Entrepreneurial innovation in pharmaceutical research and development.

Change, and in particular innovation, in organizations is a perpetual dilemma. Although organizations are primarily designed to facilitate and control the production and provision of goods and services, innovation is key in order for a company to establish and maintain competitive advantage in

an increasingly complex world. In recent years, the popularity of entrepreneurship, intrapreneurship, change management, and innovation have been evident in the number of popular business books published. The magnitude of attention focused on innovation in business magazines, books, Wall Street analysts' reports, consulting firms' services, academic courses, and academic journals reflects a widespread, perceived need for more innovation. The 1990's have been years in which the demand for adaptability and speed of responsiveness has increased the need for innovation and the energetic styles described by "entrepreneurial" behavior.

Researchers have compared successful and unsuccessful innovation and change. Boyatzis (1982) applied a modified version of the extreme case, or criterion sample, methodology developed for the study of individual competencies of effective and less effective people in specific jobs. This method contrasts subjects selected to represent opposite outcomes. Three studies of high- and low-performing units within the same high-technology, manufacturing, and military organizations, identified three sets of variables that cause or were associated with successful innovation and implementation of change (Boyatzis and Greenley, 1986; Dalziel and Schoonover, 1988). They included: (1) individual competencies; (2) job role requirements; and (3) organizational structure, process and climate, or culture. For example, in one of the studies cited above, manufacturing plants that were effectively utilizing CAD/CAM (i.e., computer-assisted design and computer-assisted manufacturing) technology were compared to plants not effectively utilizing the same equipment and technology. Both sets of plants had the equipment delivered, and both were expected to be using the technology by division and corporate management. In the "effective using" set of plants, the CAD/CAM technology was used daily as an integral part of their operations. In the "not effectively using" set of plants, the technology was not used often (i.e., maybe once or twice a year) and in some plants the equipment had never been plugged into an electrical outlet!

These studies revealed individual competency requirements related to five particular roles necessary for successful innovation. The five roles were: (1) sponsor; (2) entrepreneur; (3) creator; (4) technical expert; and (5) administrator. In the sponsor role, senior managers encouraged and protected entrepreneurial people and initiatives. Competency requirements for this role included socialized power motivation, the desire to attain positions of visibility and influence, and using "empowering" managerial styles which arouse achievement motivation in subordinates (McClelland, 1985).

In the entrepreneur role, aggressive product or idea champions pushed the innovation from concept to market against all obstacles. The most important competency requirement for this role was achievement motivation, which is a strong personal concern with doing better against internal and competitive standards of excellence (McClelland, 1985). In the creator role, creative professionals identified new process or product ideas, but did not necessarily see or pursue markets for new ideas. The critical competencies in this role were knowledge and conceptual abilities related to the specific field or subject area of the innovation.

In the technical expert role, functional specialists in marketing, production, and finance helped entrepreneurs implement business plans. Here again, the important competencies were knowledge, conceptual abilities, and interpersonal abilities related to the specific function. In the administrator role, supportive managers took care of organizational maintenance requirements, keeping other team members on track and freeing them to create, or be entrepreneurs. The important competencies in this role included goal and action management and human resource management abilities (Boyatzis, 1982).

Although a particular person might perform more than one role (e.g., that of creator and entrepreneur), a key finding was that entrepreneurship in large organizations was essentially a team phenomenon: most successful innovations involved groups in which several members performed key roles. For innovation, the entrepreneur role appeared most important, but the absence of competent persons in any one of the five roles significantly reduced an organization's likelihood of success.

Organizational factors which promoted innovation and entrepreneurship included elements of: (1) structure, (2) process, and (3) culture and climate. The most effective structure involved formation of small, autonomous "new product teams" separate from a firm's traditional businesses and administrative practices, yet supported by marketing, finance, and manufacturing function experts.

The most effective processes involved specific programs which encouraged employees with new ideas to submit them to an internal "venture capital" group which identified ideas and people for further development, then trained and supported entrepreneurs and new product teams from product development through market introduction.

The most effective climate and culture involved an organizational environment which valued new ideas, supported calculated risk taking, gave employees sufficient responsibility and clarity, and rewarded entrepreneurial efforts (Litwin and Stringer, 1968). It was found that organizational units successful in innovation had a "readiness" for change resulting from their past experiences, organizational learning, and the processes mentioned above.

