CEO Lessons Learned From a Successful Company Reinvention
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Episode 18 Transcript:
Chris Curran: Growth Igniters Radio Episode 18: CEO Lessons Learned from a Successful Company Reinvention.
This episode is brought to you by Business Advancement Incorporated, enabling successful leaders and companies to accelerate to their next level of growth. On the web at www.businessadvance.com. Now, here’s Pam and Scott.
Pam Harper: Thanks, Chris. I’m Pam Harper, founding partner and CEO of Business Advancement Incorporated. With me is Scott Harper, my business partner and husband.
Scott Harper: Good morning, Pam. It’s great to be here with you again. If this is your first time out there listening to Growth Igniters Radio, our purpose is to spark new insights, inspiration, and immediately useful ideas for leaders to take themselves and their companies to the next level of success.
Pam, what’s our topic for today?
Pam Harper: It’s the story of a successful company reinvention. This is an incredibly important story, because no matter what the industry, there are times when every company hits high points, but also when they hit the low points due to the complexity of the business environment.
Scott Harper: That’s true. For example, this complexity includes things like changes in technology, new customer needs, new competition, regulatory issues, different business models − all sorts of things. In pharma, of course, you’ve got ups and downs that go with R&D that are just part of the environment. The question, is, however, what is it that you do when you’re facing a low point? How do you decide how to get back up to the top?
Pam Harper: Exactly. Today, we’re going to be speaking with Dr. Francois Nader, a prominent leader in the biotech industry who faced that very situation. Between 2008 and 2015, he led NPS Pharmaceuticals through a dramatic reinvention to become a leading global biotechnology company focused on delivering innovative therapies to patients with rare diseases. This culminated in the sale of NPS to Shire Pharmaceuticals this past January for $5.2 billion.
Scott Harper: Pretty impressive.
Pam Harper: It is.
Dr. Nader currently serves as Chairman of the Board of Directors of Acceleron Pharma and is also Board Director at several emerging biotechnology companies. You can learn more about Dr. Nader’s background by clicking on this episode [#18] at www.growthignitersradio.com.
Francois, welcome to Growth Igniters Radio.
Francois Nader: Good morning, and thank you for having me on the show.
Pam Harper: Well, it’s our pleasure.
Let’s set the stage. Now, you started at NPS as Chief Medical and Commercial Officer. Two years later, you became CEO. What was the challenge NPS faced when you became CEO?
Francois Nader: Well, the major challenge that NPS faced when I joined was the fact that the company was setting up to launch its first product in osteoporosis − a very large market. Unfortunately, the regulatory process did not go exactly as the company had predicted. The company received an approvable letter from the FDA, which in our world means that the product could not be approved with what was submitted. With that, the company got into a [screeching] halt trying to redefine its future, knowing that the product could not be approved within the timelines that the company originally planned from. Therefore, a whole new strategy and whole reinvention had to take place.
Scott Harper: How did you decide, then, what to do next? How did this reinvention get started?
Francois Nader: Well, it started by something that we ought to do in those situations − which is, really stop and think rather than jumping into action. The stop and think for us was really mainly geared towards assessing what the situation was that we ended up with. If I look at the situation, it was pretty dire because the company had lost about 80% of its market value.
Pam Harper: Oh, my.
Francois Nader: We had a cash burn of around $140 million a year. We had a debt that was due in about 18 months − $172 million. [We had] 435 employees in four sites, and frankly, nothing to build the company from. The first effort that we did was − again, putting my physician hat on − was really to stop the bleeding. The company could not sustain its current status. We took immediate actions to significantly reduce the cash burn.
Pam Harper: So, there were many things that were going on all at once. Where did you feel that you really needed to focus on absolutely first?
Scott Harper: This is a triage situation.
Francois Nader: The triage was focused really on two elements. One was to work with the agency to see if there was any possibility to salvage the product. The second was, meanwhile, as I said, to have to take immediate action to reduce our cash burn. This was a cash burn that we could not afford. We approached it from three different perspectives. The first one was to unfortunately eliminate our commercial and medical organization and/or related field operations. In doing so, we reduced our headcount by 53%; we took the company from about 435 FTEs down to 230. We had to look at our four sites and make the decision to close one of the four sites, leaving us with three. The third element was frankly to put a halt on all our activities that were not critical to the good functioning of the company. These were the three measures, if you will, that we took, really from day one to make sure that we have enough time, or we created enough time for us to decide and devise the next steps of our strategy.
