How SmithKline Beecham Makes Better Resource-Allocation Decisions
Shrinking R&D budgets and shorter product life cycles mean investment dollars must be invested with precision if companies are going to stay on the cutting edge in their industries. For a pharmaceuticals company like SmithKline Beecham, the problem is this: How do you make good decisions in a high-risk, technically complex business when the information you need to make those decisions comes largely from the project champions who are competing against one another for resources?
By Paul Sharpe and Tom Keelin
Harvard Business Review, March 1998
Tom Keelin from Strategic Decisions Group and Paul Sharpe from SmithKline Beecham explain how they overhauled the resource allocation processes within the pharmaceutical development function at SB. In 1993, the company experimented with ways of depoliticizing the process and improving the quality of decision making.
In most resource-allocation processes, project advocates develop a single plan of action and present it as the only viable approach. In SB's new process, the company found an effective way to get around the all-or-nothing thinking that only reinforces the project-champion culture. In another important departure from common practice, SB separated the discussion of project alternatives from their financial evaluations.
The new process at SB has allowed the organization to spend less time arguing about how to value its R&D projects and more time figuring out how to make them more valuable. In the end, the company learned that by tackling the soft issues around resource allocation - such as information quality, credibility, and trust - it had also addressed the hard ones: how much to invest and where to invest it.
(c) 1999, Harvard Business School Publishing.