The Study and Intervention

The importance and challenge of innovation in the pharmaceutical industry are particularly acute. The average new drug requires an investment of $100 million and 11 to 13 years to receive approval by the FDA. Because new drugs are patented at the beginning of their development cycle, a pharmaceutical firm typically enjoys only four to six years to recoup its investment before its 17-year patent protection expires. Increased concentration and global competition have made continuous innovation at maximum speed imperative for enduring success in the pharmaceutical industry.

This article describes a diagnostic study and intervention in a large pharmaceutical company, identified here as Sinclair, Inc. The purpose of this intervention was to accelerate the company's development of new drugs and their submission for approval by the U.S. Food and Drug Administration (FDA). The organizational diagnosis and intervention took place in 1986. The researchers returned in 1989-1990 to assess the effects of the earlier intervention.

Sinclair, Inc.

Sinclair, Inc. is a Fortune 500 company in health care and pharmaceuticals. It has a worldwide presence in 130 countries. In 1987, the Pharmaceuticals Division described its charter as,

To engage in the discovery, licensing, development, production, and marketing of superior prescription or over the counter products and services which are promoted in the domestic market primarily through professional channels. In addition, the Division will market, sell, and distribute health care goods and services to the domestic physician office market segment. The Division will conduct global pharmaceutical research and provide research and development services to sister divisions.

The R&D unit within the Division had the objective, as described in the same 1987 document to, "Become one of the premier Research and Development organizations in the industry based on a consistent flow of new leadership products and a commitment to scientific excellence." In this same document disseminated within the company, one of the critical success factors relevant to R&D was, "Increase the rate of new products to the market place by increasing R&D productivity and shortening the development and product approval phases."

The R&D unit was headed by the Vice President of R&D, who was a physician. Also reporting to the Divisional President were the Director of Sales, the Director of Administration; the Controller; and the VP of Operations.

Reporting to the VP of R&D were the Heads of Discovery, Pharmaceutical Development, Medical Affairs, Project Management, Regulatory Affairs, R&D Systems (i.e., computer systems), and the Controller. Reporting to the Head of Discovery were scientists in four therapeutic areas representing the strategic focus of the Division. Reporting to the Head of Pharmaceutical Development were scientists, clinicians, and technical staff in Toxicology, Metabolism, Pathology, and Analytic Chemistry. Reporting to the Head of Medical Affairs were physicians in Clinical Studies and scientists in Biostatistics.

In 1985, the VP of R&D and several of his staff began soliciting proposals from selected consulting firms to conduct a study, make recommendations, and assist in implementation. Their objective was "To achieve an optimally efficient and cohesive drug development organization within Sinclair, R&D Division, while maintaining quality." The project study team consisted of six staff members of McBer and Company, led by Mary Esteves. The implementation of changes resulting from the study were primarily conducted by Mary Esteves and Richard Boyatzis. Three years after completion of the first study and implementation of changes, in 1989, the VP of R&D requested that the same staff conduct a second study. A chronology of events is shown in Exhibit 1.

The specific objective of the first study was "To assess the drug development process and make recommendations to reduce time, reduce cost, increase quality, and improve morale." The specific objective of the second study was "To assess the status of drug development within the R&D Division and make recommendations for continued progress toward the overall objective."

Methods in Study One: The Drug Development Process Up to 1986

The research team held a meeting with key R&D managers to discuss the rationale, assumptions, and design of the study, and to assure individuals of confidentiality. The project team toured the main facilities to observe work in progress and conducted a review of selected internal documents, such as annual reports, U.S. drug development charts, drug product histories, major project planning guidelines, new drug application flow charts, general and R&D organization charts, policy manuals, incentive, succession and business plans. A variety of data collection methods were chosen to establish triangulation of the findings (Jick, 1979).

A total of 139 people were interviewed, using one of three approaches: 12 project interviews of individuals; 52 individual role interviews; and 10 group interviews involving 75 people were conducted. The executives of the Division identified three drugs that were considered examples of successful development projects within Sinclair and three that were not considered successful. The 12 project interviews consisted of interviews with each of the six Project Managers (i.e., one of each of the six different drugs) and one scientist from a different functional unit.

