Ahead of his presentation and closing keynote at the upcoming FlyPharma Conference, Hugh Williams from Hughenden Consulting gives us a sneak preview of the insights we can expect to hear at his talks, with a clear focus on the need to collaborate in the industry.
Collaboration is one of those warm, fuzzy concepts that, in theory, most everyone can get behind. Making collaboration happen in practice is another story entirely – especially in industries like big pharma whose cultures lean towards traditional hierarchy and privacy. At FlyPharma, I’ll be hosting an interactive session from 9.15-10.00 on June 8th called “How do we collaborate?” during which I will share personal experiences working with clients to implement cross-functional teamwork.
Most FlyPharma delegates are likely to grasp and endorse the ‘whys’ of collaboration. When it comes to ‘how’, conviction peters out somewhat. In my work to embed better supplier collaboration practices with big pharma over the past three years, I’ve reached a simple conclusion about the how. It’s fundamentally about moving towards honest negotiations and trusting behaviours. Again, easy warm, fuzzy concepts to embrace but much harder to practice.
To illustrate what I mean, at a recent workshop I asked people to raise their hand if they offered transparent ‘open book pricing’ to their suppliers. Only one man raised his hand. However, upon pressed him further on this, he admitted that the prices were all ‘made up’!
This is categorically not to suggest that big pharma companies are inherently dishonest. The problem I’m describing is a systemic one. In researching this, I found roughly 250 different established negotiation practices based on deception. Procurement has been playing the conventional hard-bargaining game with its suppliers for so long it has become the norm. In this ‘zero sum game’ approach the side with the most power (usually the manufacturer) wins at the expense of the other (the supplier).
Quite apart from the obvious problem this adversarial approach creates of weakening suppliers, it can lead to grave long-term business risk for manufacturers. Disadvantaged suppliers looking for ways to recoup losses might fight for their survival by inflating prices or cutting corners in logistics, inventory or quality. These, especially the latter, can lead to major crises that can irreparably damage public trust and profits.
The commercial warfare in non-trusting supplier relationships can also lead to unwelcome surprises when the balance of power shifts up and down the supply chain. The recent merger and acquisition activity in the US drugstore industry is mainly down to the retail chains’ desire to gain more purchasing power with pharmaceutical companies. Exploiting power may work in the short term, but it is not sustainable and can lead to dangerous levels of complacency.
A much better, more sustainable alternative is to move to a win/win, or ‘integrative’ negotiations approach. This is the healthy principle advocated in the seminal “Getting to Yes” and the more recent “Getting to We” methodology based on award-winning research conducted by the University of Tennessee. These investment-based approaches are founded on the idea that every negotiation can find common ground and work towards co-creation of value.
Again all this sounds warm and fuzzy and instinctively right, but to make such a profound cultural shift after years of adversarial supplier relationships can be very hard indeed. We work through this culture change with our clients using simulation workshops that get people playing roles, negotiating deals and seeing the positive outcomes. Leadership, as with all major change initiatives, is essential. Not just in procurement, but at the board level.
It’s early days yet but I am very confident of the potential for systemic change based on what I’ve seen in our workshops so far. In one, the suppliers and manufacturers were working together so well, it was impossible to tell which person represented which organisation. That has to be a good sign.
I look forward to meeting – and collaborating – with you all at FlyPharma!