The effects of M&A activity on R&D productivity are a classic example of where and how to implement change management principles. Change management in R&D requires great sensitivity and is a difficult task [1]. In this post I discuss why our process mapping efforts appeared to work so well as a change management technique for R&D after an acquisition.

Recap … My last post was a case study about restoring productivity in R&D after an acquisition [2]. The goal of the pharmaceutical company in the case study was to address productivity issues experienced after an acquisition by improving internal R&D operations. The focus was on developing executional excellence in the NPD process [3]. The solution included developing a well-defined, clearly understood, easily followed and repeatable NPD process which drew from best practices from each company and integrated the acquiring company’s SOPs into the NPD process. Upon successful completion of the process mapping initiative, the company was delivered a user-friendly, web-enabled, intranet reference tool that:
• Supported a consistent “way of working” within R&D that was the “gold standard” agreed by the functional process owners.
• Represented the combined “best in class” knowledge and expertise of two leading pharmaceutical companies.
• Eliminated confusion around the correct process and documentation to use.
• Freed R&D workers from determining how to do the work so they could spend more time on actually doing the R&D work, thereby improving productivity and innovation.
• Increased the client’s R&D NPD knowledge and improved their global R&D culture.
• Provided Gantt chart templates to ensure more accurate project milestone information.
• Enabled easier portfolio management using a custom dashboard that was based on the process maps.

The Change Management Effect … Interestingly, after the project was completed, the internal sponsor of the project reported that the work seemed to have an unexpected additional benefit on R&D morale.

(To recap: The process mapping interview process ensured that the maps included the best ideas from each legacy organization. Unlike so many process redesign efforts that are largely “top down” with minimal support from subject matter experts, here the process maps were built from the bottom of the organization up. This helped us tap the knowledge of those actually doing the work, but built consensus and buy-in for the new process. Colleagues from different functional groups were interviewed multiple times, one-on-one, to validate maps at the functional level. Next groups were validated at the functional group level, then at the cross-functional group level and finally with the whole organization. Using this approach we were able to ensure that almost everyone had a hand in developing the maps and hence developing their new culture). This approach [2] helped to resolve R&D performance issues and resulted in more productivity because R&D colleagues were able to focus on doing the work rather than on figuring out how to do the work.

Other additional benefits in the new NPD process included less rework because duplicate processes were eliminated and the work could be done correctly the first time. Also there was less work that was “missed” because all process steps were followed in the correct sequence. Previously this “missed” work often had to be done at the last minute, out of sequence, and often resulted in project delays because they were not planned.

Why Productivity Freezes after M&A … People naturally resist change and view most M&A situations with a healthy dose of skepticism [1]. However Management tends to want change to happen fast after an M&A. Often the new organizational structure is rolled out quickly, synergies calculated, and new vision, mission and values statements are developed and “imposed” from the top down in a “tell-sell-yell” approach. “Survivors” in the new organization are often left “shell shocked” wondering how they are going to operate in the new organization.

When Management understands that resistance to change is natural and that the best strategy is to embrace it instead of trying to manage or ignore it, solutions can be implemented quickly to prevent lost productivity. Efforts to push change through without addressing resistance are not normally successful. For full ownership of change to occur, people need to embrace the change by being supported in (and being granted permission to) challenging the underlying assumptions, having time to assess the change, and being given sufficient information to begin to shift towards the change. When this happens, eventually, most people will feel attracted towards the change.

How this Process Mapping Initiative Short Circuited Productivity Loss and Improved Morale in R&D … This process mapping initiative, implemented after an M&A, was very helpful to bring R&D people together around a common cause and quickly improved mindsets around the change and improved the new innovation culture. While the “tell-sell-yell” approach is often not very effective, process mapping initiatives that involve everyone will reinforce that “we” all now embrace how work gets done in “our” new culture. This effectively gets colleagues past the change and into defining their new culture.

Following the merger in this case study, employees from each legacy company naturally felt a little suspicious of each other and tended to want to work in the old way and rely on old legacy alliances. Using conflicting legacy processes threatened to slow productivity to a stand-still. The R&D process mapping initiative involved all R&D workers as architects of their own change, rather than expecting them to be the passive objects of change. They actively participated in the process mapping interviews to create the new process as well as the validation sessions. As the work progressed, the initial resistance to the acquisition subsided and people eventually felt attracted to the change, rather than feeling like cogs in a big machine without any influence or control over their own destiny.

The interview approach for the process mapping initiative was a bottom-up approach and effectively engaged almost everyone in the new organization in “building” their new innovation culture. Project status/update reports were simplified and aggregated as a result of using common milestones which resulted in more accurate project status reporting to Management. Better reporting, less rework and less “missed” work in the NPD process improved the professionalism of the R&D group and gave greater transparency to R&D’s true productivity. R&D’s project timing estimates were more accurate because the NPD processes were more accurately defined and more closely reflected the sequence of work that was required to develop new products.

Summary … There is no doubt that M&As negatively affect R&D performance and that loss of knowledge, loss of motivation, lack of decision making, lack of defined processes and reorganizational chaos all contribute to the pipeline being frozen (and then slowly thawing) for a period of time. A recent article [4] in the journal Nature, reports that it can take more than 9 months for a pharmaceutical pipeline to “unfreeze”. However in my experience, NPD never bounces back to 100% efficiency; it’s more like a gradual thaw and it can take 2-3 years for everything to be humming like it did before the M&A activity.

The way R&D groups adapt after mergers is critical to how quickly they get back to full speed in NPD development and refueling the pipeline. Therefore, efforts that accelerate acceptance of change in R&D are likely to be highly productive. Any methodology that results in R&D returning to full productivity and efficiency should be highly valued and worth the effort.

Process mapping initiatives work well in this context. Process mapping using our methodology and interview approach helps to resolve the difficulties around change after an M&A and results in a more productive R&D with less down time. In my next post I’ll discuss the project’s effect on innovation culture and discuss some lessons learned.

References…

1. http://www.zuehlke.com/fileadmin/pdf/fachartikel/134_ion_svd_change_management_english.pdf
2. https://innovationcrescendo.com/2014/05/28/restoring-rd-productivity-after-a-merger-or-acquisition-a-case-study-in-good-timing-comprehensive-approach-building-consensus/
3. The case study is based on a project with a major pharmaceutical company trying to address R&D productivity issues after an acquisition. They hired Philosophy IB (PIB) as consultants for this project. I was the consultant project lead for this Philosophy IB project (I am also a Managing Director at PIB) and was intimately involved in this project. I am unable to disclose the company or other specifics for confidentiality reasons.
4. http://www.nature.com/nrd/journal/v10/n8/full/nrd3514.html

© Dennis Nelson 2014