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Volume 23, Issue 12
To achieve manufacturing excellence, biopharma companies must adopt four key operating principles.
When I was first hired by a biotech manufacturing site as a member of the leadership team more than 10 years ago, I was very concerned about what I'd gotten myself into. I had just left a successful career as a performance turnaround specialist in the semiconductors industry and I felt ready to tackle whatever I found in biotech. Yet I was concerned, because I had a sense that something wasn't right with my new industry and I couldn't quite describe what it was.
I had a couple of positions I needed to fill quickly, so I called an old semiconductors buddy to interview for one of them. He had the skill set we needed for the role, but what I really wanted was to have him make the rounds in my new company to see if he picked up on my feeling about biotech. He was a straight-shooting operations-minded veteran and I wanted his take on the situation.
The interview process included long discussions with the heads of manufacturing, quality, and technical services. At the end of his day of interviews, we went to dinner to debrief—just the two of us. Once he had settled down with a drink, I asked what he thought. He set down his pint and wiped his old-school mustache with the back of his hand. Then, true to form, he cut to the chase. He shook his head, sighed, and said, "Chris, these guys are really smart . . . but they don't know how to make stuff."
That was almost 10 years ago but it's one of my favorite quotes. It suggests a problem at the operating principle level that continues to plague many in our industry. In the early days at my new site, it was what I was picking up on in my interaction with the talented group of people I had just joined. These individuals were technically brilliant, personally driven, and supportive of their peers, but something was missing. They didn't know how to "make stuff."
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It wasn't a shortcoming of this particular biotech. Frankly, they led the league in everything important at the time. Instead, this was a shortcoming of a technical industry still early in its lifecycle. In the early days, technology companies have implicit operating principles around excellence in science and engineering. But as companies mature, too many of them fail to draw the line and formally enter the realm of those who "make stuff." To make the transition effectively, it's important to understand the operating principles for making stuff well.
The technology companies that have learned how to make stuff well have adopted four such operating principles, which I will explain.
The highest priority for a company that is focused on execution is personnel management. Across technical industries, there is a tendency to hire and promote based on technical expertise and to largely ignore management skills. It's easy to see how this happens. Most companies fail to recognize that competence is domain-specific and that top performance as a scientist or engineer says nothing about one's ability to manage people. Most companies still look at good technical performance as an indication of some sort of enlightenment that results in the person being great at everything. This extrapolation of technical competence into non-technical areas is a problem. Believing that technical competence is an indication of managerial competence is the same as assuming that golfing great Phil Mickelson must also be a great singer. If we look to the companies that are good at making stuff, they identify a core set of management skills and make sure everyone has them.
The hard part is acknowledging that something non-technical can have a significant impact. In biotechnology, we still have a cognitive bias away from non-technical solutions, so it's difficult for many site heads and leaders to acknowledge the impact of management skills.
A majority of managers in our industry do very little personnel management in their current roles. Instead, they are called on to continue carrying out their roles as technical experts and individual contributors while also having a group report to them. When I begin working with a client's managers, one of the first things I hear is that the manager doesn't have time for things like one-on-one meetings with direct reports. In other words, a majority of biotech employees have no meaningful connection with their bosses. This in turn means that our teams are not engaged and our organization is underperforming.
When a company recognizes that it is in the business of making stuff, then it focuses on execution, which is tied directly to the effectiveness of the individual manager. For a company that wants to be operationally excellent, there is no priority higher.
Focus on your core competencies and be willing to outsource everything else. Biotech companies continue to face cost pressures, and along the way, they explore outsourcing. However, we are not yet realizing all the benefits of a robust outsourcing strategy because we forget to tell our people how to operate in a new way. I hear two comments from biotech managers that reveal this problem.
One: "I don't like using contingent workers or consultants because at the end of the day all of the expertise walks right out the door."
Two: "It's better to do the work with full-time staff, because the quality is always better."
Both of these statements show a lack of understanding of outsourcing. Companies that have learned the secrets of making stuff know that the object is to find the combination of in-house resources and outsourcing that yields the lowest cost and highest quality as fast as possible. So the question isn't whether outsourcing can do that for you. The question is whether you can do that with outsourcing. The answer depends on your ability to execute. When I am helping clients with outsourcing strategies, someone will always say to me, "But sometimes outsourcing ends up costing more." I always acknowledge that there is no magic in it. "You can screw this up just like anything else," I reply. "It's about execution." When companies focus on what they can do with outsourcing, they get a different result. Instead of managers standing around and hoping everything goes well or talking in the lunch line about how they wish they had more full-time staff to work with, they go out and get better at working with contingents. When a manager is good at working with contingents, she recognizes that she needs to manage the outsourcing company behind the workers too. The manager needs to be clear with expectations and feedback for the service provider. This seems simple but it's not getting done. Instead, client companies sit back and assume that the company that employs the contingent will handle everything.