Exhibit 1
Chronology of Events

November, 1985     R&D Division solicits proposals

March, 1986        Study begins

July-Sept., 1986   Preliminary report to R&D top management
                   and redesign of recommendations

October, 1986      Report and discussions with Sinclair's
                   corporate and Division executives
                   Workshop with R&D top management:
                   report and discussion (2-1/2 days)
                   Workshop with many R&D professionals:
                   report and discussion (1-1/2 days)
                   Redesign of recommendations

January, 1987      Workshop with R&D top management and
                   selected key people on Venture Team
                   concept and planning (4 days)
                   Workshop for larger group of R&D management
                   regarding results of the four-day workshop
                   on the Project Team concept and its
                   implementation (1 day)

March, 1987        Management development and team building
                   workshop for R&D top management (3 days)

April, 1987        Formal start of Venture Teams

February, 1989     Follow-up study begins

March, 1989        Report and discussion of findings

May, 1989          Final presentation to President of Division

December, 1989     Two Venture Teams file NDAs

The protocol for the project individual interviews included the following topics: describe your role in the development of drug X; describe the critical points/key decisions in the development of this drug and how they affected time, cost, quality, and morale; describe key interfaces with other internal and external organizations that helped or hindered the development of this drug, cite specific examples; describe how you see your competitors proceeding with development of a comparable drug.

Individual role interviews were conducted with managers and individual contributors from both within and outside R&D. This included all key functional managers for discovery and development, as well as key managers from the International Division.

The protocol for the individual interviews included questions such as: What is your role in the drug development process? What do you see positively affecting the drug development process (cite specific examples)? What do you see negatively affecting the drug development process (cite specific examples)? How do you interface with others within and outside the organization?

The group interviews focused on the processes with which projects proceeded through the Division. The 10 group interviews included four types of employee categories: scientists and researchers; technicians and clerks; managers of scientists and researchers; and project managers. The groups covered the preclinical, clinical, regulatory affairs, research computing, and scientific affairs departments (i.e., functions) and stages of the drug development process.

The protocol for group interviews included questions such as: What are the critical points/key decisions in the drug development process? What helps the drug development process? What hinders the drug development process?

The drug development process typically took from 11 to 13 years in the U.S. prior to 1986. In Sinclair, a molecule, or compound became a product candidate when it was called a New Chemical Entity (NCE). This marked the hand-off from discovery to chemical synthesis and preclinical studies. From NCE to the Initial New Drug (IND) filing with the Food and Drug Administration was called the preclinical phase. It often took a half year in chemical synthesis and three-and-a-half years for animal pharmacology and toxicology in the U.S.; within Sinclair, the experience as of 1986 was 18 to 36 months. From the IND filing to the filing of the New Drug Application (NDA) with the FDA, called the clinical phase (i.e., involving Phase I studies on healthy humans, Phase II studies on humans who were ill, and Phase III studies on humans with the specific problem or disease indicated for the drug) typically took six years in the U.S. Within Sinclair, the experience of 1986 ranged from three to eight years. The Sinclair drug development process was often taking about 11 years in the U.S., and seven years in Europe. From the filing of the NDA to its approval was taking two to three years. Given that a patent is good for 17 years, and that the patent is filed with NCE status, Sinclair wanted to substantially reduce the drug development time.

Findings from Study One: The 1986 Diagnostic Study

A number of specific strengths about Sinclair's drug development process and the R&D unit were found, as well as a number of specific problems that needed to be addressed. These are summarized in Exhibit 2. In addition, a number of preliminary recommendations were made.

The highest-priority recommendation was to develop project teams organized around specific drugs. This would reorient human and technical energies and provide opportunity for strategic decisions affecting the development process. For example, it was clear that clinical trials could be underway in several countries at the same time and allow for continuous collection of important data (even though studies in one or more countries may encounter regulatory obstacles of a bureaucratic nature, as differentiated from health and safety issues, and experience a delay in the studies). Another example regards the time it might take for the FDA to review the NDA filing (i.e., time to approval). Often a drug has several indications to which it might be oriented. Choosing one to explore that has no other available counterparts currently on the market, and pursuing one that the FDA has rated 1A (i.e., highest level of priority) would result in a faster review cycle through the agency. It was also thought that the leader of a project could provide the entrepreneurial energy and enthusiasm to maximize collaboration within the R&D unit, and with relevant external groups. The recommendations are summarized in Exhibit 3.

Feedback and Implementation, 1986

As shown in Exhibit 1, a series of feedback and discussion sessions were conducted with R&D management, Divisional and Sinclair management, and most of the professionals involved in drug development. These sessions were designed to reveal the findings, discuss them, and explore the preliminary recommendations. The management groups felt that the findings reflected their sense of the condition of drug development at Sinclair. They liked the recommendations, and wanted to proceed. Their first priority was to implement the change in project teams, which they preferred to call Ventures. The project leaders were to be called Venture Heads.

