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.

More on Vision Statements, Alignment and Strategy

The last post discussed how Mr. Hassan, CEO of Schering-Plough, developed a powerful, compelling vision as a key foundation for his business turnaround, and how this vision served both to create the strong workforce alignment required for Disciplined Execution, and also for Creative Renewal. This post can be viewed in the blog entry entitled Creative Renewal: Schering-Plough's Turnaround.

As a reminder, or in case you haven’t read previous blog entries, to our way of thinking here at the Center for Corporate Renewal, we think that sustainable growth depends critically on three core competencies. A self-renewing company must be able to…

Think with STRATEGIC FOCUS: Make sense of a changing environment and gain focus on the next right strategic move
Act with DISCIPLINED EXECUTION: Align and mobilize the entire organization behind this new strategic focus
Lead with CREATIVE RENEWAL: Renew the entrepreneurial spirit, while enabling your organization to continually cycle through stronger and stronger strategy-to-execution phases

A strong, compelling vision can also serve as a key driver for Strategic Focus. In an earlier blog entry we discussed how, prior to Mr. Hassan’s ascendancy to CEO, the company had to a significant extent lost it’s way due to an entire laundry list of serious problems, most of which were of S-P’s own making. And while under the tremendous pressure of trying to put out all those fires, the company addressed them with a fire-fighter’s perspective: they just bounced around from crisis to crisis, from a tactical/ operational perspective: without any kind of coherent, over-arching, forward-looking framework in which to understand and “locate” their current woes, and also see beyond them to a genuinely new future.. As a result, the company became somewhat lost.

Anyway, when Mr. Hassan and his team wrestled with the future direction of the company, out of a great deal of friction and heat emerged a powerful, compelling vision for the future. And now to the point: this compelling vision provided a “guiding light” to help the company navigate successfully through the dark fog of tremendous uncertainty, strong competitive thrusts, and constant marketplace flux. That is, the company’s compelling vision helped the senior team to think with Strategic Focus, make sense out of a myriad of complex, constantly changing environmental signals, and to discern the appropriate course of action in alignment with the company’s long-term vision for the future.

A genuinely compelling and powerful vision has a kind of beauty about it. A vision that’s the real deal connotes something deeper, higher, and more meaningful than the usual vision statement. How? The run-of-the mill vision statement generally speaks to some form of “winning” (getting to the top of the heap) and to tremendous financial success. (By the way, both of those are great things.)

The problem is that such visions define the desired end-state solely in financial, operational, measurable terms. Such visions are strangely empty: they lack the emotional and spiritual resonance of visions that paint a vivid picture of the kind of company it intends to become! That is, they don’t paint a vivid picture of the “guts” of the company: its deep purpose, values, and the unique, authentic contribution it intends to make to its customers, and to the larger world.

Financially driven vision statements are generally written by senior management, and for senior and upper-middle management, financial goals are indeed the primary driving force of their lives. The problem, however, is that for the rank-and file employee, purely financial/ operational visions don’t generate sustainable motivation, passion and commitment. A ton of scholarly research bears this out. And the great body of employees are the folks who actually enact the vision – who make it happen.

If you want to capture and release the vast stores of passion, energy, commitment and drive to succeed in your entire workforce, you need a passionate, energetic, meaningful, contribution-oriented vision of the future. If it’s genuine, if it’s the real deal, people can genuinely rally around it and get behind it. If you have that kind of authentic vision, you won’t have to work so hard at trying to “enlist” them or get “buy-in”, both of which are generally thinly veiled sales efforts or compliance and control efforts.

Wow, I went on longer than I expected. I’ll move to a new subject next time.

Dean Robb, Ph.D.

Creative Renewal: Schering-Plough's Turnaround

Last week, we discussed how Mr. Fred Hassan (CEO – Schering-Plough (S-P)), during his initial moves at a business turnaround, also set the stage for a new organizational capability for “Disciplined Execution” – the ability to align and mobilize the entire organization behind the company’s new strategic focus. This post can be viewed in our blog entry “Disciplined Execution: Schering-Plough's Turnaround.”

This week, we’ll discuss the initial moves Mr. Hassan made in the area of “Creative Renewal” – the ability to renew the entrepreneurial spirit, while enabling the organization to continually cycle through stronger and stronger strategy-to-execution phases.

Both of the last two blog entries mentioned the critical importance of a “compelling vision” to both Disciplined Execution and Creative Renewal. I’d like to spend a few moments amplifying that idea a bit.

As mentioned in last week’s entry, a compelling vision provides a key foundation for Disciplined Execution. Previous to Mr. Hassan’s tenure at S-P, the company was in the doldrums. In some sense, the company had lost its way. It was reacting to the marketplace with a series of short-term, tactical maneuvers; however, there did not seem to be any overall “rhyme or reason” – i.e. an overarching, proactive, forward-looking, coherent framework of purpose or direction. It seems that the company was behaving something like a pinball in a pinball machine – ricocheting about from problem to problem, incident to incident. And, because of this lack of rooting in something larger – some kind of powerful vision that would provide people with a sense that the company had a larger, more long-term vision or game plan, each of those little reactive “ricochets” seemed rather meaningless. And, because there was no larger vision, the company just seemed to become more and more fragmented, reactive, and purposeless. It isn’t easy to see why employees became detached and demoralized – and thus, unmotivated to give their all.

A clear, compelling – and genuinely shared – vision can overcome this problem. Short-term problems don’t overwhelm, because they are set into a larger, longer-term, purposive and proactive context. It’s like the company knows where it’s going, and WHY it’s going there. I’m not a religious guy, but this idea isn’t new. I think that in the Old Testament, the prophet Isaiah (I think) said something along these lines: “Without vision, the people perish.”

A clear, compelling vision also provides a critical foundation for Creative Renewal. In fact, an exceptionally powerful vision is at the core of the entrepreneurial spirit. After a company has been successful, and has grown into a more mature phase of development, all-too-often the primary “spirit” driving the company becomes nothing less, and nothing more, than the “next quarter’s financials.”

In the start-up phase, however, this drive for financial success is inextricably linked to a profound vision – of how this new company will make a difference; of what kind of value creation and contribution the new company will make. This burning vision is the stimulus for innovation and adaptation, as well as a kind of burning, or urgent, commitment. It is a large part of why so many people love to “throw in their lot” with a new company, even given the risks involved. A new, entrepreneurial company is just plain exciting and fun. There is unbounded opportunity for contribution, innovation, performance and reward, together with an atmosphere of pride, vision, togetherness (“we’re all in this together”), excitement and – yes – fun.

That burning energy doesn’t have to die as a company grows older (chronologically). It can remain young (spiritually) if it can retain – and continually renew – that initial coupling of powerful vision with the drive for financial success.

We’ll continue this discussion next week.

Dean Robb, Ph.D.