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Designing an agile transformation in pharma R&D

Pharmaceutical companies are increasingly turning to the concept of agility to help them transform their R&D functions.

Many pharmaceutical companies are seeking to transform their R&D engine into a source of competitive advantage. For some, the driving force is a change in leadership, a major M&A deal, or a shift in the pharma landscape.1 For others, the impetus for transformation might come from investor pressure to fix poor productivity or a pipeline gap. But whatever the motivation, leaders are increasingly turning to the concept of agility to help them navigate a volatile, uncertain, complex, and ambiguous external environment.

In broad terms, an agile organization is one that combines a stable backbone of core processes and capabilities with a high degree of flexibility for rapid response to change. For an R&D organization, the backbone typically consists of functional expertise and leadership; standardized processes and stage gates; the tracking of key performance indicators (KPIs) along the pipeline; clear decision rights and accountabilities; and a common purpose and set of values. The stability these elements provide is critical in an industry where patient safety is at stake. Flexibility, on the other hand, involves spotting and seizing external opportunities as they arise; developing, testing, and refining new solutions at speed; and rapidly reallocating resources as priorities change.2

An example helps illustrate the power of agile transformations. Four months into a transformation designed to increase R&D capacity, one pharma company was able to devolve 80 percent of decisions to team meetings and established daily progress discussions to accelerate development times. By the end of the first year, it had successfully extended agile working to more than a dozen departments and over 700 scientists—and, as a result, managed to double R&D capacity without adding more resources.

What distinguishes agile transformations from the cost-oriented transformations of the past is their focus on improving the quality of outcomes. For R&D, that could mean raising the standard of evidentiary packages, reducing lead times for bringing products to patients, or taking scientific innovation to a new level. In our work with early adopters of agile in pharma R&D, we’ve found it can unlock considerable value provided companies follow the steps outlined below.

Why R&D transformations are challenging

All transformations are difficult, but those in R&D come with an extra layer of complexity:

  • A science-dependent business. Pharma is not alone in being a research-intensive industry that relies on placing a small number of big bets, but it also has other complicating factors: high investment levels, long development timelines, and high rates of failure for factors beyond a company’s control.3
  • Risk-averse mind-sets. Because R&D staff tend to be highly specialized and accustomed to ways of working that are rigid and sequential, moving to an agile model can be disorienting in the early stages until the benefits start to materialize.
  • Intense competition. As innovation cycles accelerate, competitor assets may be separated by only a matter of months—especially in rapidly advancing areas such as oncology—so transformations need to be planned so as to minimize distractions that could delay critical projects.
  • Multiple customers. Since pharma companies have many external stakeholders—regulators, payers, providers, patients—identifying how best to serve key customers across a range of products can add complexity to transformation planning.

Despite these risks, pharma companies can’t afford to leave their R&D organizations untouched; nor would their investors allow it. To improve outcomes and responsiveness, leaders need to embrace a new approach.

An agile approach to R&D transformation

Unlike other transformations, agile transformations are comprehensive, encompassing the whole R&D organization (Exhibit 1), and iterative, with the target state repeatedly refined as the organization learns from pilots and the early stages of rollout. As outlined in the McKinsey article “The journey to an agile organization,” an agile transformation typically begins with an “aspire, design, and pilot” stage to determine the desired future state, followed by a “scale-and-improve” stage in which agile working methods are rolled out across the whole organization. This article outlines how that approach can be applied to the R&D organization, with a focus on the first stage, in which companies start to define their innovation engine.

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Top-team aspiration

Essential to agile transformation is having strong and aligned leadership from the top. Agile transformation begins with this top team defining their aspiration: what do they want to achieve in terms of qualitative or quantitative impact? That might mean reducing time to market, rethinking the product portfolio, boosting R&D productivity, spurring innovation, or improving the patient experience, for example. With a clear aspiration in mind, the team then reexamines the company’s R&D strategy and key areas of focus, whether they are therapeutic areas, pathways, or modalities. In some cases, companies will enter new areas, deepen their focus on existing ones, or exit business areas. In others, overall strategy will not change significantly. Either way, reaching alignment and clearly communicating the new R&D strategy to the rest of the organization is essential.