Focus on managers and provide training in how to manage contingents. Then, hold the managers accountable for hitting the budget target. When contingents are used just like full-time staff, waste ensues. The contingents spend time in unnecessary meetings and blend into the local pace of work. Then, when you do the math on the hourly rate you end up seeing that it costs more. The point is, companies need to clarify their expectations for managers and hold them accountable for running the business. There is a learning curve involved. To get good at making stuff, a company must move through that learning curve and drop its reluctance to outsource aggressively.
This one seems obvious, which is why it doesn't get the attention it deserves. The best operational companies are full of team members that know what it means to work in a competitive business. Here's a quick example. If you're in a company that has multiple manufacturing locations or outsourced manufacturing sites, consider how transparent your company is about comparing one site to the others. The best companies get to the point where they don't try to tell their team members that the objective is to have one big, non-competitive family. Instead, they make it clear that in a competitive business environment, you are either aggressively competing or you are waiting to be defeated. That applies at the company level and it applies at the intra-company site level too.
Some companies are good at discussing competition when it's about their product versus someone else's. But they resist encouraging internal competition. The argument is that they don't want to lose sight of the big picture, which is about "all of us" winning. The truth is, we can't compete with other companies if we're not comfortable competing internally. There is a first violin chair in an orchestra and all of the violinists would like to sit there. Along the way, they play their part to the best of their ability. But make no mistake: They want the first chair. Acknowledging the need to compete drives behavior change.
The primary behavior change comes from understanding that you have to improve to survive. You simply can't stay the same and be around in a couple of years. When managers understand this and hold their teams accountable for behaving this way, performance improves. Instead of complaining about how uncertain everything is and longing for the imagined days before cost pressure, people get to work and find a way to improve. Or, they go work somewhere else, and that's okay too. The companies best at making stuff understand that their objective isn't to retain all staff; it's to retain the right staff. By helping everyone understand that they must continue to improve to remain competitive, a company focuses energy in the right place and drops the waste involved in any other perspective.
A friend of mine joined a financial services company about 10 years ago because he was interested in becoming a stock broker. The head of the office hired John and explained the he would pay him a salary for six months as John learned the business and got some clients of his own. Thereafter John would need to generate his own fees from managed assets.
Like all new brokers, John entered the world of cold calling. The brokerage house knew that the name of the game with young brokers was for them to make lots of calls. That way, they would learn what worked and what didn't. So John and the other newbies were measured by the number of calls they made in a day. In the early days, John told me about how many calls he was making in a day. Ever supportive of my friends, I think I said something like, "Gosh, that's quite an existence you've carved out for yourself John."
My sarcasm aside, John learned how to do it. After a few months, he began bringing in significant investment dollars and developed a successful career as a broker. But not everyone was like John. After John had been there for four or five months, one of his co-workers was still coming by his desk and saying things like, "100 calls already this morning, man. Can you beat that?" The problem was, the guy had brought in very little money. He was still counting calls when the successful people were counting dollars.
This mistake also shows up in biotechnology. How are your metrics for closing nonconformance investigations? Are you getting really good at closing investigations quickly? How about those metrics on closing work orders? Are you getting better at processing unnecessary paperwork?
I've worked with organizations that ran Six Sigma projects to get better at something they didn't need to do. I've also worked with multiple clients that found a way to check for errors before the actual check so they didn't need to record an error but instead could just take the time to do it over again. Hurray!
If you're going to be among the best in the world at making stuff, be careful what you get good at. The more efficient we get at unnecessary, non-value adding activity, the easier it is to institutionalize. Once waste gets in that deep, your team begins describing it as "the way we've always done it." Worse, the unnecessary process grows like a vine through something that is actually required and then disentangling everything is nearly impossible.
Be careful what you get good at.
The biopharmaceutical industry is full of smart people. Being smart, however, is not enough. To be successful in manufacturing, companies must understand how to become good at "making stuff." To do so, they must understand and adopt the four key principles described here. If they follow those, operational excellence will come.
Chris Driscoll is the CEO of the Driscoll Consulting Group, 303.725.4473, chris@DriscollConsultingGroup.com