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The Art & Science of Decision Making - Key Note Speech
 

The Art & Science of Decision Making - Key Note Speech

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Key Note Speech Given at International Conference on Operations & Quantitative Management

Key Note Speech Given at International Conference on Operations & Quantitative Management

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    The Art & Science of Decision Making - Key Note Speech The Art & Science of Decision Making - Key Note Speech Presentation Transcript

    • The Art and Science of Decision-Making: Industry Perspective Surya P. Chitra AstraZeneca LP Delaware, USA International Conference on Operational Quantitative Management 04 August 2006 1
    • Change is Inevitable Decision Making Needs to be Dynamic Blend of Experience & Calculated Decisions International Conference on Operational Quantitative Management 04 August 2006 2
    • Transition to New Global Economy Operational/ Business Model International Conference on Operational Quantitative Management 04 August 2006 3
    • Drivers/ Influencers for Change Transparency Reach - Product Technology - Product - Price & - Geographic - Value Information - Easily - Services - Supply Chain - Supply International Conference on Operational Quantitative Management 04 August 2006
    • Drivers & Business Model Changes DRIVERS/ INFLUENCERS Cost Inefficiencies Cost of Capital Competitive Products Price Pressures Long Development Cycles Low entry Barriers Oil/ Petrochemicals Electronics Personal Care Chemical/ Pharmaceuticals Automotive Specialties 1970 1980 1990 2000 2010 BUSINESS MODEL CHANGES/ STRATEGIES Cost Management Emerging Market Strategy Geographic Leveraging Differentiation Model All to Segmented Targets Customer/Value Management International Conference on Operational Quantitative Management 04 August 2006 5
    • In a moment of decision, the best thing you can do is the right thing to do. The worst thing you can do is nothing. Theodore Roosevelt International Conference on Operational Quantitative Management 04 August 2006 6
    • The Challenge “To survive & sustain growth in the dynamically changing global markets, companies and organizations need to make flexible and actionable decisions” WE SHOULD MANAGE RISKS TO BALANCE DECISIONS International Conference on Operational Quantitative Management 04 August 2006 7
    • Growth Risks/Decisions PRODUCERS CUSTOMERS Balance Risks - Innovation - Value - Efficiency - Speed - Low Cost - Long Life INDUSTRY’S SUSTAINED GROWTH INNOVATION INCREMENTAL - Novel - Extensions - Quality - Formulation Weighted - Lasting - Delivery Decisions REVOLUTIONARY CHANGES NEED RADICAL DECISIONS International Conference on Operational Quantitative Management 04 August 2006
    • Transformation RADICAL TRADITIONAL 1. True Innovation Brand Extensions 2. Risk & Uncertainty Formulation Changes Management Geographic Expansion 3. Simpler Structure/ Mergers & Acquisitions Effective Decisions Vertical Integration 4. Value Chain Leverage Re-engineering Costs 5. Adaptive Flexibility Out Sourcing International Conference on Operational Quantitative Management 04 August 2006 9
    • INNOVATION NOT INCREMENTAL INNOVATION “Marginal Benefit to Patients but Boost Short-term Corporate Profit” PHARMACEUTICAL RADICAL INNOVATION “Optimum Medical and Economic Value to Patients” Individualized Medicine Disease Management Biologics Biomarkers/ Diagnostics RADICAL DECISIONS CAN BE MADE BY CALCULATED RISKS International Conference on Operational Quantitative Management 04 August 2006 10
    • RISK: CALCULATING UNCERTAINTY 23Aug05 25Aug05 29Aug05 27Aug05 International Conference on Operational Quantitative Management 04 August 2006 11
    • RISK: PRODUCT DEVELOPMENT Revenue Potential More Early Stage 25% Target 55% Fewer 85% Early Late Target Product Launch Revenue Potential More Late Target Stage 55% Fewer 85% Early Late Target Product Launch International Conference on Operational Quantitative Management 04 August 2006 12
    • RISK: PHARMACEUTICAL VALUE CHAIN PRODUCTION PRODUCT LAUNCH R&D Drug Clinical Formulation Marketing Distribution Discovery & Manufacture & Sales Development PROGRAM RISK PRODUCT RISK Project Risk Launch Risk Execution Risk Competitive Risk Regulatory Risk Regulatory Risk Decisions Based on More Past Decisions Based on Experience Than Risk Models Statistical Risk Models International Conference on Operational Quantitative Management 04 August 2006 13
    • STRUCTURE REDESIGN M & A Created Complex Organizations Building Blocks for Change •Rules •Simple •Processes •Flexible Decisions Structure •Speed Information Motivation •Adaptation •Technology •Knowledge Share
    • VALUE CHAIN RESTRUCTURE PRODUCTION PRODUCT LAUNCH R&D Drug Clinical Formulation Marketing Distribution Discovery & Manufacture & Sales Development 24% 76% 2005 Expenditures R&D 16% Op. Profit 26% Which parts of Each COGS Function is Crucial to 16% Company’s Value Admin Chain? 7% Sales 35%
    • ADAPTIVE FLEXIBILITY • ADAPTATION • External Dynamics • Technology • Globalization • Uncertainty • FLEXIBITY • Operations • Strategies • Structure • Innovation
    • quot;Change is the law of life and those who look only to the past or the present are certain to miss the future.quot; - John F. Kennedy International Conference on Operational Quantitative Management 04 August 2006 17
    • Need For Change “To sustain the growth for better living globally, we need to prepare and plan our decisions with adaptive flexibility and scientific rigor” International Conference on Operational Quantitative Management 04 August 2006 18
    • SUMMARY • Incremental & Radical Innovation • Balancing the Decisions • Managing Risk & Uncertainty • Risk Models and Forecast • Simpler/ Effective Organizations • Speedy & Adaptive Decisions • Value Chain Management • Prioritized Decisions
    • CONCLUSIONS Change is Inevitable in The Industry Decision Making Needs to be Dynamic Blend of Experience & Calculated Decisions It’s Not the Science, It’s What Science Forces one to Decide International Conference on Operational Quantitative Management 04 August 2006 20