World Class R&D, Take III

How do you know if what you’re about to do will be effective? You won’t know until you’re done. If it takes 10-15 years to finish, which is not uncommon in R&D for some industries, then you can waste a lot of time and effort for nothing. Instead we look for interim measures of effectiveness. How do we know along the way whether or not we’re eventually going to be effective? That’s a question the management sciences have been wrestling with for decades, with varying degrees of success. That’s the answer you now have for the first time in World Class R&D.

It cannot be repeated enough: this is not faux effectiveness+. You are not being effective if you free up the time of your people (i.e., through Early Kills+). You are not being effective if you allow your people to do twice or ten times as much as they could do before (i.e., through automation). You are not effective even if you are World Class in any particular R&D activity. Effectiveness in R&D means getting valuable product out the door. Effectiveness is systemic – everyone must be effective together.

How do you know if you’re getting better at being effective; that you’re moving toward being more effective with your improvement initiatives? To answer this question we first take a brief detour:

I know what being effective means when we talk about the claims process for auto insurance. We need very experienced adjusters. You wouldn’t believe what our customers try to pull on us. They go drag racing in their cars, rip out their trannys, and then come to us claiming they ran over a curb. A practiced adjuster will spot that in an instant. But I tell you, all the great insurance adjusters in the world cannot make up for lousy policy-writing. If they write bad policies, there’s only so much I can do to stem the bleeding down the road. Vice President, Auto Insurance Claims Adjustment (2010). Personal Communication

We have one of the best electronic patient record systems of any major hospital group, and looking back over the history of coronary stents we predicted that if we consistently perform these 19 procedures, then we could dramatically reduce complications, re-admits, emergency visits, and a host of other costs down the line. We cut a sweetheart deal with one of our insurance providers to split the difference in savings. We would perform the 19 procedures for every patient receiving a stent, we would charge fixed fees to the insurance provider, and we would take responsibility for future costs due to complications, re-admits, etc. For 7 quarters we made good profits on this deal. Then in the 8th quarter we lost it all. Our losses in that one quarter exceeded all the gains we had made to-date with the program. CEO, Major Hospital Group (2008). National Academies of Sciences conference on Containment of Health Care Costs

You are not being effective unless you string together all the pieces that need to have in place to be effective. You are not being effective if you think you can get it right the first time.

As an illustration, in World Class R&D, in order to be more effective at Evidence Gathering you need to give researchers the time and resources they need to examine alternate interpretations of their data. Decision makers cannot succumb to deadline bias+, forcing researchers to pick an alternative. But decision makers are pressured by the investors. How do we set it up so investors, who are naturally anxious, since they put skin-in-the-game up front, can feel comfortable that researchers are genuinely working toward effectiveness, and not just spinning their wheels? Or, that Mother Nature will just not cooperate? We must string together all the pieces that run from the researcher through to the investor (i.e., our Investible Unit+).

Let’s assume we put together all the pieces into a landscape that is elegant, compelling and has high explanatory value for today’s R&D activities. As our second anecdote warns, this is not enough. We need a high level of flexibility built into our effectiveness program. We need to be able to tack and turn in our management sciences, just as we need to in our research sciences. We cannot assume that our first cut at this landscape will be correct. For example, a kitchen pass or timeout clause would have been advisable in the hospital story related above, to take into account those infrequent but very damaging perfect storms. Our landscape becomes a moving picture.

I look at the landscape and see a portion that is both relatively constant and fits within an improvement initiative that I already have in mind. Not so fast. That portion may be critical to the overall effectiveness program, a keystone project, and I need to get it right the first time. If I implement effectiveness piecemeal, which will almost always be the case, I need to be very careful to avoid ‘tainting the well’.

We’ve tried that and it doesn’t work. Pharmaceutical Industry Colleague (2009). Personal Communication

How often have we heard this excuse? I don’t open up options for researchers only to shut them down arbitrarily when decision makers lose patience. It would be better to do nothing at all. Partial implementation of the landscape requires a mix of artistry and cunning.

Effectiveness in R&D is a program, not a plan. It starts with an elegant landscape, one that strings together all the pieces of a comprehensive approach, and these are delivered within a program of continuous change. You need an Institute dedicated to exploring the endless variations and boundaries for effectiveness. You have a choice of dedicated affiliates who help you move toward effectiveness in a way that is measurable and sustainable. You need to build up a critical mass of R&D staff believing they can and will become World Class.

This is a new way of thinking; thinking in terms of effectiveness. This way of thinking permeates our every activity, our every decision. Those adept in World Class R&D view the world differently. Every article they read, every lecture they attend, they now view with an eye toward whether or not it contributes to the World Class R&D agenda. They are no longer subject to the Three C’s+ or to the latest consultant jargon. They are supported by an Institute that advocates their view of the world, one that looks at everything done in R&D through the lens of effectiveness. They are part of a new movement in industrial R&D.

We have cracked the code. We know what it takes to achieve sustainable effectiveness. We know the many pitfalls and obstacles firms face in trying to nudge that supertanker of an organization toward the direction of increased effectiveness. We are harsh on the prevailing orthodoxies commonplace to R&D: tendencies toward retrospective distortion+; the hubris of ‘show me your blockbuster’; the inability of many R&D organizations to move forward in the face of little or even dis-confirming evidence+, etc. The code has been cracked and the solution is elegant, has high explanatory power, is comprehensive and surprisingly, it is largely proven outside of industrial R&D. We hold this code to be true.

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