Scott Harper: Strikingly, you decided that it was worth going forward − that you weren’t going to fold the company. There was something there that really gave you the feeling, like “we need to stick this out. There’s something here that the world needs.” Is that right?
Francois Nader: That’s true. That’s probably the key turnaround of the situation, because one could think that “okay, we’re done,” therefore we can take the company down a different path, which would have resulted into a, for all practical purposes, shutting down the company the way we knew it.
Looking at our assets, it became very clear to me that there could be a road less traveled. The road less traveled that we took was based on a concept that I’ve always had in my life, personal and professional, which says very simply that to be successful, be different exceedingly well. I had to pause and think as to − given the situation we were in, and given the constraints of the marketplace − was there a way for us to still be successful by being different exceedingly well.
Fate had it that the two products that we had in our pipeline could be repurposed into orphan indications − rare diseases where there was no competition. This was a major strategic shift of the organization − switching from large markets to very niched, small, high-valued, no-competition markets. This was one of the three or four extremely important strategic decisions that we made to turn around the company.
Pam Harper: “Being different exceedingly well” − I really like that.
Scott Harper: That’s fabulous.
Pam Harper: And I think that’s a fabulous place for us to take a quick break. When we come back, we’ll talk more with Dr. Francois Nader about successful company reinvention. Stay with us.
Scott Harper: You’re listening to Growth Igniters Radio with Pam Harper and Scott Harper, brought to you by Business Advancement Incorporated − on the web at www.businessadvance.com. We enable successful companies to accelerate to their next level of innovation and growth. If you like what you’re hearing, spread the good word. Go to www.growthignitersradio.com, select Episode 18, and use the share links for Facebook, LinkedIn, and Twitter at the top right of the page to tell your social media communities all about us.
Pam Harper: Welcome back to Growth Igniters Radio with Pam Harper − that’s me − and Scott Harper. We’re talking with Dr. Francois Nader, who as CEO of NPS Pharmaceuticals, led their reinvention culminating in a $5.2 billion sale to Shire Pharmaceuticals. Francois, how can people reach you with any questions?
Francois Nader: They can reach me at firstname.lastname@example.org.
Pam Harper: Okay. In the first segment, we discussed your transition to CEO, and how you made decisions about how you and your leadership team were going to have to craft your company’s reinvention to realize its full value. We talked about “being different exceedingly well.” Let’s go a bit deeper into the actual reinvention process.
In our own work, with clients going through all types of transformation and change, large and small, we’ve often seen that there’s usually some kind of resistance or push back. What was the biggest challenge that you faced in gaining support for the reinvention from stakeholders, both inside and outside of your organization?
Francois Nader: I think the biggest challenge we faced was to go down the path of creating a new company rather than trying to fix the old one. When we made this decision, it became very clear that we had to have a new and exciting mission. We needed a new and lofty vision. We needed a crisp strategy. We needed a new culture, a new set of values. Frankly, we needed new and best people that would fit [with us]. At the same time also, we needed to think about a methodical, disciplined execution.
Probably, what we needed most was to communicate, communicate, communicate, and communicate again, both internally and externally. We face a situation where the company was over 20 years old when we started the turnaround. People, whether internal or external − all stakeholders − had their own impression and understanding of the company. We had to change the mindset, and the only way to do that was to go through the process of communicating at all levels and with anyone who would want to hear our story.
Scott Harper: You had, obviously, a wide variety of stakeholders with whom you had to communicate. You were public at the time, right…
Francois Nader: Correct.
Scott Harper: … so you had an investment community, you had the folks inside, you had your partners and suppliers [and so on]. Different people require different types of communication. How did you cultivate the communication so that it would fit each individual stakeholder group in the way that they needed to hear it?
Francois Nader: You’re absolutely right. Different stakeholders require different ways of communication. What is constant, though, is the message. Our message was extremely simple, extremely clear. The message was, “we are focused on late-stage development. We have prioritized our portfolio and are going against two shots on goals with our two products in rare diseases, where there is no competition. We are establishing a culture by design, and we are adopting a global strategic outsourcing model.” Really, these were the three or four messages that we repeated ad nauseum internally and externally. They were simple.
Probably, the key message here in communication is, even though the way we communicate might be different or nuanced, the content or the message has to be exceedingly simple, exceedingly clear, using very simple language, and has to be be consistent. This is the message that we carried over and over and over and over again. With that, we were able to enroll our internal employees in the mission, and it became truly the mission of the company and the mission of everyone in the company. We were also able to enroll our patients, and they became our best ambassadors because they were also enrolled in the mission. We were there for them trying to find, develop, and put in their hands a treatment that would treat their condition.
