With market capitalizations down and staff reductions up during the last five years, biotechs must determine innovative ways to introduce new products. Interestingly, many biotech companies do not have a formal product-planning function or personnel. Even among companies with these elements in place, many have not identified specific objectives for their product-development approaches.
Biotechs frequently lack the fundamentals necessary to support successful product development. Research and development (R&D) managers are frustrated by the absence of a rigorous product-development process, are hampered by ineffective tools for gauging the market, and struggle with insufficient budgets. What’s more, downsizings have affected employee engagement, creating environments where staff members are more concerned about self-preservation than product development.
A company’s priorities should determine the approach a project team employs for new-product development. Such approaches include phased product development, integrated product development, the Ideo (a consulting firm) innovation process, probe and learn, and TRIZ (Theory of Inventive Problem Solving). Each approach lends itself to achieving different objectives. These objectives include enabling discontinuous, or radical, innovation; facilitating incremental innovation; increasing speed to market, aligning R&D with market needs; and promoting development standardization.
Each involves tradeoffs. To make informed trade-off decisions, biotech executives should examine how a product-development methodology fits with their corporate goals. Does a company’s current or planned process help to fulfill these priorities? Does the process anticipate the needs of the market — physicians, commercial and government payers, and employer purchasers?
To answer these questions, R&D executives should understand the benefits and limitations of each product-development approach (see table on the next page).
|Development methodology profiles|
|Methodology||Defining characteristics||Key benefits||Key challenges||Instance of greatest applicability|
|Phased product development||Disciplined process with 4–10 development phases running from idea screening to post-launch review
Gate at entrance of each phase serves as a “go/kill” decision point for project
|Process standardization: New-product development is consistent across business and product lines||Discontinuous innovation: Adherence to standard processes may stifle discontinuous innovation, as technologies with uncertain market or cost projections may fail to meet gate-review criteria||Low-margin sectors where cost containment and risk mitigation is essential
Capital-intensive sectors where the high cost of failures makes process standardization necessary
|Integrated product development||Flexible process that blurs structured phases of development
Core team members are dedicated full time to the project and are led by a project manager with authority to make decisions
|Speed to market: Pulling traditional downstream activities upstream facilitates early decisions and speeds time to market||Process standardization: Under a project-management approach, in which members spend most of their time on relatively autonomous project teams, standardization and depth of functional knowledge are at risk||Fast-cycle sectors with intense time-to-market competition
Companies with strong organizational capabilities in project leadership
|IDEO||Equal emphasis on design and engineering to produce aesthetically pleasing, technically advanced products
Constant brainstorming and frequent prototyping enable project teams to identify and quickly fill gaps
|Speed to market: Rapid prototyping enables project teams to move quickly from concept to development
Alignment with market needs: High product-success rate results from constant attention to changing customer demands
|Process standardization: No aspect of product-development process is formalized||Sectors in which form and function are equally important
Instances in which small changes often result in unforeseeable ripple effects
|Probe and learn||Vehicle for gaining insight into target markets to pursue, technologies to use, and features to incorporate||Discontinuous innovation: Enables project teams to obtain information needed about the technology, the market, and the timing of the delivery||Speed to market: Iterative approach results in longer R&D cycles
Process standardization: Information needed for continuous product development evolves slowly, meaning product- and project-management activities cannot be defined within predetermined development phases
|Companies pursuing “white space” growth opportunities that are central to the business
Product offerings for which the penalty associated with initial quality problems is not severe
|TRIZ||Based on idea that universal principles of invention across industries can resolve technical contradictions without a compromise in product features||Discontinuous innovation: Principles of invention can be used for breakthrough product-and-service improvements||Alignment with market needs: Systematic approach to problem solving works from a technology-push perspective irrespective of customer demand||Companies that face standard technical difficulties with prototypes or with scaling up to production|
Creative leaders will recognize which of these product-development approaches meld with their company’s goals and will customize them in ways that can help them attain their commercial objectives.
Through research and discussions with product-planning directors, we have made several intriguing insights and have developed a unified product-development methodology, PRIDE, which incorporates many of the features of the approaches listed in the table. The PRIDE framework has five components: Process, Research, Integration, Discipline, and Efficiency.
Many corporate functions are involved at each stage of product development. For example, the late preclinical stage needs input from research, medical, regulatory, manufacturing, and other departments. Most of these groups have different priorities, and frequently, they do not have a reporting structure that ultimately leads to a planning manager. Therefore, establishing a rigorous product-development process is very important.
A successful process should align expectations, define roles and responsibilities, and create an explicit pathway for resolving conflict.
Forecasting illustrates the importance of aligning expectations. At various stages of development, a product-planning manager is asked to provide a revenue forecast for the product. Senior management frequently relies on these forecasts to select priorities and allocate resources.
Development of a revenue forecast is always a struggle; too much specificity may adversely affect the level of resources required to bring a product to market. We helped one biotech establish a forecasting process that also served to educate senior management so that the development team continued to receive sufficient resources to do its work effectively. At each stage of product development, specific revenue forecasts included robust documentation to support resource needs.
Because of the involvement of multiple functions in product development, it is easy to lose the decision makers’ original insights and vision. More often than not within biotech companies, business decisions tend to be based on consensus, arriving at consensus delays execution and tends to demotivate the true expert in the process.