The next step is for the company to assess its current level of agility through a qualitative and quantitative diagnostic. We’ve found that a good way to approach qualitative assessment is to describe “best-in-class” and “average” performance in a dialogue with R&D staff and then ask how they think their company compares with these benchmarks. For the quantitative assessment, companies typically compare their performance with peers’ using outside-in analytics. The speed of decision making, portfolio turnover, and the ability to mobilize behind winning projects can act as proxies for agility.

Having understood the company’s starting point, the top team then begins to sketch out what agile will look and feel like in terms of the structure and culture of the future organization. It could mean delegating more decision making, soliciting earlier stakeholder input, or encouraging risk taking. Finally, leaders align on the desired speed of change, which partly depends on the catalyst for the transformation. A major acquisition may prompt the rapid rebuilding of the organization from the ground up, for instance, whereas the arrival of a new head of R&D may allow for more gradual piloting and scale-up.

The goal of this phase is to design a realistic transformation that can deliver on objectives without jeopardizing the timely launch of valuable medicines.

Blueprinting

Once their aspiration is in place, R&D leaders draw up a blueprint identifying which changes will drive the most value and how these changes will be unlocked (Exhibit 2). The aim is not to craft a detailed design but to quickly develop a minimum viable product (MVP) that provides enough direction for the organization to begin testing new processes.

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Blueprinting is an iterative task. First, R&D leaders identify where the greatest value lies in terms of functions, processes, or stages of drug development. Then a dedicated transformation team defines the target structure of the organization, identifies where agile ways of working should be deployed, and specifies how the company’s backbone processes, technologies, capabilities, culture, and mind-sets must change—sketching out initial ideas and then refining them over several rounds. Finally, the team sketches out a road map for driving transformation.

Companies seeking to increase their agility have multiple levers to choose from in planning their approach (Exhibit 3):

  • Ensuring asset teams are fit for purpose and empowered. It’s not unusual for the cross-functional teams that manage the development of specific assets or programs to grow too large or become less effective over time. Tell-tale signs include complex matrix structures, poorly defined decision-making rights, and a tendency to seek consensus on every issue. Creating a team that is “fit for purpose” starts with identifying who must be on the team and who need not be. Teams can also shrink and grow as an asset’s needs evolve. Some asset teams will benefit from engaging medical and regulatory specialists early in the process. Others may want to bring in digital experts or “translators” who speak both the language of the business and the language of technology. Whatever the composition of the team, it must have decision-making authority if it is to help accelerate drug development.
  • Reviewing the portfolio. Many transformations will involve reviewing the portfolio to ensure investments are aligned with strategic priorities and areas of greatest opportunity—which could mean entering or exiting some therapeutic areas. Following such a review, one top ten pharma company exited multiple therapeutic areas amounting to 30 percent of its clinical portfolio. Agile organizations build a shared view of portfolio priorities to improve the speed and consistency of decision making. They take care to dedicate enough capital and talent to likely winners, often reallocating investment and people from less promising projects. They act quickly to shift resources internally and across their networks of vendors, whether that means running extra trials or opening more sites. Some leading pharma companies have developed resource-management systems that sever traditional links with multiyear budget cycles and allow resources to be reallocated as frequently as every week.
  • Redesigning processes from beginning to end. To achieve a step change in R&D timelines, companies need a radical approach to process design. Which processes to target will vary from company to company, but typical areas of focus include protocol design, study close-out to filing, patient recruitment, and portfolio governance. A design-thinking approach can be used to reimagine key processes, centered on understanding user experience, ideating around ways to meet their needs and rapidly testing prototype solutions. Taking the example of trial design, in an agile organization, one team is typically accountable for an entire process to minimize handoffs. From the beginning, this team seeks and incorporates input, not only from internal functions but also from external stakeholders, including investigators, payers, patients, physicians, and regulatory agencies. The team seeks feedback on an MVP and builds on the response through multiple iterations until it reaches a “good-enough” solution. One R&D organization we worked with used early physician and cross-functional input to redefine trial design and developed a standard process and MVP within weeks.
  • Collaborating with external partners to create value. Pharma companies are increasingly working with other organizations to innovate. In sourcing, for instance, some companies are investing in promising early-stage companies that they may later want to acquire (“build to buy”) or using venture-capital funding to access scientific advances and promote an innovation culture. Similarly, in asset development, companies can manage fluctuations in volume and gain access to cutting-edge technologies by partnering with sophisticated vendors that execute clinical trials, manage regulatory filing, or take on other complex activities, often taking on a share of the risk at the same time. As smaller players embrace “virtualized” development, one leading pharma company has externalized more than 50 percent of its activities, particularly for mature-product R&D. It uses vendors in areas ranging from innovation sourcing to clinical operations, pharmacovigilance, regulatory, and chemistry, manufacturing, and controls. Deriving maximum value from such partnerships calls for advanced vendor-management capabilities that support sophisticated partnership structures and risk-sharing models.
  • Embedding digital tools in ways of working. Sophisticated analytical approaches are a key enabler of agile R&D transformations. In clinical trials, for instance, analytics and machine learning can help companies design protocols and select sites to maximize recruitment rates and reduce variation between sites. Once trials are under way, the use of real-time analytics allows companies to rapidly identify sites that are off track so that they can intervene early on or open new sites. Similarly, they can assess risk across the portfolio by using real-time modeling tools that combine internal data with external competitive intelligence. When new insights emerge, companies can reallocate resources to maximize overall portfolio value.
  • Shifting to an agile mind-set. No transformation can happen without a mind-set shift that puts end users firmly at the center of product and process design and helps employees adjust to making decisions earlier based on preliminary, rather than complete, information and sharing work in progress rather than finished products. As part of its agile transformation, one major pharma company decided to transfer 70 percent of decisions from governance bodies to the asset teams closest to the actual data. To support such shifts, senior leaders must redefine their role from hands-on decision maker to visionary and coach.
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Agile pilots

