Managing NPD Process R D Management Conference

1. Introduction
This paper is intended to share the experience of an academic-industry liaison to facilitate the process of managing the Research and Development endeavour in the new product development process (NPD) for a major pharmaceutical company, say ABC Ltd (original name changed). The pharmaceutical industry in India is in the front rank of India’s science based industries with wide ranging capabilities in the complex field of drug manufacture and technology. The Indian pharmaceutical market, which consists of almost 20,000 manufacturers, was valued in 2000 at US $ 3.8 billion, or only 1.1 percent of the global market. It grew by 10.4 percent over 1999. Although India accounts for 16 percent of the world population, the sale of pharmaceuticals is just 1 percent in terms of value and 8 percent in terms of volume. However considering the R&D scenario the proportionate expenditure on R&D is minute when compared internationally.

With a growth rate of above 10 percent annually for the last ten years, which is well above the industrial growth rate of India, this industry is a net foreign exchange earner for the country. India exports both bulk drugs and formulations. Initially bulk drug exports were greater in value terms than the exports of formulations but since 1995 the exports of finished formulations have overtaken the exports of active bulk ingredients.

Fig.1 R& D expenditure in Pharmaceutical Industry in India. Source: OPPI Pharmaceutical Compendium 2001.

The major players in the industry have constantly shifted towards competing in regulated markets in order to expand their market size. At the same time the completion in term of first-to-market or rather first to file with the regulatory authorities has became a key to success.  Managing risk and time to file is critical in this industry.

In March 1999, the government formed a Pharmaceutical R&D Committee to recommend the measures necessary to strengthen the R& D capabilities in the pharmaceutical sector and determine the support needed for domestic R&D initiatives. The report of the committee says that:
“The pharmaceutical industry is intensely knowledge driven. Its intellectual assets are the key determinants to its competitiveness. A higher level of innovation and IPR (Intellectual property rights) management coupled with strategic manufacturing and aggressive marketing will determine Indian Pharma Industry’s future.”

In this changing scenario the healthcare market is undergoing rapid transformation. The traditional delivery of health care is being challenged, as is the procurement, dispensing, and utilization of pharmaceutical products. The emergence of third-party financiers of pharmaceutical products has created new decision makers with different needs.

This led to many Indian Pharma organizations to develop their capabilities to expand business in regulated markets like United States and Europe.
3.    Identifying the challenges at ABC Ltd.
ABC Ltd. engaged the Center for Project Management, an initiative of a premier management and research institute of India for development of competency in managing the NPD projects more effectively. The basic reason for selecting NPD was the organization’s needs to generate a strong international presence.

In the first phase of a five-month association with the ABC Ltd., an exploratory study was made to identify the focus areas based on strategic business objectives of the organization.

The study revealed that coordinating multiple functional units, lack of process ownerships in the conventional line sequential process framework resulted in delays, lack of role clarity, team-work issues and cost over runs. In some instances, this ultimately resulted in loosing the opportunity of first to file. ( To register the generic drug development and formulations with appropriate regulatory bodies for the purpose of marketing he product.)

The GAPS identified were:

• Project ownership with an end-to-end responsibility not allocated to a single person.
• No specific charter or scope planning
• Project wise cost estimation and control not done
• No formal kick-off/closing process.
• No specific risk management plan in place
• Changing priorities due to IPR issues, leading to resource problems.

Most importantly the critical resources of the organisation for new product development were engaged in non-critical activities, and the clashes of priorities among multiple projects in assigning key resources resulted in delays. It also mean the probability of losing the market to competitors. The export orientation of the company also calls for more synchronised co-ordination between different units to meet the quality and compliance requirements under regulatory frameworks internationally.

So, for ABC Ltd, the basic objectives for NPD were:

• Simplifying the process of NPD
• Eliminating wasteful activities (non value added     activities)
• Reducing time to file.

These objectives were based upon the basic premise of enhancing speed of development by completing the product development cycle in the shortest possible time and increasing the rate of success of each new product.

