Culture — Investing — Then Do Better

A recent interview with Stripe co-founder, John Collison, has plenty of food for thought (link end) especially around what makes successful start-ups, businesses and what we can learn from congleremates, being an outsider to America and technology. One item raised, I’d like to discuss is:

Speed

This is the idea of speed as an under-recognised competitive advantage and a defensible one. Collison applies to business and start-ups but I think it can be applied to make areas of life. In particular, I am thinking of theatre making and personal life decision making.

Jeff Besos has articulated a related idea on what he calls Type 1/Type 2 decision making. A few decisions are heavy weight, very hard to reverse course and require considerable due diligence before making. These decisions are rare and more rare than most believe. (In this framework) Most decisions should be made fast because they are not heavy weight, not hard to reverse and the answers may only come from experimenting with the choice. (This leads to the notion of “Disagree but commit” another Besos/Amazon idea that you might disagree but that shouldn’t impede the decision being made fast.)

Collison makes a point I believe to be true but is seldom raised.

“Speed” is attractive to a certain type of person. This type of person - and for business this is typically an employee - can have particular creative qualities (and often not fit in well with the bearocratic nature of big companies - and slow moving nature of some).

While Collison talks about start-ups and business I think you can apply this to the arts and theatre making. Some theatre makers like to be speedy, make fast decisions, create work quickly and show it fast and early. Others are slower in approach. This extends to organisations.

The rule of thumb might be that larger organisations are less speedy but Collison makes the point that this is not necessarily so. Collison argues that Facebook and Google/Alphabet can very fast when they commit. Amazon as well.

However, it does seem true to me that many large organisations do lose this quality. There are intersectional reasons for this: culture, growing risk aversion, complexity, number of humans involved and differing goals.

But for large organisations that can keep this ability and have it infused in their culture, it can be an important advantage. This idea is related to Jeff Besos stating his wish for Amazon to always be a “Day 1” company.

If we believe it’s not merely size of company, can we highlight other aspects? I mentioned culture (set by the top people and embodied by all people) as important but more complex to set. I think size of team is a controllable item.

Collison also suggests this. He argues that a small team (even a solo person) can often make breakthroughs or create solutions where 300 person teams fail. The academic work on the nature of innovation - incremental or step change - and size of team is mixed but I think Collison has observed a general truth about small teams.

Certain managers in certain large organisations understand this, they assemble small teams typically with people who tend towards the effective and speedy spectrum, and they task them with solving something important.

That’s not to confuse when a heavy weight decision needs to be made. But, a decision on whether to marry is seldom, a yes/no on a short drink date should probably be made fast and not agonised over.

Processes in many organisations are not geared to helping speed. Mostly they are geared to minimising risk. And while risk mitigation is a consideration an error of omission is many times a more serious error.

One example is how Netflix simplified the expense policy for the goals of speed and simplicity.

“…

Our policy for travel, entertainment, gifts, and other expenses is 5 words long: “act in Netflix’s best interest.”
Our vacation policy is “take vacation.” We don’t have any rules or forms around how many weeks per year. Frankly, we intermix work and personal time quite a bit, doing email at odd hours, taking off a weekday afternoon, etc. Our leaders make sure they set good examples by taking vacations, often coming back with fresh ideas, and encourage the rest of the team to do the same.
Our parental leave policy is: “take care of your baby and yourself.” New parents generally take 4-8 months.

…”

A complicated expense policy is mostly there to try and mitigate risk rather than increase the time and productivity of its people.

Small organisations mostly do not bother with an expense policy and rely on trust and common sense.

I find this a telling observation. Small teams and small organisations can rely on trust and knowing. Big organisations lose that ability and rely on “policy”.

It’s false reassurance. Policy won’t save you, if you don’t have the trust of people.

If you understand yourself enough to know what frustrates you and how much you like speed or not, this can set you up for the type of work and creative environments you should try and find. Perhaps that’s why hubs like around San Francisco are full of people who think like this.

