Setting the Pace of Change in Life Sciences

Patti Hall, Life Sciences PracticeContributed by Patricia "Patti" Hall, Life Sciences Practice Quick Leonard Kieffer

Although it has perhaps become cliché that creating effective change in any organization requires the commitment of all of its members, this is, in fact, particularly true for companies in the life sciences industry. As a result, change management skills have become a critical qualification sought when identifying the most highly qualified candidates at every level of a life sciences organization.

This increased focus has been prompted by a complete upending of the business model of life sciences companies in recent years. New products are no longer automatically celebrated – or even accepted; instead, they must demonstrate both clinical and cost effectiveness. As a result, life sciences companies have been forced to navigate a cultural shift that puts more emphasis on developing innovative, value-based products, and less on delivering the dazzling blockbusters that have traditionally defined the industry's promise and potential – a change that is challenging on several fronts.

1. Articulating a compelling mission. Companies must be able to maintain the high sense of purpose and commitment of employees who joined the industry because they wanted to achieve "big things."

2. Fulfilling a global mandate. By definition, value-based products have global applications, necessitating that companies work across cultures to effect a global transition, while maintaining employee focus and ensuring quality standards.

3. Responding to new market dynamics. The impetus to develop more value offerings is coming from providers and payers, whose institutional market power has increased as a result of healthcare reform. Providers and payers have long believed that technology is the greatest contributor to rising healthcare costs (although this is a perception that has been debunked by research), and they are seeking to balance the ledger.

To be effective, culture change must engage everyone at every level, on a global scale; this is the core reason that life sciences companies are looking to "seed" change leaders throughout their organizations, an approach has long been proven to work – and to pay real dividends.

A McKinsey study of a group of life sciences companies demonstrated the ability of effective change management programs to bolster companies' returns. Eleven companies in the study integrated change at every level of their organizations, from senior and middle managers to frontline employees. The leaders at each of these companies delivered on two priorities for effective change: 1) explaining the reasons for change, to engender both understanding and increased engagement from employees; and 2) making sure that everyone at every level understood their individual responsibilities for implementing the change. The result was a 143% average return on expectations.

That approach may speak to internal stakeholders, but the question remains – how can changing relationships with payers and providers be successfully managed? This requires recruiting talent with the vision to see how the products they are developing fit into the broader scheme of patient care, including understanding the provider and payer perspectives.

Providers are hiring more physicians, effectively transitioning purchase decisions from individual practices to sophisticated purchasing departments with broad market power. Driven by a system that is designed to reward wellness and prevention over treatment, payers are seeking to establish more favorable payment terms, including value-based reimbursement and payer/technology risk share arrangements.

In previous blogs, I have discussed the importance of cross-functional teams for life sciences companies in developing products more efficiently by balancing clinical, regulatory, production, and sales/marketing priorities throughout the development process. To be most effective, the cross-functional teams must also look outside the organization, incorporating the views of external stakeholders into their planning and execution in order to strengthen those relationships and deliver better results.

While it is true that engaging external audiences takes the cross-functional team to a new level, the payoff is in developing more trusting relationships all around and gaining the insight to develop products and services that better meet market needs.

Life sciences companies have a compelling message to rally their stakeholders. In the end, change means having more resources to do the kind of work that makes peoples' lives better; that includes generating the level of returns that fund blockbuster product development over the long term. What is needed is talent at every level, and in every functional area, with the skills to set the pace of change.