Zen And The Art of Business Execution

When you launch a business or a product, one of the hardest things to do is set boundaries for yourself or your company. As an entrepreneur, your job--and your nature--dictates that you constantly be on the lookout for opportunities to exploit. And, it seems logical that the more opportunities you research, the more likely you are to strike gold. Sooner or later, something has got to work out if you just play the averages. . . right?

In the words of Lee Corso: Not so fast, my friend.

A team of professors, led by Rajesh Chandy (currently at the London Business School) published a study in the Journal of Marketing Research focusing on the Pharmaceutical Industry and companies' ability to get products from the conceptual stage, through the epic FDA process, all the way to market. In other words, they wanted to see who could execute and why.

Given how highly regulated the pharmaceutical industry is--thereby generating a ton of documentation--it provides what might be the only opportunity to be able to document most companies' journeys from concept to market. Here's the breakdown of the study:

What they did and how they did it
Chandry and his associates looked at all 1,573 drug patents filed between 1980 and 1985 and followed them to market. Of those, 18.30% (@ 285) made it to market.

They filtered further by weeding out companies that either were acquired or that acquired the drugs from other companies so as to only look at groups that could take an idea from start to finish. So, in all, 654 drug ideas from 88 companies represented "the field."

What they found: 

"Focus Power": Many pharma companies are known for a particular expertise (cardio, neurologic, cancer, etc.) Those companies which stayed within their primary field of expertise had the highest rate of success. So, in pharma, as with any endeavor, you have to pick what you want to be and stick to it. That's especially hard in new ventures and expecially service industries--where you want to explore any and all opportunities for revenue, but likely at the expense of fully exploiting your core business.

There are those companies which can branch out into new endeavors (ala iPhones, X-Boxes, Britney Spears' acting career--wait, scratch the last one), but they represent the exception, not the rule. And for every iPhone and X-box, these same companies have also attempted the Zune and Apple TV. These moves are best tried by strong brands from well-established companies as they involve risk and brand dilution.

Focused Company

Unfocused Company

Additionally, Chandry et al looked at the number of ideas firms tried to develop. Many in industry and research had postulated that the more ideas you generate or pursue, the greater your chance of achieving success. The study found that the opposite was true. All ideas, even bad ones, put a drain on a company's finite resources and hurt the progress of good ideas with real potential. So, make choices--thoughtful, well-considered choices--then own those choices and move forward. Otherwise, you (and your company) spin in circles like a five year old having had six Cokes and a box of pop rocks.

"Speed Kills...Slowness Kills More":Probably a poor choice of words when discussing medications, but those companies that attempted to move the fastest from concept to market had a much higher failure rate. Further complicating matters was that being the slowest represented an even higher failure rate (in addition to potential massive loss of revenue in terms of development expenses and lost patent protection time.) So, focused, deliberate progress is key.

"Experience and Expertise in Management Matters": Yes, yes, this seems obvious. But remember that people had been getting beaned with apples for centuries before it happened to Isaac Newton who then developed the law of universal gravitation. Documenting and proving what may appear to be common sense is important and necessary. Too often, entrepreneurs either think that it's enough just to be smart & aggressive, or that if they have succeeded in one thing, they can succeed at anything--only to find out that they deeply, desperately suck at their new venture (prime example).

The average cost to take a drug from concept to market is $802 million. Yes, the regulatory environment for drug approval is stiff and capital intensive. But, the two greatest contributors to that number are the quantity of failed ideas and time to market with the successful drug. And in that $802 million number, there is a tremendous amount of variability from firm to firm. The range in time for market ran from three to fourteen years. In other words, lackluster, unfocused management appears to drive the high cost of drug approval more than anything else.