Having defined a blueprint, companies need to put agile principles into practice. It’s helpful to pilot new processes in parallel with the blueprinting process so that teams can see and feel the impact of agile methods while they are still building capabilities around new ways of working. For the best chance of success, pilots need to be visible for all to see, managed by highly capable leaders, and large enough to involve multiple teams. In addition, keeping them separate from the broader organization helps reduce the number of interfaces between agile and non-agile working areas where friction may arise.

In an R&D transformation, pilots could address specific asset teams or trials, a single function, a full therapeutic area, or a single R&D location. One company we know developed a new asset-team model, spent two or three months piloting it, and then rolled out the revised model across its entire R&D portfolio. To speed up the process, it used agile coaches embedded in teams and agile training programs that began with 300 staff and gradually scaled to 1,000 people.

Having learned from the “aspire, design, and pilot” phase, companies can then apply their proven new ways of working to the broader R&D organization through a “scale-and-improve” effort.4

Learning from agile transformations

As companies embark on these changes, they can apply agile methods to the transformation effort itself. We have identified five factors for success:

  • Vision. Sharing a well-articulated vision of why the transformation is important and what agile working will look and feel like.
  • Credibility. Appointing a transformation leader who has decision-making power, the respect of the organization, and the support of senior executives, and ensuring the team has the right mix of agile expertise and R&D content knowledge.
  • Embedding new skills. Using agile coaches to establish new ways of working and developing new expertise in areas such as analytics, clinical-trial design, and vendor management, whether internally or via external partners or vendors.
  • Cultural change. Employing a team to help manage and communicate change and translate agile principles into concrete actions, such as how often meetings are called, who is invited, and how leaders provide coaching and feedback.
  • Course correction. Using digital tools and KPIs that reflect blueprint priorities to monitor progress in real time and navigate around the inevitable bumps in the road to keep the transformation on track.

Excitement is growing in the pharma industry about the value agility could unlock in R&D. To capture that value, companies need to plan their transformation thoughtfully and take advantage of emerging best practices from pioneers of successful agile implementation.

For more on agile transformation in pharma R&D, please see “R&D in the ‘age of agile’” and “Agile: The new active ingredient in pharma development.”

About the author(s)

Aliza Apple is an associate partner in McKinsey’s San Francisco office, Harriet Keane is an associate partner in the New York office, Rachel Moss is a partner in the London office, and Valentina Sartori is a partner in the Zürich office.

The authors wish to thank Christopher Handscomb, Robert Hsiao, and Shail Thaker for their contributions to this article.

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