Pam Harper: People became actually personally invested in helping your patients.
Francois Nader: Exactly right. In our business in biopharma, if you put the patient at the center and the core of everything we do, the rest is easy. This is exactly what we did. We had a fantastic support from the patient advocacy community, because we’re working for them, really. That was the ultimate intent of what we were doing. We were working on two conditions where there was either no or not good alternatives. They were waiting for us, and we were actively waiting for them.
This is why everything we did, we called it our mission, if you will, in the true sense of a mission. We had a start, we had an aim, we had a target. All our efforts were focused on reaching the goal.
Pam Harper: So it totally was out of the cerebral side and very much onto the emotional side.
Francois Nader: It has to be both. Emotion is important because if the message doesn’t carry with it emotions, it doesn’t really carry anything, because communication has to carry the urge to do something about it. In our particular case, frankly, the emotion was a natural fit because we were there to develop and have two drugs approved for our patients. At the same time, this was in itself necessary, but certainly not sufficient. What was needed also was a flawless execution, and an extremely laser focus on all the steps that would take us to the finish line.
Unfortunately, we had to make some tough decisions. When we took the company originally from 400 and some down to 230, we had to go to the next phase. And the next phase was to take the company from 230 down to 17, and then build it back to 40. The reason we had to do that, Scott, is exactly what you just said. We needed the right people for the right mission at the right time. For multiple different reasons, the people, the individuals we had on board before the crisis were not necessarily the people we needed going forward. It was an extremely difficult decision; it was extremely painful for everyone involved, but we treated everyone with utmost respect and gave them severance packages that were very generous, given that we did not have much money back then. But we went the extra effort, and were rewarded because many of them came back in due time and worked with us again, which was very, very rewarding personally, and professionally.
Pam Harper: So if you could sum it up, what was the major lesson that you learned from this whole experience?
Francois Nader: There are a number of lessons along the way. One − probably the first in our business − is to always keep the patients at the core, and with really no exception. If I extend beyond that, it’s really keeping the focus on your client, on your customer at all times. We are a company that is very much values-driven, and this is extremely important because the values really help us identify the “how” of runnig our business, not necessarily the “what”.
As leaders, we have to be completely schizophrenic. What I mean by “schizophrenic” is not the clinical schizophrenic, but really, the business schizophrenic. We have to have this duality every day, every minute about being strategic and being operational at the same time. This is probably the hallmark of good leaders − individuals who can think strategy and act operationally. What I also learned is it’s also a team work. I had the privilege of surrounding myself with the right people, but at the same time, it takes courage to change them quickly if wrong choices were made, and we made some wrong choices. Ultimately, I had a terrific, terrific team around me that made my life so much easier.
One thing I also learned is the fact that in any situation, especially in a turnaround where it’s totally uncharted waters, is really to seek help before it becomes needed. There are a bunch of people who could offer help, but often, as leaders, we think we know everything about everything. It takes humility, if you will, to look at others and seek for help.
Last but certainly not the least, as a leader, I encourage everyone to be themselves and try to have fun doing what they’re doing, because life is too short. We’re on a mission, but the mission, as difficult as it is, has to generate an enjoyable journey. Otherwise, it’s probably not worth it.
Pam Harper: It sounds like you came away with so many lessons from this experience.
Well, in the next segment, we want to talk with you about some actionable steps that people can take in their own companies as they reinvent. We’re going to take a quick break, and when we come back, we’ll continue our conversation with Dr. Francois Nader. Stay tuned.
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Pam Harper: Welcome back to Growth Igniters Radio with Pam Harper and Scott Harper. Over the last two segments, we’ve been talking with Dr. Francois Nader, a leader in the biotech industry who, as CEO of NPS pharmaceuticals, led their reinvention culminating in a $5.2 billion sale to Shire Pharmaceuticals.
Francois, can you give us the way which people can contact you if they have any questions?
Francois Nader: Sure. I can be reached at email@example.com.
Pam Harper: Okay. Well now, getting to specifics − let’s talk about some specific advice that you can give our listeners that they could immediately apply to their own organizations regarding company reinvention and transformation. What would be the biggest thing that you would say they should do, just for starters?
Francois Nader: For starters, I would suggest that instead of trying to fix the old, try to create the new. That’s probably the biggest lesson I’ve learned throughout this process. What I mean by that is redefine the mission of your company, redefine what your core competencies are, redefine the culture you want to be in the organization, change the people if need be. Also, redefine the execution model. Rather than trying to fix the old, build something new.
