Michael Wong is an Emeritus Board Member of the Harvard Business School Healthcare Alumni Association.

Michael Wong

Michael Wong: At the November 2022 HBS Healthcare Alumni Association’s annual conference,

 a spirited debate around this year’s Inflation Reduction Act of 2022’s likely impact on prices and new medicine development took place; and although you were not even at the panel,

 your company was brought up during the concluding comments. Why do you think your recent 2022 efforts have garnered so much attention when there have been so many other ideas proposed to solve this long-standing challenge of safe and affordable medicines for communities?

You don’t need a degree from Harvard to understand the simple and transparent business model that my start-up has deployed. As a public-benefit corporation (PBC), our social mission of improving public health is just as important as the bottom line. We've built a vertically integrated supply chain to transparently charge a standard markup on every drug we sell. For instance, we charge $47 a month for Imatinib (Gleevec®), a common leukemia medication which typically retails for more than $9,600 a month or, with a drug voucher, would cost roughly $120 a month.

Our medications are available directly to patients or through our 

. To date we have nearly 1,000 of the most highly utilized and/or most high-cost generic medications in our pharmacy and so it is not surprising that over 1.2 million people have created accounts with us.

As for why I think there has been so much attention; it is the huge potential impact and value that our company can potentially create. For instance 3rd party researchers have shared their objective viewpoints; such as the Annals of Internal Medicine which suggested that Medicare could have saved 

 a year had it purchased generic drugs from Cost Plus.

Well, biopharma firms seem to be under constant scrutiny, but how about the value that they provide, like they did with the fast response to creating products to combat COVID-19?

I am not challenging the value that new innovative medicines can bring to solve ailments. However, disruption is needed when there are clear inefficiencies in the market. For instance, one report shared how the CBO estimates that the drug pricing provisions in the Inflation Reduction Act law could reduce the federal deficit by 

Still, as the provisions show how some of the price changes don’t take place until 2026 and thereafter, my company provides value now, in 2022. Last month, we announced that Capital Blue Cross will be the first health plan to partner with us. To secure a better understanding of our business model, check out 

 interview and hopefully your readers will enjoy it as much as they like seeing me on Shark Tank!

All kidding aside, the current state of the overall healthcare ecosystem needs to be disrupted in America. According to a 2021 Cost of Care Survey by Genworth, a private room in a nursing home costs $297 per day, or $9,034 per month. So just imagine what this could mean for your sandwich generation alums who not only might have tuition payments for kids in college and private school but also six-figure payments for a parent per year if their parent(s) do not have such insurance. These are big numbers that even many of your alums might not be able to handle if disruption doesn’t happen soon.

Mark Cuban is an entrepreneur, television personality, and media proprietor. Besides being the owner of the Dallas Mavericks of the National Basketball Association (NBA) and one of the main investors on Shark Tank, Mark recently launched his “Mark Cuban Cost Plus Drug Company” to disrupt the pharmaceutical industry and provide complete price transparency from manufacturing to prescription delivery.

Michael Wong is an emeritus board member of the Harvard Business School Healthcare Alumni Association.

https://www.hbshealthalumni.org/s/1738/cc/21/page.aspx?sid=1738&gid=11&pgid=77789&content_id=110204

2. file:///C:/Users/michael.wong/Downloads/Agenda-Boston-Conference%20November%208%202022%20(2).pdf

Medicare could’ve saved $3.6 billion by buying drugs at same prices as Mark Cuban’s online pharmacy, according to a new study

https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/#bullet02

https://www.markcubancostplusdrugcompany.com/

Michael Wong is an emeritus board member of the Harvard Business School Healthcare Alumni Association

Articles

A Harvard Business School Healthcare Alumni Association C-suite Q&A with Mark Cuban, Cost Plus Drugs co-founder



Disrupting the Pharmaceutical Industry

While 6% of Harvard Business School’s Class of 2021 joined the healthcare sector, their peers continued to flock to professional services, with 23% going into consulting.

