Category Archives: Tools and Methods

Indiana Jones in the Temple of Portfolio Management

By Jay Armstrong

Imagine that you are Indiana Jones – a series of ancient doors before you – behind one – unimaginable success, profitability and reward. Behind the others – defeat, loss and failure. You have but a single key and too many possible doors – which to choose? Does this sound like your organization? This is the constant dilemma facing those inindiana portfolio management. With exploding R&D costs, falling productivity, high failure rates and persistent competition from generics, the need for effective portfolio management in the pharmaceuticals is a forgone conclusion. While every drug company utilizes some management process to ensure the success of their portfolio, certain approaches can be substantially more effective than others.

The Nature of the Beast

Historically, organizations have prioritized and applied resources against what were the major (or most politically connected), projects in their portfolio – sound familiar? Although this is the easiest and seemingly most obvious solution, it is not always the best or most efficient one. Projects evolve, expectations change, results and requirements conspire over time, all derailing the best laid initial plans and portfolios. By returning to the process that got you there and then reapplying that thinking, you only create more issues and deeper frustrations – the cycle of performance despair.

Resource directed portfolio management has enabled organizations to extract a competitive advantage from the application of valuable, unique and usually, scarce resources. Traditionally, resources are your human assets, financial strengths, processes or knowledge brought to bear by your organization to fulfill its strategic initiatives. This definition illuminates an underlying problem faced by pharmaceutical companies – various factors must intelligently be brought to bear in a complex and dynamic reality to produce a profitable outcome within an acceptable time-frame, under regulatory scrutiny. Unfortunately, all of this usually occurs in a vacuum of understanding around the organization’s resources potential, leading to poorly supported or weakly delivered project objectives. So, which approach(s) make the most sense and can consistently provide the highest ROI and prospects for success ?

The Process

Obviously, your initial strategic and organizational assessments must be robust – therapeutic areas, finances, markets, production and R&D capability and internal and external variables – all must be understood, evaluated and tracked well before portfolio planning begins. Only then, can the heavy lifting of portfolio resource management begin. Your first step should be to create a benchmarking strategy to obtain insights into the best practices in portfolio resource management. By reviewing how those in other industries and companies operate, you can compress your learning curve, establish solid performance metrics and save valuable time. It’s best not to restrict yourself to the pharmaceutical industry for ideas – the financial, manufacturing and software industries can all provide ah-ha moments and creative solutions to your planning problems. In addition to providing your portfolio teams with a solid lift-off, you can gain a deeper sense into how good portfolio planning should perform and execute.

A good second step is to identify all of the available or potential resource options that you have which match your anticipated portfolio plan. Are there resources in other sites, countries or departments that could be applied in the portfolio? Should you hire-in, or train your people, develop in-house, or purchase new capabilities and technologies? Can existing resources, tools or processes in one area be re-purposed to support another, new one? Do you need full resource support, or can people be shared, or rolled on/rolled off for peak demand periods? Many organizations fail to adequately understand or gauge the full breadth and depth of their potential resources and thereby artificially limit what they could accomplish. When you begin with assumptions or suppositions, you have already significantly undermined the possible capability of your alternatives. Use a broad based portfolio team from different sites, departments or countries to ensure that all options have an equal probability for consideration.

The third step requires an evaluation of how those resource options can best be leveraged across the portfolio mix. Which resources and in what combinations provide the greatest ROI with the lowest cost?Will they change over time? How can I measure effectiveness and impact? This is where software and tools such as decision trees, greedy algorithms, resource matrices or scenario modelling may be particularly impactful. Singly, or together, these instruments will allow you to ask various what-if questions, without the burden of having to learn from failure. Because they execute brute-force quantitative analyses quite well, these approaches are seductive, but be careful to evaluate the outcomes against your internal experts for a reality and fitness check. Once you have created an optimal resource mix and launched, it is critical that you are able to measure the performance and outcomes of your portfolio.

An important overarching continuous responsibility is having the capability to carry out a real time analysis of your portfolio performance. This provides an appropriate answer to the How are we doing right now? question. It enables quick responses to unexpected outcomes or evolving conditions and requirements that are inherent in any portfolio. In fact, it may be wise to develop short-term and long-term forecasts to optimize staffing over time as conditions and demands change. Additionally, this philosophy allows you to compare, balance and re-balance the portfolio resource demands against financial costs, outcomes and skills capability.

Finally, any reasonably good portfolio resource management plan must have an internal stage-gate review process. This can be as simple as a quarterly meeting of the principals crafting a go/no go continuation decision based on the current performance metrics. Nothing is more financially draining or demotivating to an organization than an unbalanced, weak portfolio, or initiatives that hang around long past their expired by date. It drains and misapplies critical resources, while wasting time and money that could be better applied elsewhere.

Effective portfolio resource management is a dynamic beast, it requires insight, flexibility and responsiveness to be able to balance and extract the full value from your portfolio. Solid portfolio planning beforehand, helps to minimize failures and creates a culture of excellence that is both sustainable and highly profitable.