Some of the managers of the functional units within the R&D unit were less enthusiastic. During the feedback meeting with R&D drug development professionals and selected people from Discovery, certain of the professionals in functional groups did not see the same need for change as others. They feared that entrepreneurial Venture Heads would run roughshod over the functional people.

A workshop was held for the top managers of the drug development groups to finalize, clarify, and communicate the mission and role of Venture Heads; identify and practice leadership skills needed; identify existing and needed systems; and plan for communication and implementation of this new approach to the R&D unit and the rest of the Division. Activities included a day and a half on responsibility charting of the Venture Head and Operations Manager roles. The Venture Head was to be the scientist/clinician who would be a product champion for the drug, and who would move it through the drug development process with maximum speed, while making key strategic decisions. The decisions might include terminating the drug and moving onto another compound of the group to pursue a particular indication (i.e., disease or treatment problem).

An implementation plan was designed and action steps identified. The project findings and recommendations were communicated to the rest of the employees. Key managers were trained in their new roles in several separate training sessions. The management group met periodically to assess progress and solve problems as they arose.

Methods in Study Two: Assessing the Impact of the Changes, 1989

About three years following implementation of the new structure and processes for drug development, the authors were asked to assess the status of drug development at Sinclair. The four types of data collection methods were: review of documents, such as project milestone reports; observation of various Venture groups and staff meetings; and 41 individual interviews of professionals involved in drug development about the current process and experiences. The interviews included personnel from: the discovery group; Venture Teams; functional managers and departments within the R&D unit; bulk drug synthesis; a sister division; business unit marketing directors; International Division managers; and corporate executives.

In addition to the type of information, stories, and observations collected during the first study, each person interviewed was asked to rate the current drug development process as compared to the process prior to 1986. They evaluated the current process in terms of its quality, time, cost, and morale of the unit. Responses used a scale of -5 to +5 (i.e., -5 represented "much worse than before," 0 represented "about the same," and +5 represented "much better than before"). Key managers were briefed on the findings in an off-site meeting in March 1989.

Findings from Study Two: Impact of the Changes

Three Venture Teams were formed in 1986. One of the Teams had, during the intervening three years terminated two successive drugs and was working on development of a third related compound. The other two Venture Teams brought a drug through to filing the NDA by December, 1989. Although the ultimate test will be time taken from NCE status to NDA approval, it appeared that Preclinical and Clinical Phases (i.e., from NCE status to NDA filing) had been accelerated by one-third compared to the time required prior to 1986. The graph in Exhibit 4 compares current and past experience. It is expected that the NDA approval will come more quickly than in the past, but for purposes of comparison the estimate of NDA approval time is held constant across both periods. As shown, saving four years in drug development extends to eight years the available time to market and sell the drug under patent protection. This change doubles the earlier typical experience of four years under patent protection.

Analysis of the budgets revealed a tremendous increase in drug development expenditures, but when analyzed in terms of the money it cost to proceed through the various phases of development, the cost was just about the same. It appeared greater because the expenses were being realized during a much shorter time period than before.

In the view of a number of managers interviewed, the possibility existed that Sinclair would have more of its own drugs (with full World-wide rights) coming to market in the next few years than they had in the prior 25 years. The atmosphere of the R&D unit was electric; enthusiasm was rampant.

A review of the responses to the ratings of change on the four basic goals of improving drug development (i.e., quality, time, cost, and morale) is shown in Exhibit 5. It showed that all groups of managers and professionals interviewed felt that the quality of the drug development process had improved as compared to earlier processes. They all felt that the time it took to develop the drugs was much more satisfactory than previously, but that the costs were greater. The interpretation was mentioned earlier that they were looking at total expenses and not adjusting them for the increased number of phases concluded each fiscal year as compared to earlier efforts. Although the researchers began by asking a single question about morale, everyone interviewed was asked to respond separately concerning professionals involved in the venture teams and those involved in the functional departments. As shown in Exhibit 5, they believed that morale had improved within Venture Teams and was unchanged within functional departments.

The status of drug development at Sinclair in 1989 revealed that all of the strengths noted in 1986 were still present, and that additional strengths had appeared. They are summarized in Exhibit 6.