There is so much about life which is due to uncontrollable chance factors or factors which may as well be chance. Again, if you understand or accept that view that about life then that may weigh on how you make decisions and view of risk.

When creating theatre, I think it does say something about the management of people and size of team that can be speedily managed or not.

If you are in the mode of creating a business, you might want to spare some thoughts to the culture you want to be developing and whether speed will be one of your advantages and if speed is part of your advantage, how to keep it.

Links:

Netflix Culture, policies and explantions

Interview with John Collison

The 1997 Amazon letter about decisions

Positive R&D Culture: (1) Follow the science. If it tells you to go into an area, don't force it to try to work where it's not supposed to.

(2) Incentivise smart risk. Make people feel appreciated for making courageous decisions, and taking risk and not fearing failure.

(3) Single people make key decisions. Committees spell death to innovation.

(4) Focus. Fund aggressively the best projects. Say No. No. No. … how Steve Jobs said it. I'm as proud of many of the things we haven't done as the things we have done.

Innovation is saying no to a thousand things….in Apple, there's a little sign that says, simplify, simplify, simplify, with the last 2 simplifies crossed out.

(5) What you do with a bad decision that had a good outcome, that's called lucky. Do not reward lucky... Luck is not a good strategy.

(6) what if you make a really good decision that's wrong, that has a bad outcome? We need to celebrate that as much. Otherwise, we're going to teach people, only make those decisions that work.

Hal Barron is considered to be one of the most thoughtful and successful biopharmaceutical R&D leaders (with stints at Genentech/Roche, Calico/Google and now GSK).

At a recent public R&D meeting (slide pack 25 July 2018) he spoke about science, technology and culture of R&D as three strands needed to be successful (and if one scores zero in any strand, it will be zero overall like multiplication).

While from a healthcare/pharma point of view his comments on technology and science are interesting (GSK is reinforcing / becoming science led (again), embracing AI, functional genomics, cell therapy and 23me – see full slide pack)

His comments on an R&D culture are also insightful about innovation in general (see below from transcript). I can’t give a view publically (standard disclaimers apply no endorsements etc. I’m not predicting the sun to rise tomorrow), you’ll have to come speak/message to me! But you can see my question on culture as a matter of public record at the end.

His point on focus (see below) – might very relevant to many research processes. He claims it is not number of ideas that needs work but it is the full resources to execute on ideas.

Barron: “....as exciting and as challenging as it is to deliver, to execute on the science and technology, having a culture of innovation is incredibly important, and one that I'm really excited about focusing on.

We've divided it into 5 different areas, really following the science. And by that, I really mean -- and I want to highlight this piece -- is that sometimes, particularly with genetically validated targets, but also in immunology, we need to make sure when the science sort of speaks and says, "Look, I'm a target, and I'm supposed to go into neurodegeneration," that we don't say, "That's too bad. We're a company that focuses only on these 3 areas, and we'll force you to look like you work in one of those."

So what I mean by follow the science is to do so in research, as you're discovering targets and trying to figure out what a disease is, in a therapeutically agnostic way. Follow the science. If it tells you to go into an area, don't force it to try to work where it's not supposed to. And we have to make sure that when we do that, we're not taking molecules into diseases where there's not very much unmet medical need, that's not commercially viable. But we need to make sure we're not pushing it into places where the science tells us it won't work.

Probably the most exciting area for me in culture is ensuring we have a culture where we're incentivizing smart risk. And by that, I mean making people feel appreciated for making courageous decisions, and taking risk and not fearing failure. And I'll talk about that in a second.

The third is something that I've basically grown in -- up in, the biotech culture of having single people identified to make decisions, people who have the context needed and the skill set needed and the courage really to make the right decision, and not simply take a vote, not simply to see what everybody can live with because consensus will get everybody happy. There'll be nobody who disagrees or at least disagrees violently. But it's almost rarely -- it's rarely, I should say, the best answer. And it's -- I think it's part of a culture that drives innovation, is feeling that you can be bold and be courageous and be rewarded for taking smart decisions even when they're wrong. Focus, focus, focus. We're not going to be successful if we don't identify those projects that are most likely to work and fund them aggressively at the expense of the ones that probably won't work or clearly won't work. It sounds simple. It doesn't always happen.

