Eli Lilly is a leading pharmaceutical company located in Indianapolis, Indiana, which specializes in treatment of several high profile diseases. Evista, a newly developed drug by Eli Lilly, is an estrogen replacement therapy medicine for prevention of osteoporosis which through testing has seemed to lower the incidence of breast cancer in women. This FDA approved drug is expected to be a potential blockbuster and generate revenue of 1 billion US dollars per year for the company.
Pharmaceuticals is a highly competitive market and it is imperative for the leading companies to recuperate their development costs and generate returns for stockholders as well as fund research and development for potential new drugs at almost a constant rate. With the profitable lifetime for drugs, in United States, being significantly shortened since the 1980’s, Lilly Research Laboratories was able to develop Evista in a much shorter time period by adopting a Matrix-Based development approach and utilizing heavyweight teams. This strayed from their usual path of function-based product development strategy. With the possibility of profound profits from the commercialization of Evista, Dr. Gus Watanabe has to weigh whether the increasing internal resistance to heavyweight teams and shortage of resources is worth it. Watanabe needs to make a decision about adopting this new successful heavyweight team approach for commercialization of Evista as well as product development.
Changes in the past few years have pressured the pharmaceutical manufacturers to reduce the price of their drugs. However, the cost of bringing new beneficial drugs to the market has been increasing dramatically since the 1980’s due to the increased time required to conduct the pre-clinical trials, formulate results and get government approval. All these changes have resulted in reduced profits, increased costs, increased competition, and higher risks for the pharmaceutical companies. Because of this, Eli Lilly had to improve its abilities to develop and introduce new products to the market efficiently.
Eli Lilly has a history of using traditional functional-based teams that take a slow and cautious approach for product development with no proper tracking of resources, accountability or focus. Staffing was a serious issue, with members tied to multiple job titles at once. This lead to older projects being drawn out and newer ones constantly being put off. The introduction of “heavyweight” teams in product development at Eli Lilly sped up developing innovative methods to gather information, develop large clinical trials to answer many questions, anticipate regulatory concerns before they occurred and allowed teams to overcome functional gaps and differences. This cut down on production times drastically and was very successful in the development of Zyprexa.
This wasn’t a smooth transition by any means due to the fact they were logistical nightmares to coordinate. The employees might have seen it as “switching horses mid-stream’ and can be detrimental in many cases. It took awhile for the functional groups to disband into the heavyweight teams, but once assembled were very successful. Another significant factor in moving to heavyweights was that it allowed groups to constantly be in contact and communication with each other. In the functional system, teams often only met once a month. While there were many positives to the overall outcome of the heavyweight teams success, there were many negatives as well.
From the get-go, heavyweight teams were not popular amongst the rest of the Lilly organization. The formal announcement to introduce the teams set the tone as to how important they were. They would have nearly unlimited access to company resources and the attention of senior management. It wasn’t just that they had the access, it was the behavior associated with using that power. It is this behavior that would come back to haunt the teams, especially the Evista team, which gained the nickname “the big pigs”. This was a serious issue, because not only was the rest of the organizations productivity limited because of resources tied up with the “more important” functions of the heavyweight teams, but also their personal morale was hurt. This hampered morale has the ability to grow into counterproductive behaviors.
Detaching heavyweight teams from the company has undoubtedly created tension between employees. If other projects were given the same resources, then they could excel at their projects as well. Something else Eli Lilly considered was how to label their drug. Should it be listed as “prevention” or “treatment?” One word could continue the product for years. The market was new for Evista as a prevention of osteoporosis, so getting to this market before others would mean even more revenue and a bigger grip hold of the market. This may not seem exactly like an OB problem, but there was a divide amongst team members of how this should be handled. Furthermore, the proposal to keep key team members passed product development and into commercialization would severely decrease their marginal benefit to the company. The reason for this is because there was a general shortage of experienced personnel in technical capacities. This creates a bottleneck within the company, reducing their availability for other projects. Again the alienation factor continues as employees outside of this team feel their work isn’t as meaningful or important. If they have to be put on hold or at a disadvantage because they need to wait for technical support being held up by a mostly complete project, why should they stay motivated?
Our groups choose the major OB problems to focus on as the alienation from the get-go resulting from creating heavyweight teams, and the continued tension if Lilly keeps going down that path. Although the other functional groups and even the heavyweight teams are far from perfect, a divide within the company could spell disaster not only for the current projects, but also the future and well-being of the organization.
