Innovation and Value Creation at Schering Plough

The last blog entry, More on Vision Statements, Alignment and Strategy looked at how Schering-Plough’s (SP) new “compelling vision” was a primary tool in helping senior leadership unlock and channel vast stores of passion, energy, commitment and drive to succeed in their workforce.

This week’s blog entry will focus on how SP channels unlocked workforce energy into innovation. Unblocking employee passion, energy and commitment – opening up the floodgates – is only the beginning. It’s critical to channel that energy productively. What I mean by “channel” is 1) to keep unlocked workforce energy continuously open and flowing, 2) align it with company mission, vision, values and goals, and 3) create the means or mechanisms through which that energy can be continuously converted into new forms of added value – for customers, employees and stockholders.

There are both structural/technical, as well as human, factors involved in the process of continuously channeling workforce energy into new forms of added value. We’ll start with the structural/technical side of SP’s innovation initiative, and then, in later blog entries, we’ll talk about the human side of their innovation plans.

In SP’s case, prior to the advent of Mr. Hassan as CEO, SP was in serious trouble on the innovation front. In an earlier blog entry we discussed how SP had fallen seriously behind their competition in their ability to create new products (see Corporate Renewal as Turnaround Strategy: Schering-Plough).

Mr. Hassan’s first priority was simplification of their new product development process, and a re-orientation of its central focus. What do I mean by “re-orientation of its focus”? Prior to Mr. Hassan’s tenure, the previous new product development process was driven by R&D – creating new molecules that could possibly be converted into medications to be sold to their customer base. The new process started with the customer – with doctors and patients. The old process was to 1) survey customers using standard survey tools and methods, 2) develop a new product, and finally, 3) test market it. (And hope like hell you got it right). The new way is to spend time with customers, get to know them as people, observe and work with them in their natural environment, and through a deepening collaborative relationship, find out first-hand what their real problems and concerns are.

It’s a different mindset and a different approach. It’s customer-centered rather than technology- or product-centered. A few years ago, this was known as “customer intimacy,” but the previous focus was somewhat more aimed at how customers were treated (i.e. customer service). This new approach takes customer intimacy several steps further, and invites your customers (both current and prospective), as well as other stakeholders/gatekeepers, smack-dab into the core of your business!

A parallel priority was to simplify and integrate the incredibly complex process of moving “molecules to market.” This took substantial process redesign. Previously, the process was highly “silo-ized” – meaning that the process was purely linear, where each key function needed to get new products into customers medicine cabinets (R&D, marketing, finance, operations, sales, etc.) worked separately, and when one function was “done” working on their piece of the puzzle, the completed work product was “thrown over the wall” to the next functional silo so they could “do their thing.” And on top of that, each silo was very steep (many layers of management), so that decision-making within each silo was slow and difficult.

As we’ve all learned, this is one helluva lousy way to operate in a highly dynamic, complex, ultra-competitive and fast-changing business environment. The old way is incredibly slow, mistake-ridden, blame-ridden, and accountability-free (who has overall accountability when the process is so fragmented and silo-ized?).

The new value-creation process (NPD) is radically simplified – via reengineering – to eliminate redundancy, workarounds, unnecessary complexity, and to improve speed and flexibility. The process is managed cross-functionally and collaboratively – meaning that ALL required players are involved every step of the way, and are all involved in decision-making. Although at different phases of the process, different functional players have differing degrees of “say” in decision-making, depending on what’s most important at that point.

The team managing the value creation process might be understood in a way similar to the compound eye of some insects – say, like the dragonfly. Each team member serves as a different “facet” of that compound eye, and the collective intelligence of the team is drawn upon to synthesize all the different facets of understanding and points-of-view, and to make intelligent decisions based on that synthesized (or integrated) understanding.

In parallel with process simplification, and cross-functional management, the company de-layered their management structure, to simplify and speed up decision-making. Presently, there are only 5 layers of management from shop floor to CEO at Schering Plough.

More about all of this next time.

Dean Robb, Ph.D.