Achieving Financial Objectives
Once the financial objectives have been established, you can then determine what key activities and measures are most likely
to keep you focused on those objectives and spur progress toward them. If, for example, the objective is accretive earnings,
as in Table 1, the appropriate measures might include net earnings as percent-of-sales versus the same period the previous
year and percent of forecasted earnings from milestone and royalty stream. The year-on-year comparison and the percent of
forecasted earnings are leading indicators that give you a look through the windshield at where you are going. Lagging indicators,
by contrast, provide only a look in the rearview mirror at where you've been. By using leading indicators in all your measures
throughout the scorecard you can establish management dashboards and alerts to tell you whether you're moving too slowly,
veering off course, or underperforming in some activity that is critical to the overall strategy.
The nature and levels of the financial objectives, whether the idea-generating company expresses them in terms of revenue,
profit, earnings per share, or some other measure of value, will determine the actions and measures to be implemented in regard
to the remaining three areas, beginning with customers, from whom that value will be realized. The nature of the customers
will in turn determine what operations are required to serve them, which in turn determines what infrastructure is required
for those operations.
In the case of the idea factory, the customers are the Big Pharma companies to whom discoveries will be licensed. Leading
indicators of customer performance might include prospects met in the current quarter, future meetings scheduled, prospect
visits to the company site, and deals currently in negotiation. Management dashboards and alerts let you know if the company
is underperforming by any of these measures and enable you to take corrective action immediately. Such corrective action helps
to ensure that you will generate the quantity and quality of customer contacts required to achieve your financial objectives.
The critical operations for serving this customer segment are advantaged discovery and outlicensing. Advantaged discovery
is what idea factories are all about. They have knowledge, technology, or exclusive access to areas of discovery that others
do not and they are organized to deliver those discoveries economically. Leading indicators here are measures such as the
number of new opportunities hosted on the next-generation platform versus earlier technology and rate of new discoveries per
period. You must also be able to close mutually advantageous deals with customers. Your outlicensing group should be adept
at setting the value of a discovery and determining the most advantageous way to share that value with licensees. Leading
indicators of their performance include the number of licensing deals in negotiation.
The key activities of infrastructure required to generate candidates for outlicensing include seeking continued access to
the best new research talent. Discovery—new ideas and a significant number of them—is, after all, the lifeblood of the company,
and you must fill that need with talent from the best target schools and research departments. Leading indicators of recruiting
success include numbers and success of events and publications in those communities.
Thought leadership, measured by the number of scientific publications in a given period or by citations in refereed publications,
is important for raising the company's profile among potential customers. And as with the other elements of the scorecard,
the infrastructure mandates and measures keep it aligned with those other areas and with the strategy that governs them all.
FOCUSING THE FULLY INTEGRATED ENTERPRISE
For the fully integrated company, the principles of the scorecard remain the same as those for the idea factory: cascade a
clear, well articulated strategy down through the financials, customer considerations, operations, and enabling infrastructure
in order to drive the strategy deep into the organization and ensure that all parts of the organization work together to realize
it. The principles should be incorporated while using appropriate leading indicators to measure performance and keep it on
The great difference lies in the specific practices mandated by the respective strategies in each of the areas encompassed
by the scorecard. The financial objectives of the fully integrated company may be expressed in terms of revenue targets, profitability,
earnings per share, or some other value terms. Because those revenues or profits result from the sale of fully commercialized
products, the leading indicators are likely to be measures such as market share in a particular therapeutic area, through
a profit and loss for each major product, or through quarterly earnings reports. And, as we've seen, management dashboards
and alerts provide an early warning system of underperformance and indicate the need to dig down into the other areas of the
organization to discover the source of the problem and correct it.