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Category: Our Industry
Published: May 8, 2018

How can Generics Organizations Harness their Strengths to Adopt Agility?

By: Ulrich Deutschmann, SVP, Global Business Transformation & Strategic Planning, and Jean-Luc Giraud, SVP, Chief Human Resources Officer

In a 2015 McKinsey Quarterly article, the authors assert that a company’s ability to be both stable and nimble is the true essence of organizational agility. In what is described as a “false trade-off”, many executives find themselves choosing between processes that promote either stability or speed within their organization – without recognizing that agility comes from mastering both.i According to McKinsey’s research, grasping this paradox means designing organizational structures and governance that remain the same for long stretches, providing a backbone for the company, while embracing practices that foster innovation and readjust resources quickly.ii

It’s no secret that the generic pharmaceutical industry is rapidly changing and the majority of companies are challenged. Price erosion and customer consolidation as well as increased competition in the US, the largest generics market, to a large degree driven by the acceleration of regulatory approvals that allow more competitors to enter the market have put pressure on the industry. The need for generic drug makers to adapt quickly has never been higher. Organizational agility not only allows faster reactions to market changes, it improves overall performance and helps secure business longevity. Today, it is needed more than ever to react fast to market changes.

For organizations seeking agility, the route to this outcome depends on your point of origin.iii Is your organization coming from a place of high or low stability? (Think bureaucracy vs. start-up culture). In general, the generic drug makers are composed of structures that support stability. Research, development, manufacturing and quality management processes are typically stable. Once a process has proven to work, companies are reluctant to touch them. This often leaves improvement potential untouched; there is a strong risk aversion in the inner workings of generic companies. Organizational structures are often siloed. Without the balance of agility, these systems can result in painfully slow change at best.

The good news is that for those pursuing agility, the structures in place that foster a stable environment can also be the tent pole to support the adoption of agile practices. In fact, research shows that agile businesses often follow stable practices such as shared language, standardized processes and “fit-for-purpose teams” to support their dynamic behaviors.iv

Standardized ways of working are often a strong point within generics companies and through their R&D, manufacturing and quality functions we see agility practices already at play. We know that established and consistent ways of saying and doing things within a business unit leads to greater time efficiency and allow teams to work seamlessly.v Dismantling silos to apply these principles throughout an organization is one agility practice that can be implemented that already draws from an existing area of strength.

Many generics companies also employ “fit-for-purpose teams” within their R&D functions, where people work within small, self-managing teams that are accountable for the end-to-end work of bringing a drug to market. This is another example of a practice used by agile companies throughout their business. Employing this practice outside of R&D can allow teams to form and disband with the changing of priorities, while eliminating time-consuming knowledge transfers and confusion of ownership.

If stability is considered a strength in the adoption of agile practices, many generics companies already have the foundation they need to enact change. Other dynamic behaviors,vi like information transparency, role mobility and opening up physical or virtual environments may be more challenging to adopt due to the nature of the industry, but a stable environment is arguably the best starting point on your agility journey. Building on a stable foundation by leveraging existing strengths is what will truly bring the paradox of stability and speed into balance.

Nevertheless, we should keep in mind that organizational design is determined by strategy and culture, which reflects a certain leadership style. So, if the culture of the organization, for example, is very hierarchical or the leaders do not show a strong ability to deal with ambiguity, or to define proper metrics against which to measure performance or to stay consistent in their direction for a couple of years, the agile organization will never materialize. Before embarking on the agility journey, it is therefore a pre-requisite to check on the existence of a clearly defined, formalized strategy and company vision and to characterize the culture of the concerned organization. Strategy, vision and culture must collectively underpin the agility journey.

i “Agility: It Rhymes with Stability” McKinsey Quarterly, December 2015
ii “Agility: It Rhymes with Stability” McKinsey Quarterly, December 2015
iii “How to Create an Agile Organization: McKinsey Global Survey Results”, Organizational Agility Forum Article Compendium, p. 9
iv “How to Create an Agile Organization: McKinsey Global Survey Results”, Organizational Agility Forum Article Compendium, p. 9, 18-19
v “Agility: It Rhymes with Stability” McKinsey Quarterly, December 2015
vi “How to Create an Agile Organization: McKinsey Global Survey Results”, Organizational Agility Forum Article Compendium, p. 17-19