As might be expected, the organization did not experience this degree of change without some strains. The enthusiasm and focus encouraged everyone TABULAR DATA OMITTED to work harder and look for ways to improve their efficiency and effectiveness. Everyone looked for ways to save time, money, and people's energies, even if the activity was not directly within their area of expertise or specialization. Professionals in the Venture Teams and those in the functional departments were reinvigorated. They also were showing signs of fatigue, feeling excited but tired and questioning how long people could maintain the pace. Venture Heads, Operations Managers, and professionals on the Venture Teams pointed to time-saving moves that involved spending the same amount of money in one year typically spent in three years during previous drug development efforts. A summary of the problems, or challenges facing drug development in 1989 is also shown in Exhibit 6. The recommendations made to address these challenges are summarized in Exhibit 7.

Discussion

Although not a miracle cure, the Venture Team concept enabled the drug development process to proceed through several key phases in a substantially shorter time period. If this translates into approval time at the same rate or faster than previously experienced, the drugs will be entering the marketplace significantly sooner than before. In the pharmaceutical industry, first into the market often means capturing the highest market share for an important period of time and establishing market distinctiveness. The story is not without some cautions and costs, as evident in the challenges to Sinclair in 1989.

The Venture Team concept appeared to successfully address many of the challenges found in 1986. There was a clear shift to a rifleshot approach to drug selection and development, rather than the previous "shotgun," scattered approach. Rather than proceed through several phases of experimentation with multiple indications, dosage, or method of administration (i.e., pill, injection, patch, etc.) typical of the "shotgun" approach, the Venture Teams spent time analyzing and discussing the options as soon as possible. They would then "aim at a specific target" regarding indication, dosage, and method of administration. It resulted in dramatically improved relationships within the R&D unit. People appeared to be pulling together and focusing on the development of specific drugs rather than any other disciplinary, or territorial issues. This even helped improve the relationships among the drug development staff and the business unit, or marketing staff of the Division.

The Venture Team concept, with the development of the Venture Head and Operations Manager roles, appeared to clarify the leadership issues and remove obstacles to effective, multifunctional teams working toward collaborative goals. It also clarified accountability: people were responsible for helping to get the drug through the development phases, or to terminate it. Each professional represented a discipline, or function, but applied his/her talent and perspective to the specific drug. Interface issues became opportunities for communication and collaborative problem-solving, rather than linguistic and disciplinary boundaries that often look opaque and reject intrusion like a force-field.

Progress in addressing some of the challenges was independent of the Venture Team concept. For example, the integration of computer and information systems began during the data collection stage of the first study, and was successfully completed more than a year before the second study. This progress may have contributed to the impact of the Venture Teams.

The Venture Team concept appeared to clarify leadership, but did not necessarily help with the lack of management skills in scientists and physicians. As a matter of fact, the passion generated within the Venture Teams may have become a source of resistance for Venture Team members participation in extensive management development; they were too eager to get on with their drug development! With regard to confusing budgeting procedures, the Venture Teams appeared to have simplified budgeting procedures within their Teams, but created substantial budget planning difficulties.

Conclusions

This case study leads us to offer the following eight observations. We believe they may generalize to other settings, but urge careful consideration of situational factors in their application.

1. Change and innovation without strong leadership move toward entropy and are not focused. The leader provides inspiration, passion, and focus. The leader in a Venture Team needs to have complete formal authority to commit funds and resources to be effective in what is basically a small company within a large company.

2. Leaders of technical innovation must be technical experts. To establish credibility internally, with external investigators, and the regulatory agencies, the leaders of innovations must technically "know their stuff." Unfortunately, these benefits of strong leadership also place such innovations in a dependent position regarding the quality and capability of the specific leader.

3. Efforts should be organized around the product, in this case the drug, if the purpose of the organization is to develop drugs. When organized around functional or disciplinary concepts, it is not surprising that even reasonable professionals get drawn into defending the values and positions of their function rather than the product.

4. Innovative projects do not always work, so the effort must be structured so as not to punish failures. One of the Venture Heads made the observation that there previously were "ghost" drugs in the development process (drugs that should have been killed, but no one wanted to stop their projects or studies). In the pharmaceutical arena, it was noted that without back-up molecules (i.e., a molecule similar to the one under investigation, but with sufficient difference to suggest other possible effects), a Venture Team might fall prey to the same protectionism when evidence suggested that their specific drug was not performing as expected or desired.