To understand the market, customers, and competitors, a company should use the most appropriate research tools. Major pharmaceutical companies have developed tools to guide product planning. Out of ignorance of their importance, however, many biotechs have not adapted these tools. We found three tools to be specifically useful: small-scale qualitative market research, benchmarking data, and public information.
Qualitative market research: A successful biopharmaceutical product should address unmet medical needs. Obtaining direct feedback from customers is the most objective way to understand product potential. Internal development teams, naturally, are excited about their product, but quite often, physician and payer reactions are different. Scientists, for instance, are often enthusiastic about a new mechanism of action. Numerous studies, however, show that less than 20 percent of physicians care about mechanism of action. Payers tend to be most interested in outcomes, safety, and costs.
We have seen numerous forecasts that assume a 100 percent patient adherence rate. The industry benchmark for oral drugs, however, is rarely higher than 70 percent.
When budgets are tight, many companies are unable to conduct large-scale quantitative research. Often, however, quantitative research is neither necessary nor appropriate for early-stage product development. Interviewing 5 to 10 physicians is often sufficient for gaining valuable insights in a cost-efficient way.
Benchmarking data: Benchmarking is another tool for understanding the market and product potential. Benchmark data inject objectivity into a planning manager’s estimates. Take medication adherence, for instance. We have seen numerous forecasts that assume a 100 percent patient adherence rate. The industry benchmark for oral drugs, however, is rarely higher than 70 percent.
Public information: Conducting research does not necessarily mean having to purchase proprietary information. Many times, public resources can give us enough information to understand market size and competitors. PubMed and clinicaltrials.gov, for example, are useful.
Over the course of a product’s development, the team collects information from different resources. Even in a small company, it is rare that a planning manager has to start from scratch; usually, somebody in the organization has done research relevant to the task. Preclinical scientists at one of our biotech clients frequently expressed ideas from thought leaders with whom they have interacted. Integrating this knowledge not only avoids duplication of effort but also yields business insights.
The biopharmaceutical industry has begun to place greater emphasis on early collaboration with payers. Such partnerships will be critical for the success of new drugs and devices.
For new therapies to meet the needs of all stakeholders, the biopharmaceutical industry has begun to place greater emphasis on early collaboration with payers. Increasingly, such partnerships will be critical for the success of new drugs and devices. With payers demanding proof of a new therapeutic product’s value as a condition for coverage or formulary status, it is in the biopharma’s best interest to engage payers at each stage of the drug-development process.
To remain competitive in an environment increasingly driven by outcomes, pharmaceutical companies must build a strong understanding of how payers perceive value — namely, a product’s population-health benefits, economic benefits, and breakthrough clinical benefits — and integrate this knowledge into the product-development process. Doing so presents numerous challenges (see “Integrating Payer Perspectives,” page 39) but is more and more important, considering that biologics now in early development are likely to face a greater payer scrutiny and access restrictions than those that are already on the market.
Once processes are established, it is critical to execute tasks with discipline. A process without disciplined execution is of no use. To enforce discipline, a manager needs to know the difference between comfort and necessity, should have a tool for regular review, and should have access to detailed documentation.
Throughout the drug-development process, there is uncertainty. A manager is always asked to make decisions on the basis of existing information, even though that information may be incomplete. That’s where the difference between comfort and necessity becomes important. For example, interviews with 100 physicians will give the manager a comfort level, but it is certainly unnecessary. Adding such “nice-to-have” analyses increases development costs and prolongs the time line.
A project review is an effective tool for enforcing disciplined execution. For the biotech industry specifically, we recommend the target product profile (TPP).
The Department of Health and Human Services defines a TTP as a “format for a summary of a drug-development program, described in terms of labeling concepts.” A typical TPP consists of some or all of these components: description, clinical pharmacology, indications and usage, contraindications, warnings, precautions, adverse reactions, drug abuse and dependence, overdosage, dosage and administration, how supplied, animal pharmacology and/or animal toxicology, and clinical studies. A TPP can help the team identify the most important development goals for the product.
One of the most important components for maintaining discipline is documentation. In most biotech companies, however, it is the most neglected component because of limited resources and high turnover.
Like many entrepreneurial companies, biotechs tend to have high employee-attrition rates. Even those who stay with the company are frequently moved to new positions — never leaving behind a paper trail of their discoveries, observations, and obstacles. Detailed documentation can institutionalize knowledge, avoid duplication of effort, and challenge assumptions. One of our biotech clients has a running joke: “We can never kill a project.” Even with numerous analyses, topics come back to the product-development team again and again because of personnel changes.
One of the underestimated benefits of documentation is that it is beneficial for problem solving. A detailed analysis of what drove earlier decisions can help the team understand what assumptions have changed and how to adjust strategies accordingly.
Efficiency is another necessary component of product planning in biotech companies. Biotechs frequently have aggressive development time lines. Many target rare diseases. In both cases, knowing how to execute projects efficiently is of utmost importance.
The PRIDE approach can be used as is or with the phase-gate process, a method commonly used to weed out weak projects in development. Experts recommend that companies implementing a phase-gate process select a few effective metrics rather than a long list of indicators; using too many metrics can increase the time needed at each gate and can be costly.
PRIDE provides an integrated and effective framework for biotech companies to use in their drug-development processes. It can be adapted to corporate goals, resources, and limitations; can help to define product-development objectives; and is flexible enough to allow for integration of external stakeholder perspectives.
The opinions expressed in this article are solely those of the authors and not necessarily those of the organizations they represent.