Jay Armstrong holds certification as an ASQ Six Sigma Black Belt and advanced degrees from Stanford, University of Pennsylvania, Johns Hopkins in fields such as Biotechnology, Management, Biomedical Technology. He holds certificates in Project Management, and Decision/Risk Management. He has led workshops in employee coaching, designing and fundamentals with led to eight Kaizen events, and five discovery events. He was the leader in launching of the process workshops for clinical trials, and developed and led a clinical trials E-2-E work-stream which identified 10 clinical process area improvements. He is responsible for leading of five R&D process-improvement teams in delivering major cycle time, cost, and resource reductions of up to 80%, leading to $11M savings.

“Quality” based on effective use of Quality Tools

by Roy Kinkaid, Quality Consultant

Basic Quality Tools

The question I have been pondering for many years now is – why in the year 2016 are there still organizations that do not use the basic quality tools to drive improvement and impact the bottom line? ASQ describes the 7 basic quality tools as: cause and effect diagram (also known as Ishikawa or fishbone diagrams) check sheets, control charts, histograms, Pareto charts, scatter diagram, and stratification of data for trends. The companies I am referring to are small to medium size companies of less than 500 employees.

The Company

The company can be a manufacturing, service or non-profit. The operating philosophy is, get an order, produce and order, ship an order, and invoice the customer. Receive a request for service, deliver the service, and invoice the customer. If the customer complains they will react as needed. They can be owned by a larger company – with only financial reporting to the larger organization (sales, costs, P&L, etc.).

The company is financially successful. They understand budgeting, cost cutting and profit and loss. Financial data abounds. Process data – not so much! They often have a Balanced Scorecard – most measures are financial (someone read a book and decided it was the thing to have).

When asked if they have process data, or know how their key processes (or can identify their key processes) are performing – which leads to financial results, the response is a quizzical look. Monthly management meetings consist of reviewing the numbers. Reaction typically is this month’s number in relation to last month’s number. Trend charts are not utilized (as Deming said “plot the dots”).

Quality the Program

When asked about quality they understand the word, and identify themselves as a quality company – who would say otherwise?

They relate being a quality company to being certified to an industry or quality standard (e.g. ISO) as required by the customers or by the industry sector they operate in.

Quality Staff

Someone in the organization has quality in their title. Responsibilities can cover a wide range: vendor quality, process quality, final quality (service, product), registrations, certifications, audits, and response to customer complaints. Said person can also be responsible for other functions (e.g. safety). They may have a quality certification – CQE, CQA, Certified ISO Auditor, Certified Quality Manager or Lean/Six Sigma Certification. However the basics tools of quality are not being used to the advantage of the organization (there is no lack of knowledge). There are no identifiable process improvement projects underway (there is more to quality than maintaining certifications and passing audits) or process performance measures (trend charts for key processes). They have not implemented Cost of Quality, identified non-value added activities and waste (Lean) as part of the quality effort (to quote Deming again “defects are not free, someone gets paid to make them”).

The Customer

They react to customer complaints – apologize and pacify the customer. No root cause analysis is performed to eliminate the cause and prevent reoccurrence. A Pareto has not been used to stratify complaints and drive improvement. Customer satisfaction surveys are not performed on a routine basis. If surveys have been performed they have been performed unsuccessfully (low response rate).

The Basic of Quality – the Tools and Process Improvement

When the basic quality tools are mentioned and their application to   process improvement (again where are the trend charts?), the response from management can be: we are successful, we are certified to a quality standard, we are a small company, that doesn’t apply to us.

The Issue

I have often used the phrase – ‘they don’t know what they don’t know and don’t seem to want to know it’. In the year 2016 organizations still do not use some or all of the basic quality tools. 7 basic quality tools include cause and effect diagram (also known as Ishikawa or fishbone diagrams) check sheets, control charts, histograms, Pareto charts, scatter diagram, and stratification of data for trends. I have worked companies where trend/run charts are a foreign concept, not to mention the use of statistical process control charting. And they are not aware how the quality tools can be used to improve processes and have an impact on the bottom line.

The Point

So, the question is – how do we, the quality profession, make companies, (management) aware of the world of the basic quality tools (one last time, how about trend charts at a management meeting) to bridge the knowledge gap and the benefits of applying the tools? Training/workshops are available through our ASQ Philadelphia 0505 Section. Check our web site for the schedule. And remember ASQ training – it’s not just for quality professionals only – management can and will benefit – so please invite them! It’s the “quality” thing to do!

Roy Kinkaid is an independent quality consultant (25+ years of experience) with an extensive background in the implementation of various quality management systems – Six Sigma, Baldridge, Continuous Improvement, ISO and the Carnegie Mellon Capability Maturity Model. Roy has a degree in management/ statistics from Philadelphia University, certification in Six Sigma, and is a member of ASQ, the SEI, and IEEE Software Society. He has practical process improvement experience in manufacturing, service, software, and electronic commerce industries, helping companies to achieve six sigma quality performance levels. In addition Roy has hands on experience with change management, coaching and the facilitation skills necessary to implement a quality program. He has extensive experience working in Europe, the UK and Asia.