5. Venture Teams, like other successful entrepreneurial innovations, will change the "heroes" of the organization to those in the Venture Teams from those who may have been in functional, or discipline-based departments. Departments and functional units are necessary and important, but equal value placed on all aspects of the matrix organization will be difficult to sustain. The members of functional departments may begin to feel like second-class citizens. If things are working appropriately, ultimately the Venture Teams will change the perspective of what a service (functional) organization is supposed to do and the functional Heads will catch the "Venture Spirit" (i.e., transform their previous "bureaucratic" orientation to an "entrepreneurial" one). The Venture Heads become people with a checkbook (i.e., people who had spending and contracting authority) who say to the functional leaders, now anxious to help: "I need your help, what can you do for me?"

6. Cost controls were critically perceived to be antithetical to the entrepreneurial spirit needed in Venture Teams, but the experience did not show that cost controls slowed any aspect of the process. The expected significant cost savings and increased revenue generating capability resulting from getting new products into the market first will be realized in future years. As with all R&D expenditures, this places executives who must account for current quarterly earnings in a dilemma.

7. The product team and product champion concepts are not new, but the lack of wider adoption suggests difficulty in implementing them. Although this issue may seem to be an effort to establish job security for consultants, the point suggests that individuals outside of the immediate organization may be needed to explore and implement such changes. Advisory boards, corporate staff units, and special Task Groups hired for the duration of the effort may be alternatives to consultants.

8. Given the exciting nature of involvement in Venture Teams and the pride emerging from participation in successful ones, which last for three or four years, what do the staff, and in particular the key staff (i.e., the Venture Head and Operations Manager) do for an encore? Other professionals who were members of the Teams feel that they can move in and out of functional departments. They see a desirable career path involving participation in several Venture Teams. Promotion of the Venture Heads or Operations Managers to higher management positions in the corporation may respond to the organization's needs to utilize such talent, but some top management positions do not provide the excitement of Venture Teams. One of the Venture Heads noted that after someone had led two Venture Teams, it would be unlikely that he/she would be interested in doing it a third time. The one hopeful metaphor is that of a performing artist, who having acted in or directed an award winning movie, play, or dance, views doing it again through the lens of the different challenges presented by a new theme or role.

Continued learning and research within organizations is the only approach to experimenting with these and other methods that may stimulate entrepreneurial innovation. A desire to try new methods, experiment, and learn seems necessary to creating an environment that fosters innovation. It seems unlikely that technical or product innovation can occur easily in large organizations without managerial and organization innovation. Avoiding simplistic generalizations and the often mediocre results from "me too" attempts to copy another organization's experience probably require each organization to consider its history, culture, industry position, human, and financial resources in designing experiments in entrepreneurial innovation.

Epilog

Due to delays in the publication process, this article was completed two years before the publication date. Several months before the publication, one of the authors attended a presentation made by the President of the Pharmaceutical Division of Sinclair, Inc. intended to recruit managerial and professional talent to the Division. In describing the distinctive strengths of the Division, he described the Venture Team concept and its continuing positive results. Using transparencies, he portrayed the excitement of involvement and benefit of the Venture Teams, now a standard practice, as evidence of the Division's high value placed on their human resources, human resource development, and innovation.

Exhibit 2 Status of Drug Development in R&D, 1986

Strengths:

1. The general mission is understood. 2. Efforts to initiate positive communication pay off and are rewarding. 3. Technical competence appears widespread. 4. Strategic capability to shift among added applications, in-licensed, and internal, discovery-driven drugs is good. 5. Helpful services are provided to other divisions. 6. Discretionary effort exists when people are motivated. 7. The leadership understands good science.

Challenges:

1. There is a shotgun versus a rifleshot approach to drug selection. 2. Key interfaces within R&D and between the R&D Division and other organizations are informal and at times ineffective. 3. There is unclear project leadership. Many scientists and physicians in management jobs have not had formal preparation for management. 4. Improvements in tactical/operations planning and budgeting procedures have not kept up with the growth of the Division. 5. Accountability of professionals to their function is greater than accountability to products or projects.

Exhibit 3 Recommendations, 1986

1. Allow more product candidates and impose technical and business termination criteria at later stages (recognize individual contributions whether or not drug was terminated).

2. Continue efforts to enhance relationships with the FDA (consider the FDA to be your customer; develop and follow a discuss/consent strategy with FDA).