 In this, Michael Wong’s latest Harvard Business School Healthcare (HBS) Alumni Association Q&A, Professor Laura Empson, senior research fellow at the Harvard Law School, pulls back the curtain on insecure overachieving professionals and explains how they can come to accept damaging patterns of overwork as inevitable and even desirable. With her research findings, Professor Empson provides important insights for the various stakeholders—those who are and those who hire these high-achieving professionals.

Michael Wong: When I asked an HBS alum who had

often seen as the Holy Grail for elite business school students, what the difference was between working for a consulting firm versus a premier Fortune 500, she explained, “Expecting someone to work 16-18 hour days, for weeks on end, to deliver a desired result is not going to be as readily accepted in a corporation as it may be at some professional service firms, since that is frankly not what they signed up for.”

 Professionals who join consulting, investment banking, private equity, or other professional services firms know what they are signing up for, so what is the problem? After all, like the Class of 2017, nearly a quarter (23%) of last year’s HBS graduating class pursued consulting.

 From my research, I have identified how the inclination to overwork and burn out is framed by a complex combination of factors involving our profession, our organization, and ourselves. At the heart of it is insecurity—both personal and professional. Exacerbating this problem, some elite professional organizations deliberately set out to identify and recruit “insecure overachievers”— exceptionally capable and fiercely ambitious individuals, who are driven by a profound sense of their own inadequacy. In the past, firms such as McKinsey and Goldman Sachs have been explicit about their policy of recruiting and promoting insecure overachievers—though given the new societal emphasis on work-life balance, the rhetoric of elite professional firms has become more circumspect.

 Firms want to hire these kinds of people because, in the short term, insecure overachievers respond by delivering exceptional performance. The problems start when these elite firms reinforce this sense of insecurity through their tournament model of promotion and their mechanisms of social control. Paradoxically, such professionals still believe they have autonomy and are therefore consciously choosing to overwork. They do not blame their firms for driving them too hard but blame themselves for being inadequate in needing to work such long hours to get their job done. Subsequently, by the time insecure overachievers become leaders of their organizations, they unconsciously replicate the systems of social control and overwork that have enabled them to rise to the top.

Elite professional organizations offer insecure overachievers the security of exceptional psychic as well as financial rewards: i.e., they can enjoy the comforts of being associated with an elite organization and are able to incorporate this elite status into their own identity to counteract their sense of insecurity. Their actions demonstrate how the ‘comforting’ social control mechanisms embodied in strong cultures can translate into cult-like conformity among senior professionals. The outcomes are often the dark side of social control and its most typical manifestation—overwork.

Employees are, therefore, willing to routinely work 70+ hours and in some cases 100+ during protract “crunch” periods, in exchange for highly compensated and coveted roles. But they may not be aware of the talent management strategies that underpin this? One Director of HR of a world-leading professional firms explained to me her firm’s policy of deliberately seeking graduate recruits who fit the profile of insecure overachievers. She explained for insecure overachievers, a job offer from her firm provided them with the comfort of knowing “you are special because we want you to be one of us.” Once they had absorbed the status of the firm into their own identity, they would be willing to “do anything” to remain part of the firm.

I have warned some of the recent college graduates with whom I have worked over the years, who were interested in pursuing an MBA and then a career in professional services, that the 50 to 60+ hours/week they were clocking in at a Fortune 500 still provided some work-life balance. Once you hit 80 hours,

your weekends are shot and while the compensation might be great, you likely will not have time to enjoy it. Can and will professional services’ ecosystems ever be changed so that firms and employees have a challenging but healthy workplace model?

To begin with, not all professional services operate in this manner and others have recognized that it is unsustainable and are struggling to change. But, to undo this unhealthy relationship between the professionals and their organizations, change needs to happen at multiple levels.

