TLDR A leading pharma company experienced a 20% rise in operational costs and a 15% drop in productivity due to regulatory changes and generic competition. They adopted Hoshin Planning and utilized advanced analytics and Six Sigma, achieving a 15% cost reduction and a 20% productivity boost. This underscores the value of Strategic Planning and continuous improvement in overcoming operational challenges.
TABLE OF CONTENTS
1. Background 2. Strategic Planning 3. Internal Assessment 4. Strategic Initiatives 5. Hoshin Implementation KPIs 6. Stakeholder Management 7. Hoshin Best Practices 8. Hoshin Deliverables 9. Implementation of Advanced Analytics for Process Optimization 10. Adoption of Digital Health Technologies 11. Hoshin Kanri for Strategic Alignment 12. Additional Resources 13. Key Findings and Results
Consider this scenario: A leading pharmaceutical company in North America is confronted with a strategic challenge requiring a comprehensive hoshin planning approach.
It faces a 20% increase in operational costs coupled with a 15% decline in productivity, exacerbated by stringent regulatory changes and heightened competition from generic drug manufacturers. Additionally, internal challenges such as outdated technology and process inefficiencies are undermining its competitive edge. The primary strategic objective of the organization is to enhance operational efficiency and reduce costs to improve profitability and maintain its market position.
The organization, a prominent player in the pharmaceutical sector, is at a critical juncture. The rising operational costs and decreasing productivity signal deeper systemic issues, possibly rooted in outdated technology and inefficient processes. These challenges are further compounded by the external pressures of regulatory changes and the competitive threat posed by generic drug manufacturers.
The pharmaceutical industry is currently experiencing significant transformations, driven by regulatory changes, advances in biotechnology, and shifts in healthcare policies.
Understanding the competitive landscape is crucial for strategic positioning. The industry's dynamics can be assessed by evaluating:
Emerging trends indicate a shift towards personalized medicine, digital health solutions, and sustainable manufacturing practices. These trends necessitate major changes in:
A STEEPLE analysis reveals that socio-demographic shifts towards an aging population, technological advancements in drug discovery and patient care, and evolving legal frameworks around drug approval and patent laws are key factors influencing the industry.
For a deeper analysis, take a look at these Strategic Planning best practices:
The company possesses a strong portfolio of patented drugs and a robust distribution network, but is hampered by outdated technology and process inefficiencies.
A MOST analysis indicates that the company's mission to lead in innovative pharmaceutical solutions is challenged by operational inefficiencies. Its strategic objectives are being undermined by outdated operational processes and a lack of technology adoption, highlighting a gap between its ambitions and its operational capabilities.
A Value Chain analysis shows strengths in research and development and distribution but identifies significant gaps in operations, particularly in manufacturing and supply chain management, which are areas ripe for improvement.
The Gap Analysis underscores the urgent need for the company to modernize its technology infrastructure and streamline its operational processes to close the gap between its current performance and its strategic objectives.
KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.
These KPIs will provide insights into the efficacy of the strategic initiatives, highlighting areas of success and those requiring further attention to ensure the strategic objectives are met.
For more KPIs, take a look at the Flevy KPI Library, one of the most comprehensive databases of KPIs available. Having a centralized library of KPIs saves you significant time and effort in researching and developing metrics, allowing you to focus more on analysis, implementation of strategies, and other more value-added activities.
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Successful implementation of the strategic initiatives depends on the active involvement and support from both internal and external stakeholders, including R&D teams, IT departments, regulatory bodies, and health care providers.
Stakeholder Groups | R | A | C | I |
---|---|---|---|---|
Employees | ⬤ | |||
IT Department | ⬤ | ⬤ | ||
Regulatory Bodies | ⬤ | |||
Health Care Providers | ⬤ | ⬤ | ||
Patients | ⬤ |
We've only identified the primary stakeholder groups above. There are also participants and groups involved for various activities in each of the strategic initiatives.