3. Restructure worldwide drug development efforts.

4. Revise current project team practices: create new Venture Head position at a level reporting to the VP of R&D; develop functional job description; use competency model to screen, select, and train (should be a scientist-could be a physician); leads through NDA filing and approval; refocus current project management function to provide administrative and coordination support for Venture Heads; form Venture Teams early in development process and keep people involved from start to finish.

5. Up-date tactical/operations planning practices.

6. Develop and implement education and training programs for socialization into Sinclair and management development.

7. Integrate computer needs at project, department, and divisional levels.

8. Consider a dedicated Divisional drug/compound synthesis group to save time and reduce dependency on the other Division for synthesis.

Exhibit 6 Status of Drug Development, 1989

Strengths: All noted in 1986 were still present in 1989, plus:

1. Excitement, enthusiasm, and team spirit abound. 2. The Venture image attracts talent. 3. Maximum use of talent occurs within R&D. 4. Flexibility is demonstrated. 5. Venture structure creates visibility and focus. 6. Use of external resources has increased efficiency. 7. Balancing business goals and R&D goals.

Challenges:

1. Coordination of worldwide efforts is uneven and wasteful (same challenge as in 1986 but to a lesser degree). 2. Quality of relationships with the FDA is uneven (same challenge as in 1986 but to a lesser degree). 3. Scheduling and shipping drug supplies for clinical trials is troublesome, sometimes causing problems for clinical investigators (a similar challenge as in 1986 with synthesis). 4. Priorities are not established among groups with conflicting demands. 5. The perception exists that costs of drug development are substantially higher. 6. Capacity planning of functional resources is not keeping pace with operational demands of the Venture Teams. 7. Functional departments do not feel as valued as they had previously. 8. There are unclear career paths for Venture Heads and Operations Managers.

Exhibit 7 Recommendations for 1990 and Beyond

1. Form Venture Therapeutic Areas to provide a common structure for linking discovery, development, and business units.

2. Institute bi-monthly meetings for Venture Heads, Operations Managers, and Functional Department Managers for update review and planning.

3. Clarify responsibilities of VP R&D to include strategic allocation of resources, arbitration of conflicts, and re-allocation of resources where necessary.

4. Add resources to the functional departments to build their capability for the long term needs of R&D.

5. Establish multiple career paths for Venture Heads and Operations Managers.

6. Design and conduct training and development programs where necessary (i.e., management development, serving the internal customer, etc.).

7. Integrate worldwide drug development process.

8. Establish "floor" for discovery funding.

9. Extend activities to increase the quality of the relationship with the FDA.

10. Address process chemistry bulk drug synthesis and supply problems by establishing a group that would serve only the needs of R&D.

11. Form Venture study groups to exchange experiences and ideas (i.e., facilitate learning across Venture Teams).

References

Boyatzis, R.E. The Competent Manager: A Model for Effective Performance, (New York: John Wiley & Sons, 1982).

Boyatzis, R.E. and Greenley, R. "Organizational Competency Analysis: Studies of High and Low Performing Organizations." Paper Presented at the Annual Convention of the American Society for Training and Development, St. Louis, May, 1986.

Dalziel, M.M. and Schoonover, S.C. Changing Ways: A Practical Tool for Implementing Change Within Organizations, (New York: AMACOM, 1988).

Jick, T.D. "Mixing Qualitative and Quantitative Methods: Triangulation in Action," Administrative Science Quarterly, 1979, 24, pp. 602-611.

Litwin, G.H. and Stringer, R.A. Motivation and Organizational Climate, (Boston: Harvard University Press, 1968).

McClelland, D.C. Human Motivation (Glenview, IL: Scott Foresman and Co., 1985).

Biographical Sketches

Richard E. Boyatzis is Professor of Organizational Behavior at the Weatherhead School of Management, Case Western Reserve University, Cleveland, OH. Dr. Boyatzis was President of McBer during the initial project presented in this paper.

Mary B. Esteves is President of Integra Consulting, a member of the Integra, Inc. group, Philadelphia, PA. Ms. Esteves was a Senior Vice President of McBer and Account Executive for the pharmaceutical company, called Sinclair, Inc. in this paper, during the entire project presented in this paper.

Lyle M. Spencer, Jr. is President of McBer and Company, Boston, MA, a member of The Hay Group. Dr. Spencer was a Senior Vice President of McBer during the entire project presented in this paper.