For professionals, especially those who can admit that they are insecure overachievers, the most important aspect is to understand the effect that your own behavior and your employer’s attitude is having on your physical and mental states. The perpetual anxiety, which is a common theme expressed by my interviewees, displays itself in terms of how people struggle with the sense of never being good enough. Rather than simply feeling inadequate in their role (i.e., imposter syndrome), they try to make this feeling go away by working ever harder, to ensure that they “deserve” their success. But instead, their success may simply amplify their feelings of insecurity, as I explored with the professionals I interviewed for my BBC documentary on insecure overachievers.

 As one very senior lawyer said to me, when talking about him and his fellow partners, “We all feel scared, all of the time.” And, as they became overly attached to their elitist organizations, they succumb to the peer pressure from their colleagues and their culture. The irony is that very wealthy and successful people, whom you might expect to have relatively high autonomy and control over their lives, may end up feeling that they have no choice.

Second, for senior executives of professional services firms who have survived and thrived in this environment and risen to the leadership positions, the pandemic and Great Resignation have provided a unique window of time to reflect on their organizations’ cultural controls and operating models. While an 80+ work week may still be a norm at many of these firms, the pandemic has prompted many professionals to question some ”legacy” assumptions and enabled them to experiment with alternative ways of working. When I was a strategy consultant, on occasion I worked 72 hours without sleeping in order to respond to the partner’s requests ahead of a client presentation. Was I really doing my best work? Of course not. Could the partner have managed me and the client better? Of course, he could. While there are no simple solutions to the changing and conflicting sets of expectations of clients, leaders, and their professionals, smarter leaders understand the potential value of rethinking the work that their firms perform and how their employees do it.

Finally, buyers of professional services should reflect upon their behaviors and what the potential ramifications might be. As part of their increased awareness of ESG issues, many are reflecting upon the consequences of the purchasing patterns. They may examine their supply chain carefully to ensure they are not conspiring in the bad working practices in “sweat shops” in developing countries. Yet, just because they pay the professionals in their home markets very well, they ignore the more negative consequences of their expectations.

 last year, the pandemic represents a liminal phase in our economic and organizational development. We have been tested to our limits.

 Still, these experiences have offered opportunities to challenge not only historical norms within our professional organizations but also to create new and more sustainable ways of working.

Professor Laura Empson is a Senior Research Fellow at the Harvard Law School and Professor in the Management of Professional Service Firms at Bayes Business School, London. Professor Empson received her PhD and MBA from the London Business School.

https://www.hbs.edu/recruiting/employment-data/Pages/default.aspx

 (Private Equity was 14%, Venture Capital was 7% and Investment Banking was 4%).

2. Interview with HBS alum Katherine Bach Kalin, 

https://www.hbshealthalumni.org/s/1738/cc/21/page.aspx?sid=1738&gid=11&pgid=252&cid=123957&ecid=123957&crid=0&calpgid=2677&calcid=78391

What happened to Goldman Sachs? An insider’s story of organizational drift and its unintended consequences

http://www.ft.com/cms/s/2/0d506e0e-1583-11e1-b9b8-00144feabdc0.html 

eading Insecure Overachievers: The Comforts of Social Control,” In Empson, Laura, 

Leading Professionals: Power, Politics and Prima Donnas,

5. 12 hours/weekday and 10 hours each weekend day.

https://www.lauraempson.com/insights/insecure-overachievers-on-the-record

7. Empson, Laura and Howard-Grenville, Jennifer, “How Has the Past Year Changed You and Your Organization?” 

Professor Laura Empson pulls back the curtain on insecure overachieving professionals and explains how they can come to accept damaging patterns of overwork as inevitable and even desirable

Succeeding as an Insecure Overachiever

In this installment of Michael Wong’s Harvard Business School Healthcare Alumni Association (HBSHAA) Q&A series, Professor Barry Nalebuff of the Yale School of Management explains what is really at stake in any negotiation and ensures you get your half—so you can focus on growing the pie.

