Timely Halt to Untenable Pursuits

Done well, shutting down a commercialization+ effort can be harder than starting a new one. Cheap heuristics+ aside (‘this is a chance for me to demonstrate my leadership!’), a shutdown challenges the decision maker with much shorter timeframes, greatly heightened emotions, and many more players, both internal and external. The way we shut down a pursuit reverberates all the way back into the passions and emotions of individuals working on that next blockbuster+ prototype+, and prototypes already underway. A poorly executed shutdown often keeps intact the poor decision maker: they rarely suffer consequences of their decision, can easily justify their decisions since no further evidence is forthcoming, and they feel free to wreak havoc on future pursuits. And, of course, who wants to be known at being best in the industry at shutdowns?

We would hold wakes at the death of a project. The whole team would get together and have a meal and some drinks. Pharmaceutical Industry Client (~2000). Personal Communication

For World Class R&D, the handling of any shutdown looms large. We dedicate a future home page to the topic. You’ve got to do shutdown well to reach World Class R&D status.

Overview

Better selection, preparation of prototypes, and better management of commercialization, will dramatically improve today’s success rate in commercialization. It’ll be harder for bad decision makers to hide. But we can’t eliminate the few times when Mother Nature throws us a curve, or when unbridled Greed derails our attempts at better management. For those few cases we need a deliberate process for shutting down commercialization, one that respects the heightened emotional attachment we’ve deliberately nurtured for the prototype. We need a process that keeps intact the enthusiasm and passion of our prototype team for that next pursuit.

We need to know when to stop; when the benefit of further commercialization will exceed the benefits we can see from doing something else. And, we need to know when not to stop. Obstacles and major changes in direction are common in commercialization of innovative products. Done well, we handed the commercialization team the raw materials they need to tack and turn as challenges arise. We've even given them several familial prototypes to allow them to pick the best one. There should rarely be a definitive signal that a pursuit needs to just stop (i.e., TeGenero+, FIAU). We put in place mechanisms that divorce our rich, intricate understanding of the many possible work-arounds for any obstacle, from the cold cash logic involved in this go, no-go decision.

Cheap heuristics are prohibited. This is not a numbers game – there is no ranking or quantitative calculation of risk. There are no hurdles or cutoffs. We deliberate the decision to shut down the prototype with the same seriousness that we took for the earlier decision to graduate the prototype. We are just as concerned with false negatives as with false positives. There are tens or hundreds millions of U.S. dollars at stake for the participants in commercialization. They need to sense they are on a level playing field from the opening play through to the closing bell.

Don't talk to me about aesthetics or tradition. Talk to me about what sells and what's good right now. And what the American people like, is to think the underdog still has a chance. George Steinbrenner

This is not a quick decision, or a moment to ‘demonstrate leadership.’

We may set it up so the franchisee+ is paying its own money for commercialization of its own prototype. No one gets paid the big bucks unless the prototype is successfully commercialized. The firm doesn’t get a blockbuster. Vendors do not get pay-for-performance+ bonuses (i.e., typically service vendors). The franchisee doesn’t get its largest milestone payment from selling the prototype. Failure for them becomes a double financial hit: commercialization payment, plus the loss of the final (largest) milestone payment. Shutdown is very costly to many players. It will be resisted, vehemently.

Signal the Need for a Go, No-Go Decision

Key to the management of regrets in a shutdown is having given emotionally-involved players the sense that they had every opportunity along the way to change the outcome. They receive timely notice that the game is not going well, to allow them time to execute contingencies (e.g., go to plan B) or to redouble efforts. We provide this through Alternate Competing Hypotheses+, which is a tallest-man-standing approach. The tallest alternate at the start has, obviously, a blockbuster product valuation. If during the course of commercialization, alternates with poor product valuations+ continually rise to become ‘the tallest’, that none of the contingencies executed by the team seem to be changing the game, this may signal the need for a formal go, no-go decision. Teams receive timely notice in the fact that we track alternates and their attendant product valuations on a continual basis.

The franchisee pays commercialization partners and must decide whether to continue with the current team members or to change the mix. This could be the time to step back for a thorough review of all the alternates: perhaps it’s time to prioritize work for alternates that have been under-served. Perhaps it’s time to bring forward future revenues. Perhaps it’s time to find a better way allocate remaining commercialization spend (e.g., faster or slower). We put the franchisee in charge because they have the most at stake and have the most intimate understanding of the prototype. If they can’t find a timely fix then perhaps it is time for a formal go, no-go decision by the firm. The franchisee will be made responsible for fixing persistently poor product valuations

It’s the firm ultimately paying the bills, and the firm decides when the formal (go, no-go) decision mechanism should be engaged. The firm pays periodically for commercialization work covering an extended time-frame, and naturally watches product valuation closely as the next payment becomes due. Commercialization teams know the payment schedule and understand that a series of poor product valuations before the next payment may trigger the firm to engage the decision mechanism. The team receives very clear signals+ that the time is near to execute contingencies or to redouble efforts.

