How Do You Know Your Portfolio Process Is Adding Value?

In 1998, Rob Arnold, Executive Vice President, teamed with some colleagues to publish an article in the Harvard Business Review that highlighted the practical results obtained by applying modern R&D portfolio thinking to SmithKline Beecham’s late-stage assets. SB publicly claimed that the review process had added $2.6 billion in value to the corporation. That team worked with most major pharma companies to apply similar principles in the 1990s, and huge value was unlocked using superior analytic and people process approaches.

These approaches were developed to address the most significant challenge of the time: too many assets and not enough investment available. Industry challenges are different today, and more time is spent locating innovative assets that can pass the required hurdles for access and pricing. Today’s leaders bring a more marketing-focused background compared to the scientists of the ’90s. Approaches to managing the R&D portfolio have evolved and transformed. In a recent review project, we interviewed representatives of leading companies to understand more about today’s processes and their value add.

We interviewed at length six senior participants in the R&D portfolio prioritization process, with most of them leading or having recently led their company’s portfolio process teams. We included representatives from eight Western and Japanese pharma companies, from both specialty and general pharma. The breadth of their initial responses to qualitative questioning illustrates the different perspectives companies hold on the role and purpose of portfolio management.

Purpose

Assessing the portfolio versus its objectives is still the key objective of the regular portfolio review, although the results are put to different uses, dictating the specific approaches. Decision-makers want to understand the progress being made by the assets and any rebalancing actions that should be taken. The review schedule often provides results shortly before the release of updates to analysts or annual reporting.

One of our key findings over time is that companies end up with the portfolio processes they deserve. Typically, the executive decision-makers are the customers of the process, and it is their demands that will shape it. Thus, differences in the process can be tracked to different needs, cultures and situations of different companies and their decision-makers.

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Author
Ravi Visweswara
Executive Vice President

In more than 20 years of consulting and leadership in APAC, Ravi’s expertise has focused on helping clients take big-bet investments in complex and uncertain environments at an asset and  portfolio levels. Ravi regularly…

Rob Arnold
Executive Vice President

With over 30 years of consulting and executive leadership throughout Europe, North America, and Asia, Rob Arnold has developed creative solutions to some of the most challenging business situations in Life Sciences.. He’s responsible…