ALIGNMENT
We have seen life-sciences firms successfully align implementation to strategy using many techniques. The critical thing is
to use some systematic approach to link and align strategy with its implementation, whether it is management-by-objective,
economic-value-added, the balanced scorecard, or some other approach. But no matter which approach you use, the implementations
of the two business models will differ starkly. Table 1 provides a comparison of how a balanced scorecard might look for an
idea factory versus a scorecard for a fully integrated firm.
Table 1. An example of the two biotech business models which focus on different roads
Implementing the Balanced Scorecard
In our experience working with lifesciences companies, we have found that the balanced scorecard, aligning and integrating
performance across critical areas, provides the two essential ingredients for maintaining strategic focus: mandates and measurement.
It focuses on what to do—the mandates—and how to track the results of those mandates—the measurements.
Developed in 1992 by Harvard Business School professor Robert S. Kaplan and management consultant David P. Norton, the balanced
scorecard includes "financial measures that tell the results of actions already taken and it complements the financial measures
with operational measures on customer satisfaction, internal processes, and the organization's innovation and improvement
activities—operational measures that are the drivers of future financial performance."1
A balanced scorecard should be thought of as a thermostat that keeps performance rising among the parameters that you've set
in each of four interrelated areas:
- Financial performance
- Customer-facing performance
- Enabling infrastructure.
Actions that help parameters rise make sense as implementation targets; actions that do not help them rise—while perhaps still
necessary—may receive less incremental investment. Further, these four areas are linked from the bottom-up. A well-chosen
enabling infrastructure, whether of talent, technology, or facilities, can make operations fly. Great operations serve customers
better, and well-served customers support the achievement of financial goals. When the financial goals of a strategy are met,
its implementation is a success. Any successful strategic management system should deliver bottom-up alignment between actions
and strategic intent. Of course, the linkages summarized here are only a part of any success story, but as far as pointing
to any success story where they aren't a part—we cannot.
KEEPING THE IDEA FACTORY ON COURSE
Setting financial objectives is the first step in implementing a balanced scorecard. For financial objectives, an idea factory
typically focuses on earnings and the improvement of earnings. Indeed, the financial objectives of successful idea factories
are concerned almost obsessively with accretive earnings. When overdevelopment of an idea in house cuts into earnings, it
is time for it to go. As the idea factory matures, its milestone payments and royalty streams increase the earnings base,
enabling reinvestment in new ideas with equal or better earnings potential.