And lastly, a bit cliché, but really takes outstanding people in this environment with the right tools and resources to really drive innovation. And we're going to demand that we have these outstanding people. We're going to make sure we develop them, and do everything we can to retain them because outstanding talent attracts outstanding talent.

Let me quickly go through this grid. I've shown this grid, I don't know, 30 times in my -- when giving talks. It's easy to show, a little harder to operationalize, but you'll get the concept. I divide decisions that people make into either good or bad decisions and then either right or wrong. In other words, is there a good outcome or a bad outcome? And then, of course, you get a 2-by-2 grid with 4 different options. Good decision that was right, we don't have to talk about that. Everybody gets happy about that. But as we celebrate a bad decision that was wrong, that's not good. At best, that's a learning opportunity. I want to make sure you've got the people in the right roles.

The 2 boxes that you can't get wrong for an innovative culture are what you do with a bad decision that had a good outcome, that's called lucky. Do not reward lucky, because what you're doing is you're telling people that we only care about the outcome. And if you just reward luck, I can guarantee you, over the long term, that's not going to work. Luck is not a good strategy. But you laugh. But people reward luck all the time, okay?

Now even more challenging sometimes, what if you make a really good decision that's wrong, that has a bad outcome? We need to celebrate that as much. Otherwise, we're going to teach people, only make those decisions that work. So what do you do? You incentivize a very conservative sort of nature. And over time, that's not going to be terribly innovative. In fact, I would argue that over the long term, that's going to destroy a company. So you need to make sure that you put incentives and reward people when they make good decisions even when they're wrong.

If you think about it, if we came up with this great strategy that was going to double the probability of success, and I told you my first 3 failed, I would say, "Well, 80% failure rate. The first 3 just by -- that's not inconsistent with a 20% success rate, 0 out of 3." We have to celebrate that if that's a good decision and not say, "Ooh, I wonder if we got it wrong. You didn't have enough data." This is probably still a good decision. But a lot of people are rewarded 0 out of 3, people in my job, 0 out of some number. You're not going to be in your job very long. What you really have to ask yourself, is this a good decision?

Focus. And I love focus. I think this is critical. I love these 2 quotes. David Packard, who founded Hewlett-Packard, spent a lot of time [in the barrier] advising companies. And he said this to all of them: More organizations die of indigestion than starvation.

And you might even think that's intuitive. But again, these companies believe not only that, that wasn't true, but believe the opposite, that they would likely die of starvation. And they eat too much. They have too many projects. And that's why they die because none of them are adequately resourced.

And one of the things I heard over and over, when I met with the folks in R&D, was that despite spending a lot of money, we did not have many teams saying I'm adequately resourced. And I think that what we did was we didn't get rid of the least likely to work, to fund aggressively the ones that are most likely to work.

I like how Steve Jobs said it. I'm as proud of many of the things we haven't done as the things we have done. Innovation is saying no to a thousand things. And supposedly, in Apple, there's a little sign that says, simplify, simplify, simplify, with the last 2 simplifies crossed out. And I think this is the kind of culture that I would love to have at GSK, and R&D in particular, so that we can really incentivize people to focus.

Now we have been focusing. As Emma said, the -- when you saw the numbers earlier, R&D spend is down. And that's not surprising. We have made 65 decisions to terminate partner or divest programs since April 2017. 42 programs were in the clinical phase, and the remainder were preclinical. There was more than 400 FTEs freed up to be able to work on programs, like I said, with BCMA and GM-CSF, and other programs that we want to push aggressively to do this. And we're going to be continuously looking at the portfolio to find opportunities to see things that are working and aggressively move them forward, and things that are less likely to work, and removing them.

