Commentary on End-Game

Commentary

If you arbitrarily fix or narrow any of the dimensions contributing to commercial success then you allow decision makers to ‘hide’ within that dimension. They point to a failure in that dimension as an excuse to shut down the entire effort, confident their poor decision making will never be uncovered (i.e., due to falsification bias+). For example, if I say a drug must show a 20% reduction in some clinical measure, it’ll be much easier for me as the decision maker to kill that drug than if I say the drug needs to show blockbuster+ revenue potential. The clinical measure is a quantifiable yes-no answer at the end of a long string of suppositions. The blockbuster measure is a future full of opportunities, with many levers to be pulled to allow us to reach our destination.

In World Class R&D we leave open all the dimensions, including the configuration of the physical product. We restrict researchers only to the scope of scientific expertise used to justify their original mandate (i.e., the scientific platform where they are expected to develop a scientific competitive edge+). This allows a committed researcher to always claim they have blockbuster potential, and with unlimited time and resources they will often be right. This makes the end-game+ decision much more complex, and in the absence of cheap heuristics+, much more fraught with emotion.

We’ve made end-game much more challenging than it is today: research units are no longer subjected to arbitrary metrics and decision makers must take into account the satisfaction of the research team in making the decision. We fully subscribe to the doctrine of discontinuous discovery+. Our inability to ‘predict’ the appearance of the next blockbuster product in no way detracts from the blockbuster potential of a research unit. We routinely ‘recalculate’ the mortgage repayment schedule and interest rate on our investments into this research unit. There are no (few) clear cut signals+ of the need to end any particular research unit: success in the other investment categories+ means we’re constantly dealing with the best of the best.

We bring to this challenge an arsenal of insights from the behavior fundamentals+ to design an end-game decision mechanism supportive of the firm’s brand as being the best R&D franchise program in the industry. Our formal decision mechanism takes into account all the available signals about the potential of the research unit (e.g., share prices, trust levels). It has the ability to learn from past decisions. It reinforces the sense that the game just ended was on a level playing field, even if the decision went against you. Think of end-game like a product return policy for retail consumers. It may cost a bit more when seen as a single transaction, but from the point of view of overall consumer satisfaction and repeat business, it’s the best policy.

End-game Measures of Success

How will we know when we’ve done end-game well?

  • We gave many research units the chance to continue with their secondary goals (i.e., sub blockbuster+ pursuits) and we see very few ‘missed’ blockbusters (i.e., we avoided falsification bias in our end-game)
  • We can point to several successful firms with employees who were formerly members of our franchise program
  • We can point to several new research units formed by employees of research units that ended well
  • We have a solid record of booting management from research units who were not first to warn the firm when Mother Nature left the building+
  • We have a solid record of cease-and-desist orders with former research unit staff who attempted to take company-controlled Intellectual Property and exploit it to their own advantage

End-game done well does not incur additional expenses or naked investment losses. You will spend more tangible cash and there is no intangible asset (debit) to offset the cash outlay (credit). However, since the research unit doesn’t shut down we don’t realize a loss (see the 30-70 rule). Should a decision be needed for actual shutdown we control the timing of this decision to allow it to be offset by ‘wins’ from other research units. End-game-done-well does not negatively impact Profit & Loss statements or increase liabilities on the Balance Sheet.

Independent research units give the only unbiased vote on the value of membership+ in our franchise program: they vote with their pocketbook. We don’t cater to these members any more than we do to our firm-financed members and yet they stay on as members. If an independent research unit discontinues membership, either deliberately or through default, we take note of this (rare) moment to better understand our performance at end-game. Why do they discontinue membership and how does this reflect on the services we provide to research units who do not have an option of ending? If we do end-game well we preserve the moment to be able to ask this question of the independent research unit.

The main reason we do end-game well is so researchers are not looking over their shoulder when they do research. They are confident that today’s good research will be acknowledged regardless of the curve balls Mother Nature throws their way.


Home Page October 2010