With the problems facing Eli Lilly, there are several useful solutions that can be used to mitigate tension within the company. A preceding factor in the background of the case is the staffing shortage, which is reflected by the fact that Eli Lilly has been spending only 16.2% of its revenues on research and development when compared to the industries average of 19.4%. Under these constraints, Watanabe has to address the concerns of the employees in functional teams and allocate the resources properly. There needs to be a trade off between maximizing the profits for the shareholders and commercializing the successful drug, Evista, along with other drugs in the works.
As far as dealing with the tension built between the remaining heavyweight Evista group and the rest of the Lilly company, it is our recommendation that Eli Lilly see the Evista project through to the end. The major shift in our discussions was based on how truly profitable the project is and that the commercialization is vital to its success. It would not be worth it for all the tension to be caused from the beginning, for no good to come out of the situation. To obtain a competitive advantage in the market, Eli Lilly should adopt the heavyweight team approach for the successful commercialization of Evista. In an industry where the rate of development of a successful product is 0.2% and a development time of more than 10 years, commercialization of a drug must be given utmost short-term importance. Like we mentioned, it is not realistic to waste years of work. That being said, we do suggest a change in future team building and management.
The short-term challenge the company faces is the resistance from the functional teams. The managers of the functional teams must be trained to understand the importance of generating profits for the organization and hence the need for sharing/temporarily losing their key resources. They need to understand how important this drug and drugs in the future are to the company and their job security. Though the heavyweight teams were given free rein in choosing and employing the resources in the development phase, this should not be the case in the commercialization phase. Project managers should take into account resource management of functional teams during the commercialization phase as well. The collaboration of heavyweight teams with functional teams should become a key piece policy and regulations put into place regarding how teams share resources.
Most importantly, in the future, Eli Lilly needs to create transparency across the company. This starts with senior management. While they made an executive decision to initially create these heavyweight teams, there was not adequate communication between the teams themselves and the rest of the company on proper protocol. They need to remind everyone that they are all a part of the Eli Lilly family and everyone performs an important function within the organization. While there needs to be a ranking system of priority cases, whether or not someone is included on that team, should not alter their work ethic. There will be times when resources are allocated in a lopsided manner; this goes to show that Lilly needs to increase its R&D budget. More specifically, steps need to be taken to alleviate staffing concerns. This is where several alternatives are presented.
One possibility to alleviate staffing and resource constraints is to license/sell the drug, Evista, to third parties and share the profits. This isn’t the most glorified suggestion, since Eli Lilly has already gone through the bulk of the work. However, this can definitely be used in future drug ventures. Lilly has a lot of leverage and bargaining power. They could also collaborate with similar companies who may only provide certain steps within the process, such as research and development, or testing.
As far as fixing the current functional group system, Eli Lilly should form a team identity earlier so members don’t just “throw it over the wall.” To solve this problem, there are some solutions. Firstly, strengthen communication; this starts with a team leader. From page 8 we know that team members continued to be “guided by the priorities of their functional goals rather than acting as a cohesive team.” Each member should have increased communication with the others. This can be solved through virtual meetings or live interactions, such as board meetings. Only in this way, team members can integrate and cooperate sooner and have a complete sense of what other team members do. Secondly, more discussion should be had. Each member should discuss with others team members to help know what to do. This can help each team have better team performance. Thirdly, functional groups need more cooperation between each individual group. Teams should have more cooperation, such as working together or sharing their perspectives. They can help each other when they meet some difficulties.
As exemplified by Zyprexa, the team encountered a problem and was initially in shock facing almost a month’s delay. They didn’t panic, however, and because they were all on the same page and communicated so well, they solved the problem in less then a week. A great option to achieve camaraderie is for the implementation of employee rewards and promotions based upon both individual and team success. By some rewards, the performance of employees can be increased and have a higher motivation. Finally, make a detailed work plan. By a detailed work plan, team members can “plan for future uncertainties; determine internal and external interdependencies, and forecasts future potential road blocks.”