This is the pipeline. There's a lot of upcoming milestones that will inform our progress. Again, my commitment to you is that every 6 months or so, we'll be very transparent about what decisions we've made, what progress we've made, what things haven't worked for efficacy or safety or whatever that are being removed. Sometimes we can tell you right away. Sometimes, we have to wait for the data to mature and be presented at a meeting. But we're going to be much more transparent about this, so that you can actually see, is this strategy bringing value as measured by the kind of assets that you see in the pipeline?

So the new approach, really, will go from an organization that we believe was spread quite thin across many different programs. A consensus-driven making organization and an organization where R&D and commercial are a bit siloed, and where we have limited business development activity, to an organization where we aggressively back the best potential medicines, removing those that don't look promising. Create a culture of accountability, where smart risk-taking and courageous decisions are made by individuals. And that's not to say we won't have teams, but teams will have leaders, who are accountable for making a decision. And those decisions are rewarded when they're smart risks.

We'll have robust governance models with scientific peer review, commercial input. Emma [CEO] mentioned that [Luke] and I -- one of the fun things about my job is I get to work very closely with Luke . We've reorganized the portfolio investment board. We've got really terrific analytics that help us make good decisions from Kate Priestman's group. And I think we're together seeing how to optimize the portfolio because that's how you help the most number of patients and provide shareholder value. And of course, you heard that we're going to be investing significantly in business development to further optimize the portfolio. Where and what depending on data readouts.

Ben Yeoh: I have a question on the culture piece. In large organisations, particularly, we have seen that it is very difficult to do cultural change. I was wondering what are the metrics that you are looking at, which might be showing you that the cultural change is on track, and whether there are any early signs of what you are doing having some traction. A sub-part to that is, how do you incentivise people to say ‘no’? It is almost a mindset thing, and it is quite a difficult thing to get right in the process. We hear about it … we see organisations that do it well, but turning an organisation to think about that is quite a challenge.

Hal Barron: That is a terrific question. First of all, on this backing up. We, I – we all believe strongly that we need metrics to figure out how we are doing, so that if we are not doing as well as we would like to, we can figure out what is missing. The metric, specifically on culture – and it is hard to imagine how we could tackle it all – one simple way is that we have HR surveys to see how engaged people are. How well do we think we are doing at decision-making? How fast are we at moving things forward? There are a number of different questions. We have been benchmarking for different reasons, but we have been benchmarking this over the last couple of years, and those who know more can comment. I would expect that we could look at those questions and pull out, prospectively, those that we think will reflect the cultural change and use them, to some extent, at a very level but as a metric. The second one is just asking people to do these things, I don't think personally is going to work. I think you actually have to ensure that you have things in place that make it easy to do that, in fact that incentivise you to do that. For example, if we have a metric called "Put eight targets into Phase 1 next year", we will have at least, probably, eight targets in Phase 1. Now that is a progression-seeking culture rather than one that is necessarily going to be incentivised to kill things that don't deserve to move forward. When we set goals, I think we need to be mindful of goals that incentivise what we want. For example, and I don't mean that we should do this for every goal, but certain goals should say 'at the end of Phase 2' - I will make this part up - 'we should take no more than three weeks to assess the quality of the data, its impact and whether we want to move forward. Now, that might be really easy because it's negative, or it might be really hard because it's grey, or it may be really easy because it's super-positive, but incentivising to do things quickly rather than incentivising to make it go to Phase 3 - because if we incentivise to make it go to Phase 3, we are not telling people to look carefully at the data; do whatever you think is right. There is a subtle bias towards wanting to progress things, so I think it comes in measurable from the surveys, but also creating goals that will incentivise that. Also, doing a lot of talking with employees and seeing how it's going. I'm sure we will come up with other metrics that we think are useful in assessing this. […]

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My Op-Ed in the Financial Times (My Financial Times opinion article) about asking long-term questions surrounding sustainability and ESG.

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