Don’t invest in ‘white elephants’

Rahul Guha, Vikash Agarwalla, Abhinav Verma | Updated on December 27, 2020

Abhinav Verma

Rahul Guha

Vikash Agarwalla

Indian vaccine-makers are receiving praise from across the world for their role in tackling the Covid-19 pandemic. This, even as there has been a sharp increase in warning letters issued to Indian pharma manufacturers in the last two to three years.

This is expected to hit growth rates by more than 30 per cent and operating profitability by 100-150 basis points over the next two to three years. While many companies have been successful in remediation, a permanent solution to avoid regulatory issues resides in setting up a bionic quality function. The recently released joint report of IPA (Indian Pharmaceutical Alliance) and BCG focused on building a bionic quality function through three key transformations — setting up a next-generation quality lab, reimagining the role of quality assurance function, and building the quality organisation of the future.

The next-gen lab will optimally leverage technology to become paperless, flexible, automated, and predictive, thereby significantly reducing human variability and driving ‘first time right’. One of the high-impact examples of a next-gen lab is focused on enhancing the capability of analysts by using augmented reality-enabled smart glasses to instruct real-time. Further, advanced analytics can be leveraged to personalise instructions for the analyst. The other key change envisaged for the quality assurance function is to transform its role from being a policing one to that of a strategic business partner. For example, pharma companies can set up a “Google” for deviations to enable their team to learn from past deviations in drug manufacturing and perform analytics-based root cause analysis. The quality function in more mature industries such as semiconductor manufacturing and automotive has evolved into a driver of quality at source even at the supplier end. The function drives process improvement initiatives along with manufacturing, works with suppliers to enhance their process capabilities to drive ‘first time right’, and collaborates with R&D to strengthen future product development. Pharmaceutical quality functions should aspire to move to this goal.

Our past research has revealed that almost two-third of the large transformations fail to deliver the desired benefits. In most cases, a crucial root cause has been a lack of focus on building people’s capabilities in sync with the desired transformation. One of the key investments should be to upskill managers in parallel with the digital transformation. The managers should be equipped to derive the right insights from the analytics tools and leverage them in decision making. Beyond technical skills, there is need for a programme focused on behavioural skills.

The journey to set up a bionic quality function takes two to three years and requires significant time investment from the leadership. In our view, pharmaceutical companies need to consider two important aspects as they build their vision and roadmaps. Start with a four- to five-year vision of the end-state and how things will integrate with each other. This is integral to avoid investing in “white elephants”. In addition, this is not an IT project! About 70 per cent of the effort is in change management and a focus on that from the start will be critical to the success of this programme.

In our view, implementing these initiatives can lead to a 1.5X increase in productivity, reduce the time spent on non-value adding activities by 50 per cent, and take ‘first time right’ beyond 4 sigma quality levels. Given the significant upside, the industry needs to embark on this journey right now. Achieving this will enable the Indian pharmaceutical industry to enhance its global share and further strengthen its position as the “pharmacy of the world.”

(Guha is Managing Director and Partner; Agarwalla is Managing Director and Partner; and Verma is Principal with Boston Consulting Group. Views are personal)

Published on December 27, 2020

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