Michael Wong: While biopharmaceutical firms often point to planned collaborations with each other as well as with start-ups and academia to create value, failed negotiations derail many of these aspirations. Based upon your 30+ years teaching at Yale as well as business experiences, what negotiation advice would you share?

 Co-opetition, the mix of competition and cooperation was relatively rare back in the mid-1990s, but it is quite common today across not only biopharma but also other verticals such as Apple and Samsung as well as Ford and GM.

 Based upon my research and personal experiences, what I have learned is that people often do not know what it is that they are negotiating over. By not having this understanding, it is hard to know if you have ended up with a poor deal, an equitable one or a great one. My advice is to learn about the negotiation pie concept, namely the potential extra value negotiators create by coming together.

Let’s take a simple concept of pizza slices. Suppose we have a 12-slice pizza that you and I can enjoy if we can agree on how to divide it. If we don’t reach an agreement, I’ll get four slices and you’ll get two. With this framework, many of your readers might think that I am twice as strong as you. Therefore, I should receive twice as much—an eight to four division. Still, others might think that fairness means you take the twelve slices and divide it 6:6. My view is neither of these positions are correct. If we can’t reach an agreement, we only get six slices (four for me and two for you). If we can reach an agreement, we receive twelve. So, the point of the negotiation is to go from six to 12 slices, and to secure these extra six, both you and I are equally needed. Therefore, under this negotiation framework, we should divide it up the six extra slices three and three, which means I get 4 + 3 or seven slices while you receive 2 + 3, which is five slices.

With this logic in mind, prior assumptions that the big pharma company always has leverage over the smaller organization isn’t quite right. Recognize what each party brings to the table when both are required to engage in order to grow the overall pie.

Finally, think about creating new paradigms for capturing value. Split the pie as it is being created. For instance, one large pharma firm’s high-cholesterol medication is often positioned as a drug of last resort given its relatively higher price versus brands that have gone off patent, but do not have the same efficacy. This firm should consider how to negotiate with the insurers such that the brand is positioned as first-line treatment. The key insight is that the pie is the improved performance. Thus, the payment should be based on the level of improved performance on a patient-by-patient basis. The price would be the same as the generic when the response is the same. But when the response is superior, the value of the superior response is split between the drugmaker and the insurer.

As most people are not comfortable with negotiating, what three recommendations would you provide to them?

First, emphasize logic versus emotion. Many people are uncomfortable with negotiation given the emotions that often arise. A simple but effective beginning step is to discuss “how” we will negotiate. As mentioned earlier, a key theme of this dialogue will be around how a successful negotiation will create a much larger pie, versus a failed one where we both walk away. When we sold Honest Tea, a company which I co-founded with one of my students, we agreed upfront with the buyer (Coca-Cola) that we would split the pie we create. Here, that meant the sales we could create together compared to what we could do on our own. While the sales we would create together is something that we would observe, what we could do on our own is just a forecast. We converted the negotiation into a data exercise.

Second, even if you might consider the other party to be a competitor, study the many reasons for cooperation. For example, it can be a way to save costs and avoid duplication of efforts. When my mom was negotiating a real estate purchase, she and the seller agreed to hire an independent lawyer and thereby save duplication of lawyer fees.

Finally, when you start the conversation around how the other party and you will negotiate, remember that this is an opportunity to see how the other side engages. Hopefully, you can encourage a logical and trustful approach. While your goals are important, consider the other party’s needs. If they can get what they want, they will be more willing to give you what you want. By doing so, you will have a better chance to expand and split the pie.

Barry Nalebuff is Milton Steinbach Professor at the Yale School of Management, where for thirty years he has taught negotiation, innovation, strategy, and game theory. Dr. Nalebuff cofounded Honest Tea. He advised the NBA in their prior negotiations with the National Basketball Players Association and served on the board of Nationwide Insurance. A graduate of MIT, a Rhodes Scholar, and a Junior Fellow at Harvard’s Society of Fellows, Professor Nalebuff earned his doctorate at Oxford University.