Learn more about Stakeholder Management Change Management Focus Interviewing Workshops Supplier Management
To improve the effectiveness of implementation, we can leverage best practice documents in Hoshin. These resources below were developed by management consulting firms and Hoshin subject matter experts.
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The team employed the Resource-Based View (RBV) framework to guide the strategic initiative of implementing advanced analytics for process optimization. The RBV framework, which focuses on leveraging a company's internal resources as a source of competitive advantage, proved invaluable. It highlighted the importance of the company's data assets and analytical capabilities as key resources. The team then proceeded with the following steps:
Additionally, the team applied the Six Sigma framework to the process optimization initiative. Six Sigma provided a structured methodology for identifying, analyzing, and improving existing business processes to reduce waste and increase efficiency. Following Six Sigma, the team:
The combination of the Resource-Based View and Six Sigma frameworks significantly enhanced the company's process optimization efforts. By leveraging its internal resources effectively and applying a rigorous process improvement methodology, the company achieved a 15% reduction in operational costs and a 20% improvement in productivity. These results underscored the effectiveness of the strategic initiative and the value of the chosen frameworks in guiding its implementation.
For the strategic initiative focusing on the adoption of digital health technologies, the team utilized the Diffusion of Innovations (DOI) theory. DOI theory, which explains how, why, and at what rate new ideas and technology spread, was instrumental in understanding the adoption lifecycle of digital health technologies within the organization. By examining the characteristics of digital health innovations, including their relative advantage, compatibility, complexity, trialability, and observability, the team could strategize the rollout effectively. They executed the following actions:
Consequently, the implementation of digital health technologies led to enhanced drug development processes and improved patient engagement strategies. The strategic use of DOI theory enabled the organization to navigate the complexities of technology adoption, resulting in new revenue streams and a strengthened competitive position in the market.
The deployment of Hoshin Kanri for achieving strategic alignment within the organization was guided by the Objectives and Key Results (OKR) framework. OKR is a goal-setting framework used to define and track objectives and their outcomes. It was particularly useful in this context because it complemented the Hoshin Kanri process by ensuring that strategic objectives were measurable and closely monitored. Following the OKR framework, the team:
The successful implementation of Hoshin Kanri, supported by the OKR framework, resulted in a more aligned organization where strategic objectives were effectively communicated and executed across all levels. This strategic initiative significantly improved operational efficiency and strategic coherence, demonstrating the power of combining Hoshin Kanri with OKR to achieve comprehensive strategic alignment.
Here are additional best practices relevant to Hoshin from the Flevy Marketplace.
Here is a summary of the key results of this case study:
The strategic initiatives undertaken by the pharmaceutical company have yielded significant results, notably in reducing operational costs and improving productivity, which directly address the company's initial challenges of rising operational costs and declining productivity. The successful implementation of advanced analytics and Six Sigma methodologies has demonstrated the value of leveraging internal resources and applying rigorous process improvement methodologies. However, while the adoption of digital health technologies has opened new revenue streams, the quantifiable impact on the company's market position vis-à-vis generic drug manufacturers remains unclear. This suggests that while the company has made strides in innovation and patient engagement, the competitive threat from generics requires ongoing attention. Additionally, the successful strategic alignment through Hoshin Kanri and OKR frameworks is commendable, but the long-term sustainability of these changes will depend on continuous monitoring and adaptation to external market forces.
Given the results and the analysis, the recommended next steps should focus on consolidating the gains achieved through operational efficiencies and digital health technologies while addressing areas of less clear impact. Specifically, the company should conduct a detailed market analysis to better understand the competitive landscape with generic drug manufacturers and explore strategic partnerships or acquisitions to bolster its market position. Furthermore, to sustain the strategic alignment and operational efficiencies achieved, it is recommended to establish a permanent cross-functional team dedicated to continuous improvement and innovation, ensuring the company remains agile and responsive to market changes.
Source: Operational Efficiency Strategy for Pharma Company in North America, Flevy Management Insights, 2024
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