Changing Your Business Model - BioPharm talks with Tarja Mottram, CEO of Action for Results, on design-for-value concepts, management, and cross-functionality. - BioPharm International

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Changing Your Business Model
BioPharm talks with Tarja Mottram, CEO of Action for Results, on design-for-value concepts, management, and cross-functionality.


BioPharm International
Volume 25, Issue 5, pp. 62-68

MANAGEMENT AND METRICS

BioPharm: How and when should company leadership come into play here?

Mottram: Executives need to rethink how they position their products and what they need to invest in so that they are able to compete on value. Value leadership delivers "more value for the money" and recognizes the difference between cost savings and cost effectiveness. A particular product may actually cost more, but if the company can show evidence that the improved outcome is worth the extra cost (not just for one stakeholder, but considering the entire healthcare system), it can then compete on value rather than price. So, for instance, the company should consider whether its product's use can reduce other healthcare costs, such as decreasing the length of hospitalization, increasing early detection, or shortening lengthy follow-up procedures. Or, from a patient perspective, the company might ask, can the intervention (enabled by the product) allow the patient to gain his or her "normal" functioning faster, return to daily activities, or gain more independence? Companies need to be able to show evidence of value leadership.

The big breakthrough products that touch the masses are becoming harder and harder to find. So, as companies become more targeted in the markets that they are going after, demonstrating improved treatment and healthcare outcomes over time becomes an important source of competitive advantage. This value-based model changes the metrics for the industry.

BioPharm: How are the metrics different?

Mottram: A Design-for-Value model involves a long-term metric where value is defined as outcomes relative to costs. A value-driven product development program design starts with a target product profile that gets at the unmet customer and clinical needs, but also considers what the larger target outcomes should be. The big winners are the products that have a significant therapeutic impact (i.e., can cause providers to change established therapies) or that have a significant advantage over existing products as measured by cost-effectiveness (not necessarily direct cost-savings) and quality of life factors. Companies must understand in absolute, measurable terms what the key value drivers are and how to manage the tradeoffs inherent in those drivers.


Figure 1: To deliver products that have sustainable healthcare value, a deeper understanding of the healthcare value chain and player interactions is a requirement.
The Target Product Profile (TPP) in this sense becomes the most important strategic decision-making tool that an executive or project team can have. The development scenarios must address the crucial trade-offs (see Figure 1).

Every time a company makes a decision in one of these dimensions, it affects the other parts, and so the value impact is not as straightforward as what one may first think. One needs to go back to that value-based TPP and ask whether the company is still within acceptable parameters of success. It's an ongoing process that occurs at the governance level and at the team level. We need to teach organizations to conduct these types of tradeoff conversations—they don't happen automatically.

MAKING IMPROVEMENTS

BioPharm: Going back to cross-functional competencies, what's currently lacking among the industry in this area?


Figure 2: The Target Product Profile sets the boundaries for product value and should be used as a strategic decision and trade-off tool by management and program teams.
Mottram: It depends on the company, but most companies are far better at building functional competencies than developing true cross-functional capability. Cross-functional competencies are the things that bring people and teams together so they can deliver a product with the right value at the right time. Most companies have established cross-functional teams, but they tend to operate more as working groups, force-fitting their individual pieces together and reporting outputs. They lack the deep cross-functional engagement needed to come up with the best innovation strategies, development scenarios, and business and clinical risk–benefit evaluations.

Along these lines, companies have difficulty making a distinction between programs and projects. They often assign "rookies" to drive large programs and get into trouble as a result. There should be a clear career path for project and program managers, which includes increasing strategic facilitation capability. Understanding program management and project management as core disciplines and not separating them out of the product development life cycle, but rather, integrating them as competencies is key.

Milestones are still the most common project metric used by life-sciences companies. This practice worries me, especially when used the wrong way, which can cause teams to rush to meet an arbitrary milestone rather than doing the right upfront analysis and experiments that form a foundation for success. Industry needs to do a better job thinking about how to incentivize early-stage teams versus development and late-stage teams.

Empowering teams to make smart choices requires that functional managers set higher expectations, along with guidance and training that enable cross-functional engagement to take place without people having to run back to their management with questions.

BioPharm: How can teams improve this engagement?

Mottram: Having deep scientific insight to understand what the "make or break" questions are in the early stages of product development is crucial. At the same time, the ability to define upfront what creates business and customer value is necessary to know that the investment is solid. So teams need good scientific leadership coupled with a keen eye on what it takes to win in the marketplace and the courage to challenge each other and, at times, their management.

Life-sciences companies have to accept the fact that they are project-based. Ninety percent of their operations depend on projects. Some larger companies have project management offices (PMOs), which is good. However, the role of PMOs should be clearly defined so that it includes building cross-functional project management capability.

By embracing cross-functional disciplines, such as project management, teams can identify crucial connections and manage interdependencies in a more systemic and purposeful manner—leading to more proactive understanding of risks and ability to take the right actions to prevent unnecessary failure.


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