Smithline Beecham Decision Making - 5004 Words

IDEAS AT WORK By tackling the soft issues such as information quality, credibility, and trust - SB improved its ability to address the hard ones: how much and where to invest HOW SMITHKLINE BEECHAM MAKES BETTER RESOURCE-ALLOCATION DECISIONS BY PAUL SHARPE AND TOM KEELIN greatest, the demands for funding were growing. SBs executives felt an acute need to rationalize their portlifehlood of any pharmaceuticals folio of development projects. The company. Ever since the 1989 merger patent on its hlockbuster drug Tagathat created the company, however, met was about to expire, and the SB believed that it had been spendcompany was preparing for the iming too much time arguing about pending squeeze: it had to meet curhow to value its RJD†¦show more content†¦Their project had always been regarded as a star and had received a lot of attention from management. They helieved they already had the best plan for the compounds development. They agreed, however, to look at the other alternatives during a brainstorming session. Several new ideas emerged. Under the buy-down alternative, the company would drop one of the product forms (oral) in one of the markets (tumor type B), saving $2 million. Under the buy-up alternative, the company would increase its investment by $5 million in order to treat a third tumor type (C) with the intravenous form. When the value of those alternatives was later quantiMarch-April 1998 process evolved into a more sophisticated scoring system based on a projects multiple attributes, such as commercial potential, technical risk, and investment requirements. Although the approach looked good on the surface, many people involved in it felt in the end that the company was following a kind of pseudoscience that lent an air of so- it is. But solving the organizational problem alone is just as bad. Open discussion may lead to agreement, enabling a company to move forward. But without a technically sound compass, will it be moving in the right direction? The easy part of our task was agreeing on the ultimate goal. In our case, it was to increase shareholder value. The hard part was devising a process that would be credible to all SB needed a