Management consultant Steve Denning posted a provocative article in Forbes this past weekend that didn't deal with any particular industry but clearly applies to pharmaceuticals.
Another author's reflection on a recent biography of Steve Jobs triggered Denning's musings. He basically wondered why some companies slowly wither and die, while others seem able to reinvent themselves and change as circumstances demand.
For any of several reasons, a pernicious process begins to take hold of many companies. Jobs told his biographer that the process starts when the previously successful developers of innovative, new products get pushed to a back seat in favor of the company's sales people.
That typically happens because investors reward senior managers on the basis of stock price trends. As quarterly earnings lead the stock price and sales drive earnings, the product developers give way to the salesmen.
After a time, even the best-selling maneuvers yield diminishing revenue growth as customer demand flags in the absence of truly innovative, new products. That's when finance managers start what Denning calls "playing defense" by cutting costs to create short-term gains that sacrifice the future and, at the same time, lavishly reward management.
Then when it gets too difficult to make money, even by playing defense, managers cut corners and, to varying degrees, become crooks.
This devolution should seem familiar to anyone who has followed Big Pharma over the past decade. For his part Denning suggests rectifying the downslide with processes such as "radical management” and "creative destruction." Attractive as those approaches may sound, they remain nearly impossible to implement because shareholders would never sit still for the ten years of stagnant and declining earnings it would take for a new approach to yield several "insanely great" products, as Steve Jobs might call them.
At the same time pharma is not another industry such as buggy whips or men's hats that can mercifully pass into antiquity. No health care system anywhere in the world can effectively meet its goals of advancing the length and quality of life without a productive, prospering pharmaceutical industry.
Some observers remain quite unconcerned about the prospect of established, major pharmas dying as biotechs, startups and university research consortia take their place. It's not so simple. Those small entities require, at a minimum, some of the financing, regulatory guidance, marketing and other services that established pharma is uniquely qualified to offer. So after Thanksgiving this site will explore what some innovative people are doing, saying and writing to help make pharmaceuticals the well respected, productive, growth industry it once was.
Some companies can die peacefully and others will effectively meet society's needs. On the other hand, everyone has a stake in seeing a reformed pharma operate productively.
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