Misjudging Leadership In the BioPharma Industry
By Louis Garguilo, Chief Editor, Outsourced Pharma
We can learn about leadership from Lego.
Or rather, this plastic building-block company can show us how little we actually understand the subject. We’ll begin with toys but proceed quickly and seriously to how we may be misjudging “leadership” in the biotech and pharmaceutical (BioPharma) industry.
Perhaps this article should be considered the “Anti-JP-Morgan-Conference View” of business leadership. I didn’t attend in January, but I’ll guarantee this: Come December, we’ll all agree the companies who gained the highest revenues and profits should have their executives and strategies lauded. The positive results will be attributed, among other things, to sound “leadership” at the executive level. For those companies with less success, we’ll point derisively to misguided plans and troubled leaders.
The problem is, these judgments aren’t rational. More poignant for our industry, they’re even less scientific. And that brings us, ironically, to our building blocks.
Lack of Leadership At Lego?
“In January 2004, after a particularly disastrous holiday season, Lego, the Danish toy company, fired its chief operating officer. No one doubted that Paul Plougmann had to go.”
So starts chapter one in Phil Rosenzweig’s book, “The Halo Effect*.” From Lego ownership, to analysts, pundits and the media, it was unanimous the company suffered because it had “strayed too far from its roots,” and needed new leadership to “return to basics” and its core.
Interestingly, just a few years prior Ploughman had been hired to lead Lego in new directions and innovation; its building blocks were losing customers to more stimulating video games and electronic toys. So how did he “stray too far”? He forged a marketing deal with the then wildly popular Harry Potter franchise to allow kids to make characters from the books and movies with Lego building blocks. Sounds reasonable enough, but after some initial success, revenues hit a speed bump and his “leadership” was challenged.
At the time, there was little written about the fact new competition was entering the toy market, and other established players were also facing difficulties. Mattel, maker of Barbie, saw sales of that icon of molded bodies go down 13%, for example. Guess what Mattel was advised to do by the same analysts and pundits? Find new opportunities and innovate. Mattel subsequently pursued a line of fashion based on the at-that-time new TV show, “American Idol.”
Whichever way it ended up for Mattel, we can be sure executive “leadership” was judged good or bad based solely on that year’s sales and profitability.
Judging Leadership In The BioPharma Industry
Gilead Sciences CEO John Martin was chosen “Best CEO of 2014” by Harvard Business Review, and a finalist in The Motley Fool “Most Exceptional CEOs.” Did he receive these and other accolades because of some measurement of “leadership skills”? The explanations I can find herald Dr. Martin for the phenomenal market-launch of, shall we say, very adequately priced Sovaldi, a revolutionary Hepatitis C treatment.
I don’t know Dr. Martin, an acclaimed scientist (PhD in organic chemistry) who has been at Gilead since 1990, and judging by results, a fantastic CEO (also Chairman of the Board since 2008). He certainly makes prescient and solid business decisions, such as pursuing the acquisition of Pharmasset, the company that originally worked on Sovaldi. But is he a good leader? There’s no reason to think he isn’t. But beyond his company’s current success, there doesn’t seem to be a measurement to help us discern if he is.
The Motley Fool first-place pick for CEO of 2014, by the way, is Ron Renaud, then-CEO of Idenix Pharmaceuticals (also focused on hepatitis C). The reason for his selection? Idenix shareholders suffered through four clinical holds imposed by the FDA, says the review, “Yet somehow, some way, Ron Renaud managed to sell his company to Merck in June for $3.85 billion in cash. This was a whopping 239% premium from the prior day's close and an astronomical sum …”
Congratulations to former Idenix stockholders (!) and Renaud, who is now “leading” a company called RaNA Therapeutics. But is the selling of one’s company a measure of leadership?
Perhaps it is. Here’s another question that turns leadership around: Can a successful company, with success measured in rising sales, revenues, profitability and share price, have executives who are “bad” leaders? What would that mean, how would we know, and should we even care if they are?
Leadership has become an evaluation with little or no bearing on executive behaviors or a certain skill set, and determined wholly by company outcome. Maybe this is as it should be. Or maybe, in our high-stakes BioPharma industry, which affects all the life sciences and patients directly, we should look to define leadership by other measurements.
Leadership, The Even More Dismal Science
Rosenzweig explains “The Halo Effect” as our tendency to look at a company’s overall performance and then make attributions about its culture, leadership, values, etc. He says what we commonly claim drives company performance is simply based on that prior performance.
You’d expect unscientific measurements and conclusions on leadership to be a source of frustration in our industry. BioPharma is founded on the rigor of its experiments; we don’t confuse correlation and causality, for if we did our patients would suffer dearly. We don’t frame hypothesis based on results we see, and then assign any behavior in attaining those results as the thing we are in need of. We control for variables. We know what we are trying to measure. Why rely on proofs, not story-telling.
Unfortunately, we and everyone else receive a lot of the opposite from books with titles like “Built To Last,” according to Rosenzweig. To be fair to the authors of that book, Jim Collins and Jerry Porras, they weren’t specifically trying to measure personal leadership, rather document qualities of leading companies. Nonetheless, they looked at results to determine how those results were achieved and provide models for executive leadership.
I particularly remember the buzz surrounding BHAGs (pronounced bee-hags, short for “Big Hairy Audacious Goals”) in that best seller. The authors identified this as an important factor in generating lasting business success.
Let’s use a sports analogy to put this to the test. If each season a football team sets the goal of winning the Super Bowl, that’s good, right? It’s the BHAG of the NFL, and takes guts for a coach (leader) to state this goal outright. The team either wins the Super Bowl and the coach is proclaimed a great leader of men, or his team falls far short and he’s soon released for bad leadership. (Apologies to NY Jets fans if too close to home.) Frankly, the coach’s “leadership” is unlikely to be the determinate factor in either outcome. Moreover, the Super Bowl winner shouldn’t gloat. He has very low odds of winning the trophy again, and often ends up getting the boot in a few years as well. So much for any “lasting” measure of leadership.
Again, not to throw stones at Collins and Porras, who have contributed much to assessing successful companies, but in their chapter on BHAGs they include a yin-yang symbol with one side saying “Preserve the Core” and the other “Stimulate Progress.” Really? So what’s a leader to do?
If it’s the leader of Lego, you’ll recall, he tries to guide to new directions, and gets tanked for straying from the company’s core at the first sales dip. And it could have been exactly opposite: As Rosenzweig says, imagine of it was found he had the opportunity to do the Harry Potter deal but didn’t get it done?
But I’ll have to end here. I’m on my way to see “The LEGO Movie,” now playing at the local theater. It’s sure to prove some executive at the company has great leadership skills. Or not.
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*The full title is “The Halo Effect…and the Eight Other Business Delusions That Deceive Managers,” with everything after the ellipsis ironically pointing out those types of books with “lists” for achieving foolproof success.