In the long-term, Eli Lilly should concentrate on increasing the staffing in critical areas by increasing the spending in R&D from profits generated. It should also leverage its market leader label in collaborating and bargaining share rights with similar pharmaceutical companies or independent research laboratories/institutions in the development of new drugs. They can identify where resources are best used and what side is most useful at each step in the process. This approach will not only reduce the resource constraints but also improve the coordination between different teams within and outside the organization. Though heavyweight teams are not necessary in each and every project, they need to be created and employed by identifying the key projects with high probability of success and large contributions to the bottom line.
Lessons learned by heavyweight teams should be shared with functional teams to achieve cost savings in all projects by every possible manner. Key targets and objectives should be set for each project, group and group member in that order and all parties should be prepared for frequent evaluations. These evaluations can also be a great time for polling of employees to see what has been effective and what management can change. Eli Lilly needs to get across that all employees are valuable assets and train them in such a manner. Since coordination between different groups would be increased by encouraging the groups to organize frequent meetings and share their project issues, Eli Lilly should take another chunk out of their budget for workshops on team building and communication. The success of the company relies upon it.
Some of these changes can be made through simple memos or employee gatherings. Transparency throughout the company cannot be underestimated. Other changes such as increasing staffing or looing to outsource cannot be done as quickly and may require the outside presence of a consulting firm. The bottom line is to increase communication and collaboration, and maintain morale throughout the company by encouraging a one-company approach. Steps that can be taken to improve the success of function based development strategies can vary greatly. The approach we would like to take is from the top down. Senior Management needs to relay a job to a chosen manager. From there a team is assembled based off of job functions and needs. Before the actual assignment is given to the group members, they are called together. From there people already become familiar with each other before work even starts. The team leader or manager then goes over the scope of the work and creates an exchange network virtually. This is where people can voice questions or concerns before tasks are even assigned. Once that is complete a plan of action is assembled off of the suggestions of the actual members, not a senior board that will not be the ones seeing the project through. Work then begins and a schedule of meetings and resource times are met. The head of the team acts as a concierge to outside groups and services, either internal or external, to Eli Lilly. He is responsible for acquiring the resources necessary to keep the project going. Obviously there will be many leaders and many projects going on, so it is important all lead managers meet at least bi-weekly or are in constant communication to make sure resources are being split up appropriately. We believe this is the fairest and most efficient method of dealing with these situations. With all of these solutions and actions, Eli Lilly will need an effective way in determining if they are actually working. One of the easiest ways Lilly will get instant feedback is through the rewards program. If Lilly starts giving out rewards to teams and team members based on performance and deadlines being met, then it will be instant feedback that the solutions are working. One of the major problems Lilly has had in its production of new drugs is multiple deadlines being missed. With a rewards system in place, this gives team member an incentive to work hard to meet the deadlines and provides Eli Lilly a little checkpoint on the teams. The reward system would probably be the most effective way to evaluate the solutions success. Another solution we had for Eli Lilly’s team problems would be to increase the staffing in their R&D department. More staff members would mean less work for each individual, which could increase productivity in each individual. The main worry Eli Lilly should have with this solution would be no increased productivity as a whole. If Lilly hires more people to help ease the load on their current employees, and their current employees decide not to work as hard because their job is now spread out over more people, then they have a major problem. Lilly would have just increased their spending on staffing with no returns. In order to make sure this doesn’t happen, Eli Lilly should implement a team manager review requirement. Each team manager would be responsible for turning in a performance review, to upper management, for each of his or her team members. This would help higher executives keep track on how efficient the increased spending on extra people is. Last, Eli Lilly needs to be able to determine whether the communication between teams over resource partition has increased and is beneficial. This would be hard to measure without simply hiring somebody to sit in all the meetings and make sure communication was working. This is very costly to Eli Lilly and would make the team managers feel like upper management didn’t trust them. Instead, Lilly could implement a system where resource partition was tracked more thoroughly. This would give the company an evaluation on whether the communication over resources was being utilized correctly. If the proper resources were going to the proper teams, and split up according to the most needy, then it would be a sign that the communication is working well. This evaluation would be less costly to Eli Lilly and provide just as good of feedback. Eli Lilly seems to still be a strong force in the pharmaceutical drugs market. Their OB problems aren't major but are worth fixing to increase their productivity and profit. The major issue they seem to have is team accountability and resource management between teams. If these two problems were just addressed minimally, Lilly would see great returns on them. Our group has recommended solutions that would fix Eli Lilly’s OB problems thoroughly. With these solutions and actions, Eli Lilly should continue being a leading force for medicine.