4. Key areas for competency building
Three main key areas namely process improvement; information management support and human resource development were identified as the core blocks in facilitating New Product Development.  Central to this was developing a strong capability in project management through the application of Project Management Body of Knowledge (PMBOK).

5. Process Framework

Fig 2. Process framework from a buyer’s perspective

The process framework that was included in the NPD project is a three-layered structure. The top layer is Portfolio Management, in the middle is Project Management process and the bottom layer consists of development processes and control gates. The layers do not denote any hierarchy. Its just stratifying the process into three groups which denote the strategic, tactical and operational (development) processes.

At the portfolio level the NPD projects are constantly updated and revised. New projects are evaluated, selected and prioritized. Also resources are allocated and reallocated to active projects The portfolio decision process characterized by uncertain and changing information, dynamic opportunities, multiple goals and strategic considerations, interdependence among projects and multiple decision makers and locations. New product portfolio management is characterised by:

• Evaluation of portfolio. Consideration of future events and opportunities
• Balance between risks vs. reward, project types, product lines and markets. Dealing with constantly changing dynamic environment
• Serving the needs of business strategy and accordingly allocating resources effectively.

  At the bottom level, at each control gate each project passes through and goes to the next stage. At each stage gate project is evaluated by management, resources are allocated to projects and poor projects are killed before the additional resources are wasted. So the gate-keeping is management practices, behaviours, rules and procedures that govern decision making and project facilitation designed to enable project teams to move good projects forward.

Thus, portfolio management deals primarily with  the business interface and the development process deal with the product interface, the linkage between the two can be achieved through Project management skills and knowledge. This can be conceptualised in PMBOK terminology as shown in Fig. 2.

6. The Pedagogy

The whole process of Project Management orientation to ABC Ltd. was to manage a process of transformation. The situation was mapped, documented and measured. Scenario were projected on the basis of strategic business objectives taking into account resource availability.

A customised modular educational intervention was designed with the initial module of Project management Framework and Principles. The participants were mainly executives from middle management levels. The initial module gave the participants an appreciation of structured thinking in project management terms. At the same time the Center for Project Management interacted with company executives to gain an insight on operational level issues and the specific challenges faced by participants at various levels.

With the help of another consulting organisation, ABC used the six-sigma approach and identified issues related to their development process and conceptualised a stage-gate methodology to manage their NPD. The next step was to understand the managerial aspects of NPD and as seen in the process framework, using the PM process groups (PMBOK) was overlapped to the stage gate modelling. By this way the basic project management terminologies, have been incorporated with an intention of global interfacing.

The whole program was designed in a modular fashion with learning and implementation being the key focus. The concepts learnt by the participants in the interactive sessions were applied in their respective projects. The formal and informal feedback was gathered and used modifying the modular design. Topics like Project leadership and teamwork, cost management, risk management, project planning & scheduling, managing projects in new product development scenario were discussed and upgraded in the subsequent modules. Skill building sessions in using planning, scheduling software tools were also used.

Apart from training the first generation Project manager in ABC Ltd, specific issues for senior management and functional heads were dealt with. Programs were designed and conducted is not only to bring about a common understanding about Project management but also to meet strategic objective and their integration with implementation.

The in-house training of trainers was intended for snowballing the training effect across all levels of the organisation. During this phase, selected participants were trained and facilitated in imparting further training on an in-house basis.  It also enhanced the competence gained by the participants by communicating with and developing their team members.

 

Fig3. The Processes of association

The second phase of the program was meant for senior and functional managers. The idea behind such a program was to create awareness in the organization at various levels in thinking and execution in PM terms. Stakeholders at various levels can appraise, act and monitor at their respective level the progress of the project and can facilitate in reducing bottlenecks, rework cycles and non-value-added activities.

7. The observations and learning

New product development for Pharma industry is not a new phenomenon. Either in the form of discovery of new formulation or developing a new product, the key success factor lies in timely marketing of the right product. Since the whole process bears a certain amount of uncertainty, all the focus remains on successful completion.

