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Darwin's Medicine blog

Professor Brian D Smith is an authority on the pharmaceutical industry and works at SDA Bocconi University and Hertfordshire Business School.

Why change fails

In an evolving industry, the difficulty of change is a paradox

Why is change so difficult? Sometimes, the most succinct questions are the most powerful and, this one, put by a senior executive at a strategy workshop I facilitated this month, was certainly that. Immediately, the room lit up as the others around the table, representing six major pharma and medtech companies, identified with one of the big questions that troubled them all. For a workshop about business model transformation, it was very pertinent, so we took some time to discuss what evolutionary science can tell us about effecting real, valuable change in complex organisations. The answer began with the fundamentals to get to some practical outcomes.

Geeks like me who apply evolution to industries stress that Darwin’s great idea is not a metaphor, it is an analogue: what is happening in our industry is not like evolution, it is evolution. Organisational routines are information-storing entities that can be copied, analogously to genes. When routines vary, they cause changes in the traits of the organisations that contain them, just as organisms vary when genes mutate. These changes are favoured and disfavoured by the environment and a new population emerges, either a new species or a new business model. That’s the basic science and its ramifications for change, either in organisations or organisms, are profound.

Undoubtedly, the most famous book on genetics is Richard Dawkins’ The Selfish Gene but even he had misgivings about the title because, as Dawkins knew then, genes act together, not independently. His pupil Mark Ridley elaborated on this with his deliberately titled book The Cooperative Gene. The essence of it was that genes work together to create any significant outcome, from respiratory pathways to muscle building. In short, no single gene, however valuable, is beneficial unless it cooperates with, and doesn’t antagonise, the other genes in the organism. And that’s where the biology-business analogy takes us back to a useful conclusion.

It's not too difficult to change individual organisational routines but it's really difficult to change organisations

The paradox is that it’s not too difficult to change individual organisational routines but it’s really difficult to change organisations. You might change the routine for calculating a health economic outcome in a given patient pathway, for example. Or modify the routine for allocating sales team effort. Or any number of the thousands of routines that make up your firm’s routineome, the organisational analogue of a genome. But, just as if I changed one of your genes, the most likely outcome is little or no visible change. Of course, certain routines are critical, for example the routine for approving capital allocation, but the individual effect of most routines is masked and diluted by the thousands of other routines that make up the firm’s routineome. This stability has its advantages - minor errors don’t usually cause catastrophies - but it also helps to answer the question about why change is so difficult. Companies that change one or a few routines are often bemused when the outcome is less than they expect.

I see this paradox at work all the time in my advisory work. High frequency examples include changes in market access routines rendered ineffectual because they are uncooperative with or antagonistic to complementary routines in marketing strategy. Similarly, routines in strategy formation, which ought to lead to stronger strategy, are blocked by old, conservative routines in the strategy sign-off process. Most common are routines that evolved to fit an earlier market environment (eg where prescribers decided) being antagonistic to routines evolved more recently to fit a new market conditions (eg one where patients and payers are also involved in the prescribing decision).

So what’s to be done?  In simple terms, the answer is in three steps. Life science companies need to think about the traits their business model needs (eg demonstrating extended value). Those traits must be translated into what new routines are needed. For example, value demonstration requires several clusters of new routines across the company. Finally, and crucially, it is essential to understand the interactions of the new routines with the old. They must be engineered for cooperation, not antagonism. In one sense, this sounds obvious but the excitement that the powerful question engendered reminds me of the old aphorism: this is simple, it’s just not easy.

As Dobzhansky said, nothing makes sense except in the light of evolution. It seems nonsensical that well-intentioned, well-resourced and well-supported change initiatives in life science companies fail, in the sense that they rarely have a significant positive impact. But, as ever, Darwin’s dangerous idea sheds light on how we might make change happen. Think of change as the result of engineering your firm’s routineome. You wouldn’t mess about with your genome in a siloed, departmental way. You shouldn’t attempt to engineer your firm in that naïve, narrow way. That’s why change is so difficult.

22nd May 2017

From: Sales

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