There has been a big push recently to execute on more and more improvement projects. This is thanks in part to the application of lean sigma for clinical operations. But, the financial benefits of an improvement project are not easy to figure out.
For example, many such projects, and the metrics surrounding them, revolve around cycle-time reduction. This leads to a few issues. Example: if you do in fact reduce cycle times in one process, does that gain propagate all the way through to releasing the drug to market?
Business management guru Eli Goldratt says, “Throughput is the rate at which the system generates money through sales.” In other words, will the improvement allow the company to increase throughput? Will they start earning revenue sooner? Even if it does, is it possible to truly estimate the financial impact it given all the variables that exist in trying to get a drug approved?
The financial impact of an improvement project centered on operational efficiencies is simpler to estimate. It usually isn’t connected to future revenues from drug sales. But the connection is to reduced operating expenditures and/or increased throughput in the here and now. Even so, it can be difficult to agree on what the net impact of a change might be, or even how to measure it accurately.
The Ultimate Metric – Shareholder Value
How do you keep alignment with the “ultimate” metric—shareholder value? Senior management must ensure that all projects benefit the bottom line over the long run. It is imperative that a sponsor organization has all the metrics it needs to maximize its return on the huge cost of bringing a drug to market.
Any metrics collected for the sake of improvement efforts must meet the criteria of adding shareholder value. This is true for all projects, with the possible exception of those that are part of a larger strategic initiative. Projects that do not have shorter-term payoffs which can be directly measured. Similarly, even operational metrics should align to the corporate—not departmental—bottom line.
Monitor and manage only cycle times that have a direct impact on last subject out. Many sponsor companies focus on the date of first subject screened or first site initiated as “key” milestones. But, isn’t it the last subject screened and the last site initiated that really drive the timelines for the rest of the study? And even then, how financially important is it to worry about these things for a non-critical path study? We all want our trials to run efficiently. But you need to consider the return on investment for making this happen for each study if you want to maximize value for their shareholders.
Many companies still do not seem to get the benefit from metrics that they should. A large part of the problem is that they just don’t “get” why you should collect metrics in the first place. There are certain pitfalls that are common throughout the industry. Companies and departments continually tumble into them. By being aware of what they are, operations groups will be better able to navigate around them.