Earlier, in ABC Ltd the R&D department was generally responsible for the NPD. However, R&D departments had to depend on the other functional units to generate, mobilise and produce effective results. Now, since the functional departments had their own priorities and issues, the overall co-ordination issue remained a challenge in managing the NPD process. 

The need for application of project management in a structured and methodical way might have developed due to market competition in terms of adding value to the process and the perceived gap in delivering the desired level of outcomes. The Center for Project Management initially did not play any role in identifying the overall needs perception of the organization. At the subsequent levels, the Center only facilitated the understanding of certain issues in terms of the needs of ABC Ltd.

The progress of NPD often needs to be monitored and appraised at any given point of time. The personnel involved in the project also assigned with certain specific responsibilities. So, the Project manager no more burdened with lower level activities. The project approach provides the following advantageous proposition for the ABC Ltd.:

• The most important gain through the project management approach is to identify, define and suitably mobilize each component of the whole NPD process. Here each component may be activities, stakeholders or resources. To successfully plan, design, execute and control, this understanding is very important.

• Information is shared across levels. So appraising status and reducing bottlenecks at respective levels becomes easier.

• The monitoring of projects with the help of software tools helps the organization to appraise the project status at any given point of time. It also shows the impact on the outcome of the project if resources are reallocated.

• The basic assumptions made in the NPD process gets documented on more realistic grounds based upon the resource constraints. So the projected dates turn out to be more realistic.

• Although no endeavour can be fully risk proof, a systematic approach can mitigate risks to a large extent and accordingly contingency plans can be developed. This gives the NPD process adequate safeguard from complete failure.

• Learning from one NPD exercise can be well documented and used in future NPD projects.

• Team members feel more involved, accountable and participative in the whole process through enhanced communication flow and by assigning specific responsibilities to each team member.

• Effective co-ordination and communication between functions is developed.

• Better utilisation of resources occurs.

The other major factors, which were particularly considered during project management in a NPD environment are:

• Acceptability of Project Management concepts to the organization as a whole from a change management point of view.
• The very specialized nature of knowledge driven activities in the project. This leads to effective categorization of resources.
• Volatility of the NPD on IPR issues, govt. policy and positioning of the product with respect to the competition.

In ABC Ltd the project management process has been set rolling. The duration of the development process was longer than the period of association of Center of Project Management had with ABC Ltd so far. So the final impact analysis cannot be done at this point of time. But the follow-up mechanism is in place with team members training as trainers, so that a snowballing effect of knowledge and skill dissipation takes place continually.   

During the period of association one major observation has been the level of enthusiasm in implementing   the concepts learnt by the participants and in giving feedback. This shows the level of involvement through understanding and application.

8. Conclusions
New Product Development (NPD) in Pharmaceutical industry is the industry growth driver. At the same time the associated uncertainties and specialized knowledge domain often kept NPD is a sensitive issue. The application of project management skill and knowledge has not yet been widely practiced in the Indian context. Possibly, ABC Ltd. has taken up the challenge to synchronize the whole process of NPD from a project-oriented approach. Irrespective of the final outcome in terms of a successful launch of the product, the whole process of project management itself will make the organization more cohesive, team oriented, efficient, well controlled and well into a learning mode.

The challenge in this case was to introduce the discipline of project management in a dynamic mode in an industry where competition is fierce and market leaders have put NPD on priority. The changing dimensions of the business environment, market demand, competitor positioning, supply chain and government policy and regulatory mechanisms has put the whole process of NPD, a subject for regular updating and unless a structured efficient system is in place to generate feedback, appraise and take timely appropriate action, surviving in the industry will remain a question for many. Fortunately, Project management though it may not solve all the above issue, definitely facilitate the identification of the ways of resolving such issues.
References

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Belliveau, Paul;Grifin , Abbie; Somermeyer , Stephen.(2002) The PDMA Toolbook for New Product Development., John Wiley & Sonc,Inc, USA.