May 29, 2013

Lessons from Pharmaceuticals Industry: Metrics, data and productivity-driven innovation

May 29, 2013 - A few weeks ago I joined Jonathan Symonds, at that time, the Novartis CFO, and a group of distinguished guests in Zurich for a briefing conducted by Finance Director Europe (FDE), a forum for finance senior executives. 

Novartis is a long-time Genpact client, and interactions between our two organizations are always stimulating. Jon is also a very insightful speaker so I came away with a number of thoughts from his address that I want to share with you through this blog. The first is about metrics, the second is around the crucial role of data and the third is to do with productivity-driven innovation. Interestingly, while Jon restricted himself to talking about Novartis' journey, all three points go beyond pharma and resonate with Genpact's experience across industries. 

Let's start with metrics. Novartis sees very clearly the linkages between innovation, growth and productivity. Its ability to succeed lies in innovating at a rate that exceeds patent expiration, turning that innovation into growth and then carefully managing productivity levels to ensure business performance. What is interesting from a financial metrics perspective is that Novartis steers clear of over-reliance on any one metric in driving its agenda. It has learned that focusing too deeply on one measure can distort the overall performance of its business. Putting cash flow ahead of all else, for example, could lead to reduced inventory levels and an inability to deal with short-term production bottlenecks. I find this very interesting, because the idea that you need to take a holistic view and understand relationships between performance indicators aligns with Genpact's own views around metric inter-dependency and more broadly, our drive for end-to-end thinking. 

The second thing I found of interest was the value Novartis places on data. The company's finance function acknowledges that much of its success is underpinned by having excellent cross-divisional data, and the ability to aggregate metrics and gain insight into organizational workings. Procurement-related savings, for example, were enabled by group-wide data that revealed commercial relationships with key suppliers across divisions. At Genpact we're always making the point that companies should use data more effectively to understand customers, partners, markets and businesses; and ultimately to drive performance. And as I've said elsewhere, speedy and accurate information is now an imperative for CFOs everywhere. 

Productivity-driven innovation was another of Jon's ideas that I found fascinating. He talked about how cash freed up from productivity enhancements could be reinvested in the business to drive greater innovation. Of course, you need to achieve productivity improvements to generate that cash in the first place—and as expected, procurement has played a key role for Novartis, contributing roughly 50% of all productivity-related savings. This is familiar ground for Genpact; and we know firsthand the total cost of ownership, materials availability and working capital benefits that can be delivered by a more intelligent procurement process. With that in place, the idea of linking productivity benefits to reinvestment and the results of that reinvestment is an intriguing one for me personally.

So those are some of my perspectives from a very engaging session with Novartis. Whatever your industry though, I think there are vital lessons to be learned here on the role of metrics, data and productivity-fuelled innovation. I hope you found this blog as interesting as I found the morning briefing. As always, I look forward to hearing what you think.

About the author

Ahmed Mazhari

Ahmed Mazhari

Chief Growth Officer

Ahmed Mazhari serves as Chief Growth Officer for Genpact, where he is responsible for Global Sales, Marketing, Partnerships and Alliances, and the Transitions function for client engagements. He also now leads the company’s Consulting service line, therefore overseeing all Transformation Services and Managed Services go-to-market activities.