Lean Six Sigma as a Performance Multiplier

by Jay Armstrong

Internal and external issues are significantly escalating pressure on the pharmaceutical industry to improve their output of drugs, while managing costs.  This is a difficult balancing act, as there are shrinking drug pipelines, an imminent patent cliff and the emergence of generics as an alternative to the traditional drug manufacturers.  Additionally, R&D productivity and spending have declined, even as new global markets are emerging with substantial, unmet therapeutic needs.

You can’t improve a process if you do not understand the variables and factors that impact it. The industry must now try to find ways of improvement while meeting product, customer, regulatory and efficiency demands. Lean Six Sigma has been used by some of the world’s most successful companies leading to savings of billions of dollars, striking increases in speed and capacity and achieving better customer relationships.

Lean Six Sigma focuses on a smaller number of critical projects to ensure higher profitability and faster solutions. Organizations traditionally face two potential scenarios – First, there is an already existing process that is working reasonably well – this requires the application of “DMAIC” – Define, Measure, Analyze, Improve and Control.  Motorola and GE were early adopters and powerful champions of DMAIC.  Indeed, their dramatic cost savings and improvements can be directly traced to the adoption and embedding of these principles.  In the second instance, an organization may have no process at all.  This situation requires a distinctly different path – DFSS – Design for Six Sigma.  This process utilizes the IDOV strategy – Identify, Design, Optimize and Validate.  This thinking is a radical departure from traditional lean Six Sigma solutions in that quality is essentially designed into the process during its creation. DFSS has attracted the interest of the FDA, because it closely mimics “Quality by Design” (QbD)

One way that a pharmaceutical company is able to do this is referred to as an “Open Innovation Strategy.”  Open innovation distances itself from traditional R&D, wherein the company itself owns and manages the entire R&D process chain, rather than leveraging outside help to stimulate innovation. R&D in an open system assumes that even the most capable organization needs to identify and work alongside external companies as a means to enhance innovation.  Thus, pharmaceutical companies have been seeking to work with universities, hospitals government, private research institutions, and biotech companies to enhance their innovation processes.

To be able to optimize the benefits of Lean Six Sigma, it is important that the work in all areas of the organization utilize the same mind-set. There is data indicating that significant benefits can be realized by including non-manufacturing activities, since these are only about 70% efficient.    As General Electric continued to develop the Six Sigma system originally created at Motorola, they realized that the potential of Lean Six Sigma was far greater than the current applications on their manufacturing processes. This ensures that the root causes for variation or bottle necks are truly eliminated and not just moved along in the system. Sadly, even though the pharmaceutical industry is highly regulated to ensure that the companies meet all the requirements from regulatory agencies, many core processes are not meeting the requirements of today’s market.  The arduous process of drug development as a prime example. One potential solution to the business issue and challenge of high costs and long time lines for product development is the use of Six Sigma. Companies implement Six Sigma for a number of reasons and some of the main targets when implementing Six Sigma in the R&D organization include decreased costs, decreased time to market and improving the process and product quality.

When starting implementation of Six Sigma the entire organization needs to be evaluated to see where to start the implementation work. During this process it is important to be open-minded and think out of the box to ensure that an area with great potential is chosen to start with. The initial successful implementation work will send out a message (to all the company staff) and facilitate future work.

Lean Six Sigma thinking has evolved far beyond its traditional manufacturing roots and is now recognized as  a cogent driver for operational excellence and competitive advantage.  We believe that substantial and sustainable cost and time savings, as well as quality improvements can be realized through a broad and deep application of Lean Six Sigma principles and tools.

Jay Armstrong holds certification as an ASQ Six Sigma Black Belt and advanced degrees from Stanford, University of Pennsylvania, Johns Hopkins in fields such as Biotechnology, Management, Biomedical Technology. He holds certificates in Project Management, and Decision/Risk Management. He has led workshops in employee coaching, designing and fundamentals with led to eight Kaizen events, and five discovery events. He was the leader in launching of the process workshops for clinical trials, and developed and led a clinical trials E-2-E work-stream which identified 10 clinical process area improvements. He is responsible for leading of five R&D process-improvement teams in delivering major cycle time, cost, and resource reductions of up to 80%, leading to $11M savings.

Cost of Quality

“Cost of quality is a methodology that allows an organization to determine the extent to which its resources are used for activities that prevent poor quality, that appraise the quality of the organization’s products or services, and that result from internal and external failures. Having such information allows an organization to determine the potential savings to be gained by implementing process improvements.”

Excerpted from The ASQ Quality Improvement Pocket Guide: Basic History, Concepts, Tools, and Relationships, Grace L. Duffy, ASQ Quality Press, 2013, pages 62–65.

Learn more about the Cost of Quality, including videos, training, books, and case studies by visiting the ASQ website. Or for an instructor-led workshop or training, contact ASQ Philly or the Education Chair for potential training opportunities for both individuals or on-site at your place of business for your group.