1. Adam Brandenburger and Barry Nalebuff, “The Rules of Co-opetition,” 

2. Vikas Shah, “The Secrets of Great Negotiations. A Conversation with Barry Nalebuff, One of the World’s Foremost Experts on Negotiation and Game Theory,” 

3. While Coca-Cola recently announced it would discontinue Honest Tea, Seth and Barry are back for an encore start-up via Just Ice Tea—it launches in October!

 “Split the Pie” is based on Professor Nalebuff’s negotiation course at Yale. An online version of the negotiation course is available for free on Coursera. It has 400,000 active learners and the second-highest rating on the Coursera platform.

Professor Barry Nalebuff of the Yale School of Management explains what is really at stake in any negotiation and ensures you get your half

Negotiation: Splitting the Pie

In this installment of Michael Wong’s Harvard Business School Healthcare Alumni Association (HBSHAA) Q&A series, Dr. Frank Doyle, Dean of the Paulson School of Engineering and Applied Sciences at Harvard University, outlines his recommendations for Fortune 500 c-suites as they strive to attract, develop, and retain the best talent for their upcoming 2023 strategic plans.

Michael Wong: Since 2018, when you were interviewed for an HBS Healthcare Alumni Association roundtable,

 Harvard’s School of Engineering and Applied Sciences (SEAS) has developed an innovation blueprint for creating start-ups.

 With SEAS having only 5% of the entire university’s faculty, how did you build an operating model that has produced 40% of the start-ups coming out of Harvard?

When Harvard is mentioned in a conversation, some readers might automatically think about the school in terms of its liberal arts or business school offerings. So, they are surprised when they learn Harvard has engineering and applied sciences’ roots which date back to 1847. While SEAS is the youngest of Harvard’s schools since our formal establishment as a school in 2007, our operating model has been built upon the school’s long-term credo to educate individuals who have the ability to collaborate productively for the creation of solutions that solve humanity’s most complex problems. To build a collaborative culture, we have never had departments at SEAS. This organizational design has been the secret sauce to enable entrepreneurially minded individuals to become one team with a laser focus on converting ideas into commercially sustainable solutions.

For instance, you have SEAS stakeholders like Prof. Conor Walsh (founder of the Harvard Biodesign Lab), who brings together researchers from the engineering, industrial design, apparel, and business communities to develop and translate new disruptive robotic technologies for augmenting and restoring human performance. When prospective students see how leaders like Conor have been able to make available their ideas, like their soft exosuit technology, in clinics; many enter into the pipeline of future innovators.

With then Harvard President, Drew Faust, leading a “One Harvard” campaign,

 such an aligned strategy positioned SEAS for the sustainable success that we see today. During the last decade, SEAS graduates grew over three-fold and undergraduates majoring in engineering, computer science, or applied mathematics increased from 6% to over 21% of Harvard College students.

Speaking of building talent pipelines, what recommendations do you have for Fortune 500 c-suites as they strive to attract, develop, and retain the best talent for their upcoming 2023 strategic plans?



Despite the challenges that the world is going through today, I am an optimist given the convergence opportunities that abound. Here I am referring to the merging of distinct technologies, industries, or devices into a unified whole

 and for workers who can manage the complexities associated with them, there are tremendous upsides. Still, to secure and retain the best talent, here are three ideas to consider.

First, create ecosystems which prospective employees will clamor to join. For instance, Harvard’s Enterprise Research Campus will be a center for collaboration and entrepreneurship, bringing together partners from across Boston and beyond. In addition to its mix of residential and commercial spaces, and its public and community spaces, the ERC’s proximity to Harvard’s campus and Greater Boston’s robust research, education, and bio-medical ecosystem will create opportunities for intersections between academia and industry, community, health, and social impact.