Formal Decision Mechanism

We use a formal decision mechanism that is quick, fair and balanced. Unlike with the decision to graduate the prototype into commercialization, we don’t have 10-12 months for the prosecution to prepare a case. We don’t have a cohesive team for the defense (i.e., only a few team members passionately argue for the go decision). And the objective evidence developed by the team itself is pretty damning. The dream is kept alive in the minds of some team members only by a hope and a feeling that something was missed.

So we give them a choice; a real choice. We formally negotiate what it will take for a much reduced team to dedicate themselves to addressing the specific challenges keeping this prototype in poor valuation. Time is of the essence: the clock for the remaining-patent-life is still ticking. Improvements to product valuation required to reclaim the loss of patent life grow by the day. If this team can rescue the prototype over a period of about 12-18 months, then commercialization may be restarted. We negotiate the definition of ‘a rescue’, the firm’s contribution to finance this bare-bones rescue mission, and the team’s commitment to drop the prototype should this last ditch effort be unsuccessful. The decision maker in this scenario is the development team itself, and consequences are quite personal.

There is something better for these passionate team members to do. This is not a case of the tunneling+ syndrome. The team's attachment to the current prototype is founded on an implicit understanding that they themselves would probably have difficulty explaining. It may even be a sense of wanting to prove ‘the bureaucracy’ wrong: the Devil Incarnate+. Whatever the reason, we don’t alienate these individuals by challenging their firmly-held belief in the prototype, and we don’t just abandon them along with the prototype. We’ve spent too much time and effort getting these individuals up to World Class R&D certification to just lose them when Mother Nature doesn’t cooperate.

With a robust franchise operation, the firm is never held hostage+ to the success or failure of any one commercialization prototype. They can easily walk away from involvement in the rescue attempt. But they are held in check by contractual agreements from the purchase of the prototype. The purchase agreement anticipates and includes provisions for an orderly shutdown, which in this case includes bare bone financing of a patent life-constrained rescue mission.

Regret Management+

Despite all the above work we know individuals will still have deep attachments to the prototype. We wouldn’t have it any other way. Should negotiations on a rescue plan not be successful, or the rescue attempt fails, we still have a few options:

  1. Reposition the prototype as a sub blockbuster+ pursuit
  2. Repurchase the prototype from the firm (in conjunction with another purchasing agent, perhaps one of the original bidders for the prototype)
  3. Independent franchisees (or external partners) may decide to push forward with commercialization using their own funding
  4. The firm may decide to restart commercialization with a new team

For firm-financed franchisees, only the first option is open. Franchisees must demonstrate commercial acumen on a regular basis (e.g., by launching sub blockbusters) as a condition of receiving firm funding. A failed blockbuster pursuit offers a perfect opportunity: it will have excellent potential as a sub blockbuster product. Affiliates not financed by the firm are free to take their chances with the prototype. It's their business.

Independent Evaluation+

We use Independent Evaluation of franchisees to determine whether or not they continue to receive firm funding for blockbuster pursuits (i.e., prototype build). Independent Evaluation ensures the franchisee both demonstrates commitment to commercial pursuits (e.g., by launching sub blockbusters) and that the franchisee has future blockbuster potential. The firm only finances franchisees having potential for multiple blockbuster pursuits, based on their scientific competitive advantage. The decision to shut down this particular commercialization pursuit can therefore either be disastrous for the franchisee, or just a bump in the road. We tailor our approach to shutdown depending on the maturity of the franchisee.

Repositioning the blockbuster to sub blockbuster status means the franchisee relinquishes future payouts for the prototype (e.g., milestone payments) in exchange for ‘credit’ by the firm for this demonstration of commercialization acumen. It means the prototype is repositioned from a creative exercise to a mechanical exercise. We put a Finisher-Completer in charge with a mandate to push the product to market, aimed at the most promising customer segment: a sub blockbuster segment. Attempts to broaden the market for blockbuster potential are abandoned. Many new alternates are suddenly opened in our exercise of Alternate Competing Hypotheses.

There are many instances in the pharmaceutical industry of new drugs arising out of the ashes of failed projects rising like a phoenix. Insights and experience from the failed project informed future efforts in similar drug pursuits. This is the ultimate in regret management. If we can keep individuals from mentally checking out, by better managing the shutdown process, then these same individuals can apply their very hard-earned lessons in future blockbuster pursuits. We deliberately organized our franchisees based on their scientific competitive edge+, and it stands to reason that commercialization experience can only serve to sharpen future prototype work: if we can keep from losing the researchers’ passion and commitment to the mission during the shutdown process.


Home Page September 2010