Pam Harper: So sometimes, there’s a point where you have to just say “this is enough, it’s time to just push the button on reinvent.”
Francois Nader: That’s correct. An internal word we used was to “reboot the system.”
Pam Harper: “Reboot.”
Francois Nader: Yeah.
Scott Harper: And really challenge your assumptions about the whole company, and what it’s about.
Francois Nader: Exactly right. In those situations, one thing that we tend to underestimate is the power of choice. There are always choices, and the choices are multiple. At times, we box ourselves in with one choice or one outcome, saying “that’s it.” If we use a little bit of creative thinking, there are multiple choices. Now, the challenge we have is not the availability of choices. It’s to make the right choice and stick with it. That’s exactly what we need as leaders.
Pam Harper: Absolutely. We’re right there with you on that. What’s another piece of advice, then?
Francois Nader: Probably the second piece of advice is to pursue a really disciplined and methodical execution. Here again, once we’ve made the choice − once we decided what the strategy is − the proof is in the pudding. The only way to create value is through execution. Ideas, per se, do not create value. Putting ideas in action create value. This is what we try to do. In our execution, the execution for us took multiple different facets. One that was critically important was the “how”. Again, we set a number of values that were our guidelines, if you will, in how we operate. We were very methodical in planning ahead of time and thinking through the execution. Also, we adopted a execution model that allowed us to have a lot of flexibility.
It was a global strategic outsourcing model where we retained internally our core competencies, internal subject matter experts and project managers, and contracted everything else out, because out there are individuals and companies that can do this particular segment of our business much better than we can. We relied on them and created very strong partnerships.
Scott Harper: Now, we’ve seen that partnerships don’t always run as smoothly as we want. What was it that you did that really made your partnerships work and created that strong execution?
Francois Nader: We went through ups and downs, and we had successful partnerships and not so successful partnerships, but we learned our lessons. Frankly, the first lesson, and it sounds obvious, is to select the “right” partner. What I mean by that, the right partner is defined as someone with whom you can work. I would say, on top of the list is culture. It has to be a partner that shares your same culture, your same values. It has to be a partner that shares in your mission. It has to be a partner that is incentivized, actually, to deliver on the mission.
It has to be a partner that is the right fit. What I mean by that is, depending on the size of the company, the partner has to be of equivalent or corresponding size. To be more specific, you need to be very important for your partners, but you cannot be too important, and you cannot be not important enough. This is the calibration. If you’re not important enough, obviously, they won’t give you the attention that you need. If you’re too important, the partner might be too small for you, because you’re growing and they might not be growing at the same pace. You might outgrow them. In fact, we had a situation like this where we outgrew our partner very quickly.
At the end of the day, it’s a human relationship between individuals. I truly believe that good partnership really rely on individuals who can communicate, who share the same values, and share the same mission.
Scott Harper: And constantly balance and readjust as conditions change, that’s right.
Francois Nader: That’s exactly right. Through our history, we changed our partners because they were right for us for a given segment of our growth, if you will. We moved on, they moved on. We found good other partners.
Pam Harper: Are there any last thoughts about how CEOs can increase their ability to successfully reinvent and transform their companies?
Francois Nader: The only one thing that I would add is, all this being said, be opportunistic as well. Having a mission, having a strategy, and having a set of values is needed, but we also need to be opportunistic. Just to give you a very quick example, we had planned to go global in five years. The opportunity came up within three months, literally, for us to buy back our products from our ex-U.S. partners, and we did. Within 18 months, we opened 18 global markets, and we transformed the company within 18 months from a New Jersey, U.S.-based company into a global company that was present in 18 markets world-wide, because the opportunity was there and it fit very nicely with our mission. It fit very nicely with our vision. It fit very nicely with our execution model, and we seized it.
Pam Harper: In all of this, you always have to be on the lookout for a little bit of serendipity too, it sounds like.
Francois Nader: Exactly right.
Pam Harper: Well, thank you so much for being our guest today.
To find out who our guest will be next Wednesday, go to www.growthignitersradio.com and look in the sidebar for a schedule of upcoming episodes over the next few weeks.
Scott Harper: Thanks for listening to Growth Igniters Radio with Pam Harper and Scott Harper. To check out resources related to today’s conversation, share on social media, or open a conversation with us, go to www.growthignitersradio.com and select Episode 18.
Pam Harper: Until next time, this is Pam Harper…
Scott Harper: And Scott Harper…
Pam Harper: Wishing you continued success, and leaving you with this question to discuss with your team:
Scott Harper: How can we be more tuned to changes in our business environment that signal a need for our own company’s reinvention?