Second, create an enterprise-wide learning and development strategy that supports a culture of continuous learning and is strategically refreshed. In particular, just as start-ups often have flattened hierarchies, Fortune 500s have become more streamlined. There is a need to provide coaching to individual contributors who have no positional authority and collaborate well with others; often with similar type-A personalities. With many c-suite officers touting their internal innovative hubs, make sure you have trained employees who can truly operate in a start-up mode.

Finally, create simple scorecards that provide trusted and transparent facts which can help guide potential course corrections and reinforce the importance of talent management key performance indicators (KPIs). For instance, at SEAS we have a DE&I (diversity, equity and inclusion) strategy and provide transparent stats which have helped with our retention aspirations. It is not only good for business, but also the right thing to do for our employees.

Dr. Frank Doyle is the John A. Paulson Dean of the Paulson School of Engineering and Applied Sciences at Harvard University, where he also is the John A. & Elizabeth S. Armstrong Professor. He received a B.S.E. degree from Princeton, C.P.G.S. from Cambridge, and PhD from Caltech, all in Chemical Engineering.

Click on the links for Michael‘s interviews with Harvard Business School’s 

http://www.hbshealthalumni.org/s/1738/cc/21/page.aspx?sid=1738&gid=11&pgid=60716&cid=127444&ecid=127444&crid=0&calpgid=13&calcid=1298

https://www.harvardmagazine.com/2013/09/one-harvard

4. Prof. Frank Doyle: Partnerships in Engineering and Biomedicine: 

https://www.youtube.com/watch?v=pHX8_Nvd1zo

https://news.harvard.edu/gazette/story/2021/02/developer-reveals-plans-for-first-phase-of-allston-project/

https://www.seas.harvard.edu/office-diversity-inclusion-and-belonging/dashboard-and-reports

Dr. Frank Doyle, Dean of the Paulson School of Engineering and Applied Sciences at Harvard University, outlines his recommendations for Fortune 500 c-suites as they strive to attract, develop, and retain the best talent for their upcoming 2023 strategic plans.

A Harvard Dean’s Blueprint for Fortune 500 C-Suites to Magnify Their Growth Opportunities

In this installment of the Harvard Business School Healthcare Alumni Association (HBSHAA) Q&A series, Michael Wong talks to Harvard Business School Professor Amy C. Edmondson about achieving psychological safety in the workplace.

Michael Wong: From global warming to the pandemic and now with Russia’s invasion into the Ukraine, what might be the role of fearless organizations to help turn around these seemingly endless waves of incoming challenges?

With the magnitude these pain points represent in today’s world, people need to have the courage and confidence to work together to solve these challenges. Still, it is extremely difficult to feel fearless; we’ve long known that individuals may lack the psychological safety to speak up within their organizations and these external factors probably contribute to a general sense of fear. Now more than ever, we need psychological safety, so people are enabled to uncover new ideas with a learning, innovation, and growth mindset.

Still, psychological safety in the workplace takes effort. The default model for nearly everyone is to go with the flow and not challenge the status quo, especially in a hierarchy. This reflex dates back to the industrial age when a command-and-control system gave managers authority to issue orders and employees followed them. While most people recognize that the workplace has evolved over time, the habits of mind from the industrial era endure, and many employees spontaneously value self-protection over self-expression contribution. After all, what is the benefit for an individual to speak up? If the idea is accepted, the benefit might accrue, longer term, to the company but not necessarily as directly to the employee. On the other hand, by speaking up, the risk of angering supervisors leads to a potential cost that is immediate. Smarter c-suite executives understand this asymmetry and flip the calculus by creating a supportive environment, and by asking questions in such a way that employees feel compelled to respond, without fear of retaliation. As a starting point, c-suite executives need to make sure that their hybrid workplace strategy supports a safety mindset.

Well, while most c-suite executives have the financial wherewithal to walk away from their jobs, the majority of employees do not. And so, with the traditional culture of fitting in and getting along at many firms; what might be some practical strategies for companies to help employees become fearless in their daily activities?

