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Recreating a Fortune 100’s R&D operation proves a case study in change management and shows the value of internal and external partnerships.
By Marcus Schabacker, Vice President of Medical Products R&D, Baxter International Inc.
As I write this, I am reflecting on the time, three years to the day, that I have been with Baxter. This is a good time to reflect on the changes that have taken place. When Baxter approached me in 2011, the company had just brought its medication delivery and renal business units together to create the Medical Products business. But research and development (R&D), which I was to lead, was fragmented into various R&D and clinical and medical organizations. My goal was to form a cohesive global R&D organization.
My vision was to work with our team to create a culture of collaborative business innovation, a coming together of experts, idea generators, and business leaders inside and outside of Baxter all working toward a mutual R&D goal: to bring innovative therapy solutions to our patients.
Before we could get to a state of collaborative innovation, we had several things to tackle. The first was the establishment of a highly motivated leadership team of experts both in their technical fields and in the business of health care. In order to effect change, one must create a guiding coalition; a high-performing team that understands, embraces, and implements vision and can craft a compelling strategy to achieve that vision. Once this team was formed, we set about our work to transform R&D.
Our next task was the centralization of an historically decentralized R&D organization. In the past, R&D took place in small groups aligned with specific business units. While the model produced results, decentralized R&D organizations often become reactive to short-term changes. Typically, business leaders focus on what is ahead in the next quarter or the next year. R&D happens at a different pace-in the medical health care industry; development cycles of five, ten, or even fifteen years are common. If you do not think strategically with an R&D organization, your gains are minimal.
Another major strategy was the establishment of a more rigorous prioritization process. We needed more robust processes in place to determine what we would and would not do, which would mitigate the risk of trying to do too many things at once. We also needed a more disciplined approach to resource planning and staffing for our project portfolio. Our governance and control processes needed to be addressed as well.
Leading from the Front
Our change management team’s first order of business was to establish better processes. We started a program management office, created a new governance model, and instituted a prioritization process that allows us to move resources from one project to another. We have also consolidated those disparate groups into one global organization within the Medical Products business, and R&D now has a seat on the Medical Products senior management team.
This took a lot of work and required leading from the front. Change management requires the support of your peers and senior management, and we got that. By the beginning of 2012, we had everything we needed to be successful with our global R&D organization. We had a rigorous prioritization process, we were able to plan for and achieve our deliverables, and we had gotten the money we needed to deliver on our plan. So I gathered my organization for what was likely the most important global town hall meeting of my time at Baxter.
During this meeting, I discussed where we stood and what this meant for our organization. I told my colleagues, “Here’s the performance for 2011, and here’s what we’ve changed. We have the money, we have the resources, we have the agreement of the supporting staff in quality, in manufacturing, and in regulatory affairs. We’re out of excuses now. We must deliver now.” And the organization responded! We dramatically improved our milestone performance and have launched several products.
Today Baxter has R&D employees focused on breakthrough innovation at strategically important locations worldwide, augmented by contractors at laboratories in Asia, Europe, and North America. In addition, we have key strategic partners in North America and India. Global operations of this scope take collaborative innovation, of three different kinds.
Collaborating with Experts
The first type of collaboration is to work with an outside partner who has expertise in an area outside of your core competency. Given the tremendous speed of technology development, it is imperative for a company like Baxter, with its wide product and technology portfolios, to define what is truly core to us. Where do we need to be best in class? And what are the areas where others have deeper expertise than Baxter and do work on a scale and/or in a specific area that we never could or should?
We must understand what the true needs of our customers are. We need to understand the use cases of our devices and our products, and know how our drugs are used. We need to be able to translate customer needs into design requirements and those requirements into specifications and clearly define what that circuit board, for example, needs to be doing for us. Then we can give all that information to a partner that does circuit boards really well, and have it design, build, validate, and verify that for our use.
At Baxter we have identified key areas for this type of collaborative innovation and forged strategic partnerships for work in these areas. For example, we have outsourced many non-core electromechanical engineering tasks to world-class specialists at partner organizations. These engineers, dedicated to Baxter, work on our projects every day and are accessible to our colleagues around the world via our resource management tool. We’ve assigned in-house employees to stay in touch and help guide the partnership.
This collaborative innovation has really helped us maximize our resource utilization. And several times it has helped us quickly ramp up in response to demand signals we had not anticipated. The ability to flex up and down has been a major factor in our success.
Collaborating with Idea Generators
The second kind of collaborative innovation has to do with finding the right innovative ideas to work on. Here I make a strong distinction between invention and innovation. Invention for me is the act of creating something new. Business innovation comes in knowing how to develop that idea so that it generates value for Baxter and for patients.
So we partner with universities, start-ups, and others that can supplement our own idea generation and keep the product funnel filled. Toward this end, we have strong partnerships with a number of leading universities. On an annual basis, we put out a request for proposals and ask researchers there to submit their work. We then have the opportunity to fund the research programs we think are most relevant for us, and, ultimately, bring them in-house if appropriate.
Collaborating with Other Internal Functions
Lastly, collaborative innovation must take place within Baxter itself. There are numerous examples, but the strongest one is in the area of design transfer.
Too often, there isn’t a strong enough collaboration between R&D and manufacturing. And that leaves room for improvement whether from a cost perspective, a quality perspective, a yield perspective, or whatever else. If a suboptimal design gets to the manufacturing floor, we would be left investing a substantial amount of time, money, and resources to fix it-all of which could have been avoided if we had done more collaborative work up front and gotten some expertise on how to bring our design from lab scale to mass production.
It’s not easy to get different teams to rethink how they work together. But fortunately, when I started here, Baxter had just assigned a new head of global manufacturing, a longtime Baxter executive who was open to a collaborative approach.
Together we made a conscious decision to work together. So, when people came to me and said, “Well, you know those manufacturing folks…,” I would say, “Let’s take a look at this and make sure we don’t have a design issue. Let’s get to the root cause and fix it together.” Similarly, my colleague in manufacturing would say, “Hey, this isn’t necessarily an R&D problem. We need to look at this together.”
While he committed to making sure that the relevant resources would get involved early from the design perspective, I signed up by saying, “I understand you have a lot of things that need R&D support but aren’t necessarily high on our agenda. But because these are so important to you and the company, we’ll support them, and we’ll make sure you have the relevant resources.” We demonstrated our conscious choice of collaborative innovation to the rest of the organization. And that had a lot to do with our success.
The medical health care products industry faces a variety of challenges - the rise of increasingly capable local and regional, if not global, competition; ever-increasing regulatory scrutiny; tight competition for talent; and the need to become a solutions provider. But after three years here, I think we’re well-positioned to meet these challenges head on. And I’m looking forward to it.
Originally published in CTO Straight Talk, No. 1 (August 2014)