Monday, March 8, 2010

SDM students puts lessons to work in wake of Merck merger - SDM Pulse Spring 2010

By Anando Chowdhury, SDM ’09

Editor’s note: Anando Chowdhury is director of Organizational Strategy, Management, and Operations for the Global Science, Technology & Commercialization organization at Merck/MSD, which sponsors his enrollment in MIT’s System Design and Management Program (SDM). In this article, Chowdhury discusses how the lessons he’s learned at SDM are benefiting his company.

The merger of Merck and Schering-Plough last year brought together two major science-based health-care companies. The new Merck/MSD offers a more diverse pipeline of products, consisting of drugs, vaccines, and biologics, and promises to become a more far-reaching global entity—helping millions of people with innovative health-care products.

In the days and months that followed the approval of the merger, I got the opportunity to help the new company begin some of the most challenging and exciting work of the whole process—operational integration.

I have the distinct privilege of working on the leadership team of a technical organization called Global Science, Technology & Commercialization (GSTC) in Merck’s Manufacturing Division. GSTC is accountable for the stewardship of manufacturing technologies within Merck as well as the product and process development, commercialization, launch, and support of Merck drugs, vaccines, and biologics. To fulfill the promise of a new kind of health-care company, it is at this functional level that the real merger must happen, and I’ve found the work to be both complex and rewarding.

Mergers of this magnitude don’t happen that often, and when they do, the stakes are extremely high. Doing the right things at the right time and in the right way is crucial. This is where MIT’s System Design and Management Program (SDM) was able to make a strong contribution.

I have found SDM’s mindset, methodologies, and tools applicable to many of the challenges I have faced during this integration process. During the early days of the new company, I was exposed to the system project management work of Olivier de Weck and James Lyneis, as well as the lean enterprise work of Deborah Nightingale—all three MIT faculty members. These frameworks have been influential in helping me to shape Merck’s new organizational structure. Here are some examples:

System models serve as tools for conceptualizing what to expect during the merger

When two large and successful companies such as these come together, the integration work flows in two directions. Initially, decisions are made at the company level. This involves tasks from the pre-deal business case development all the way to the execution of successful integration plans. These are strategic decisions that have implications for every division in the company.

At the divisional level, decisions focus on the tasks required to manage a major operating area of the joined company—e.g. manufacturing or research and development. Those decisions then need to be translated down to the the functional level of my organization, GSTC. We are looking at the tasks required to integrate the two companies at the lowest level, including work practices migration, organizational designs, and most importantly, the implementation of hybrid solutions and best practices from both companies until we become a new, more powerful whole.

Figure 1. This systems dynamics model was
developed to help visualize what to expect at
various levels of the merger.
 To understand this dynamic, I utilized a very simple system dynamics model (shown in Figure 1), which I developed with Taroon Aggarwal, SDM ’09. Even beyond any numerical quantification, the visualization has been incredibly helpful to understand what to expect and plan for as decisions make their way up and down the various levels during the merger. As de Weck and Lyneis’s work has shown, understanding the dynamics of delays and flows of information is critical. It is with this understanding that one is able to make rational choices and plans during integration.

Design structure matrices help company to align strategies and initiatives

Each of the two powerful companies had several strategic initiatives under way at the time of the merger. While integrating at a functional level, it is important to create new ways to manage the initiatives from both organizations more effectively and ensure that overlaps are synergistic and not at cross-purposes. In trying to map these areas of synergy and staging, we are experimenting with using the design structure matrix (DSM), a useful tool for organizing tasks. This tool is incredibly intuitive, and the various groups (often spanning hundreds of project leaders and team members) have been able to map the critical organizational initiatives to a DSM.

Initially, we just mapped and brainstormed the interactions between various initiatives (see Figure 2). But then, we partitioned the DSM and two natural meta-portfolios arose (see Figure 3). Uncovering this underlying structure allows information to be governed, managed, and structured much more effectively. This increases the confidence that we can work toward a system where the whole is truly greater than the sum of the parts.

Fostering a lean enterprise mindset helps improve products and processes

Figure 2. Two design structure matrices were created
to help map critical organizational initiatives for
the Merck merger. This initial diagram shows
a simple brainstorming of interactions.
As the new organization is being established, we have created a subfunction called organizational strategy, management, and operations (OSMO) that I have the honor of leading. Moving ahead, the installation of a lean operating model will be critical. It is not only critical for ingraining lean and systems thinking into the products we support in manufacturing, but also to the products and processes we design and develop.

We have been incredibly successful in ingraining and utilizing a design for-robustness mentality in our product development efforts. The frameworks Nightingale presents in her work show clearly how these methods can only succeed if the organizational operations are tied closely to the process results we wish to achieve.
Figure 3. This second design structure matrice shows
the result of partitioning the DSM, which revealed
two natural meta-porfolios.

Thus the enterprise itself must be assessed, designed, and perfected. In the coming months, building this system and culture will be critical to achieving the promise of the new company—and it will be a major focus for me and my team. The lean enterprise toolkit provides a roadmap to get there that we will be leveraging heavily.

These are just a few examples of how a system design and management approach can help in the high-stakes environment of a mega-merger. "Given the increasing complexity of our business, it is no longer possible to make strategic advances by focusing on single elements. Using a systems approach, like the frameworks offered up at MIT, will be critical for formulating successful future business strategies," says Senior Vice President Michael P. Thien, who leads the GSTC organization.

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