In my 25 years of research, teaching, and engaging with c-suite executives, psychological safety and high-performance are tightly coupled. For example, Google conducted an extensive study of teams, examining more than a hundred factors and discovered that psychological safety was the single most important driver of team performance. Three common themes which successful companies have deployed include the following.

First, the company needs to explore the link between psychological safety and high performance. Having this analysis is crucial to explain why limited resources and time should be invested in this area, versus other competing options.

Second, the firm needs to craft a culture where it is “safe” to express ideas, ask questions, and admit mistakes. Importantly, the c-suite needs to hold itself accountable that these executives’ actions support their words in order to establish the trust that is the foundation for any company’s culture and norms.

Finally, the c-suite must nurture the level of engagement and candor required in today’s knowledge economy. They need to model behaviors that their direct reports can emulate and in turn be replicated through the other layers of the organization.

These three steps will likely evoke initial uncomfortable feelings in the short-term. After all, people are hardwired to seek comfort in the immediate term. Still, thoughtful employees across the entire organization will realize the potential larger value that comes with overriding one’s desire for comfort in the short term; and engaging to create ideas that have long-term sustainability. Leading through crisis is attainable for each of us if we have the right mindset and commitment.

Dr. Amy C. Edmondson is the Novartis Professor of Leadership and Management at the Harvard Business School. Professor Edmondson has been recognized by the biannual Thinkers50 global ranking of management thinkers since 2011, and most recently was ranked #1 in 2021. Professor Edmondson received her PhD in organizational behavior, AM in psychology, and AB in engineering and design from Harvard University.

1. Edmondson, Amy C. and Mortensen, Mark, “What Psychological Safety Looks Like in a Hybrid Workplace” Harvard Business Review, April 19, 2021.

2. Edmondson, Amy C., “The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth,” Wiley, November 2018.

3. Edmondson, Amy C., “How to lead in a crisis | The Way We Work, a TED series,” November 2020, 

https://www.youtube.com/watch?v=Cxf_SRCcaGo

Harvard Business School Professor Amy C. Edmondson talks about achieving psychological safety in the workplace.

The Role of Fearless Organizations in Global Crises

Despite well-intended transformation strategies, academic and business leaders recognize that 70% failure rates are the norm.

Moreover, with nearly 70% of digital transformations failing to achieve their ROI targets,

 the coming months could be filled with candid conversations with chief financial officers (CFOs). To help uncover practical playbooks that increase companies’ success rate, Pharma Commerce is pleased to announce a Business Transformation Q&A series in which Michael Wong, Emeritus Board Member of the Harvard Business School Healthcare Alumni Association (HBSHAA), will interview and secure forward-thinking intellectual capital from leading academic and business leaders.

In this, the first of the HBSHAA Business Transformation Q&A series, Michael talks to Harvard Business School’s Robert S. Kaplan, co-inventor of the Balanced Scorecard. For those who have M&A as part of their job description, Kaplan offers three guiding principles of execution excellence.

Michael Wong: As 2021 marked a record year for M&A with more than $5 trillion in global volume and 2022 expected to be another strong period,

 how should smarter C-suites, investment bankers and private equity leaders avoid the value destruction that often occurs, with some estimates ranging from 60% to 90% failure rates?

 when Dave Norton and I introduced a management tool called the Balanced Scorecard (BSC), I have stressed how this instrument provides a framework for a holistic view of the company’s strategy. It enables leaders to communicate the strategy to employees. Employees are then motivated and able to take actions that will support a firm’s strategic imperatives. The BSC displays how an organization’s performance can be measured not only with financial key performance indicators, but also with metrics about clients, internal processes, innovation, employees, information technology, and culture. Importantly, the BSC expands a C-suite’s view from backward-looking financial metrics to include forward-looking measures that predict future performance including satisfied and loyal clients, high-quality processes, innovation, as well as motivated and skilled employees. The beauty of the BSC is that it can provide a single source of truth for data across a global enterprise, while also enabling flexibility and customization for general managers of local business units who face their unique market conditions. With the huge global challenges including fighting in Ukraine, the pandemic, and the Great Resignation; C-suites should consider how a BSC might steer their respective organizations’ efforts.

In terms of execution excellence for deploying BSCs, what top three ideas do you have for the readership?

First, C-suites need to have a clear understanding that the BSC is not just a new and more complex reporting system. It will be most effective and have the greatest impact when leaders understand and learn how to use it to communicate and implement their strategies. This is the biggest pain point for many companies. The BSC addresses a key barrier for successful strategy execution. In most organizations, less than 10% of employees can describe their company’s strategy. And if they don’t know what the strategy is, they can’t help to implement it. 

Second, a CEO cannot delegate the deployment of their BSCs to the CFO or the chief strategy officer. The entire C-suite needs to be engaged since this is an enterprise-wide initiative. The C-suite should meet regularly, perhaps monthly, to review the data on their BSC to learn what is working, what is not working, and what needs to be done differently to keep the company on a trajectory for successful strategy execution. Annually, the entire C-Suite should meet, perhaps offsite, for a forward-looking planning session to determine any major mid-course corrections to the strategy, based on the data and experiences of the previous 12 months, plus the new opportunities and threats that have shown up.

Finally, C-suites need to provide support so that a BSC can be planned, deployed, and improved over time. The five stages of support include:

 Begin with strategy development, which springs from a company's mission, vision, and value statements, and from an assessment of its strengths and weaknesses, and a competitive strategy analysis.

 Translate the strategy into objectives and initiatives with strategy maps, which organize objectives by themes.

 Create an operational plan to accomplish the objectives and initiatives; it includes targeting process improvements and preparing sales, resource, and capacity plans as well as dynamic budgets.

 Put plans into action and monitor their effectiveness. Review operational, environmental, and competitive data; assess progress; and identify barriers to execution.

Test the strategy; analyzing cost, profitability, and correlations between strategy and performance. If their underlying assumptions appear faulty; update the strategy, beginning another loop.

The key is to leverage the BSC and other supporting means,

 which can help drive execution excellence to achieve your client’s and C-suite’s goals.

Robert S. Kaplan is Senior Fellow and a Professor, Emeritus at the Harvard Business School (HBS). Dr. Kaplan co-developed both activity-based costing (ABC) and the Balanced Scorecard (BSC), widely recognized as seminal contributions to management theory and practice. Prior to joining the HBS faculty, Dr. Kaplan was Dean of Carnegie-Mellon University’s business school. Professor Kaplan received his B.S and M.S from M.I.T and a Ph.D. from Cornell University.

1. Organizations Can’t Change If Leaders Can’t Change with Them (hbr.org)

2. 68% of Enterprises Fail to Achieve Desired ROI on Digital Transformation, and Most Cite Change Resistance as Key Obstacle—Everest Group (prweb.com)

3. “2022 M&A Outlook: Continued Strength After a Record Year,” Morgan Stanley, January 14, 2022. 

https://www.morganstanley.com/ideas/mergers-and-acquisitions-outlook-2022-continued-strength-after-record

4. Walker, Karen, “Merge and Destroy?” 

https://www.forbes.com/sites/karenwalker/2020/09/29/merge-and-destroy/?sh=30548e3a5932

5. Kaplan, Robert S., “Using the Balanced Scorecard for Successful Health Care M&A Integration,” 

6. Kaplan, Robert S.,Norton, David P., “Mastering the Management System,” 

7. Porter, Michael E., “How Competitive Forces Shape Strategy,” 

8. Kaplan, Robert S., Norton, David P., “Having Trouble with Your Strategy? Then Map It”, 

Harvard Business School’s Robert S. Kaplan, co-inventor of the Balanced Scorecard offers three guiding principles of M&A execution excellence.