Break room magic - pharma office layout has huge impact on R&D returns
By Quynh N. Nguyen
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Executive Summary
According to a BCG report, in the pharmaceutical industry balanced R&D collaborations can yield a 15-20% higher ROI, while overly insular or competitive endeavors can lead to substantial financial lost opportunity, amounting to as much as $750 million for larger firms with a $5 billion R&D budget.
Research published in the Strategic Management Journal suggests that random physical encounters of scientific experts from closely related yet distinct fields, such as biochemistry and molecular biology, lead to a twofold increase in co-authored papers (collaboration). Conversely, insular interactions between experts in identical fields result in fewer papers and reduced citation rates (competition).
Strategic interventions such as workspace optimization, pilot programs for cross-disciplinary interactions, and grounding strategies in academic research can help pharma managers facilitate effective collaboration and maximize ROI.
Balancing competitive dynamics: financial impact on R&D
Collaborative outcomes in the scientific domain have far-reaching financial consequences for industries anchored in Research & Development (R&D), such as biotechnology, pharmaceuticals, and advanced technologies. As a testament to the weight industries place on collaborative innovation, the global R&D investment in 2022 surpassed $2.476 trillion (“2022 Global R&D Funding Forecast”, rdworldonline.com).
While the promise of collaboration is tantalizing, its execution is intricate, characterized by a judicious balance of shared and diverse knowledge. According to BCG’s industry analysis of major biopharma companies, well-balanced R&D initiatives can yield a return of investment (ROI) is 15–20% higher than insular or overly competitive R&D endeavors (EvaluatePharma; FDA; “Unlocking Productivity in Biopharmaceutical Research and Development - The Key to Outperforming”, BCG, 2016). In dollar terms, this could translate to an additional $10 million in returns for a project with an initial $50 million investment. On the flip side, projects involving collaborations between professionals with excessively similar expertise risk stagnation due to duplicated efforts and the absence of fresh perspectives. This mirroring can potentially diminish ROI by up to 15%, creating a void in innovation and a drain on resources (Bernstein Research, “The Long View–R&D Productivity;” PhRMA annual survey, 2009; BCG model of small molecule R&D economics).
To put it into perspective, for an industry titan in pharmaceuticals with an R&D budget of $5 billion, this inefficiency potentially translates to $750 million in lost opportunities. Thus, for industry leaders with hefty R&D budgets, fostering collaboration is not just about simply pooling resources and minds together, but engineering partnerships in a manner that maximizes financial returns and drives genuine innovation.
The power of overlapping interests, and locality, in scientific collaboration
In the fast-paced environment of scientific research, how much do spontaneous interactions among researchers with overlapping interests influence their collective knowledge production? A 2021 paper published in Strategic Management Journal delves into the efficacy of promoting such serendipitous but random interactions to foster scientific collaboration outcomes.
A targeted field experiment on spontaneous knowledge sharing was conducted at a medical research symposium on advanced imaging in 2012, involving 15,817 scientist pairs. Using trackable electronic badges, interaction patterns between cross-disciplinary scientists were monitored. This data, coupled with a six-year follow-up on their publications and collaborations, shed light on the dynamics of knowledge transfer, creation, and diffusion. The primary outcomes of this study were the tangible results of knowledge production, marked by (a) co-authored publications collaborations and (b) further citations by others. The two main factors influencing these outcomes were the social interactions at the symposium based on the physical proximity of participants and the extent of knowledge similarity between the participants (including field specialty and intellectual specialty).
The study unveiled the nuanced issues of insularity and competitiveness in spontaneous collaboration. Interacting scientists with a moderate overlap in their expertise experienced a twofold increase in knowledge transfer. Specifically, those with some shared interests but different fields co-authored 7% more peer-reviewed publications. However, peers who met but from identical areas collaborated less, produced roughly 6% fewer joint articles over the same period. Interacting pairs from the same field also cited each other between 2.8 and 6.7 times less than those from more distant fields. The study demonstrated that scientists open to interdisciplinary collaboration can fuel innovation, whereas excessive insularity within a field fosters competition and hinders collaboration.
Designing serendipitous interactions: collaboration vs competition
The profound impact of collaboration dynamics within the R&D sector presents managers with both a challenge and an opportunity to orchestrate teams in the most subtle of ways that may appear to be “serendipitous” encounters to the participants but are designed for a specific outcome. Here is a roadmap for pharma leaders to strategically optimize these interactions within their teams.
Day One: Assess Current Innovation Space: A strategically designed workspace should facilitate cross-disciplinary interactions. Managers should consider conducting a comprehensive audit of the existing R&D layout to assess its impact on departmental collaborations. Such physical changes serve as catalysts for optimizing knowledge overlap, leading to enhanced performance outcomes. These audits aim to find the current mix of shared and diverse knowledge while logging the established team dynamics so as to not disrupt them too much later.
After: Pilot Programs and Adjustments: Following the audit, adjustments such as relocating specialized departments closer to multi-disciplinary units can be made. Additionally, redesigning common areas like cafeterias, lounges, and meeting rooms can encourage spontaneous interactions. Rather than making sweeping changes that could disrupt the workflow, managers should first initiate pilot programs. This allows them to refine their strategies and responsibly scale up successful initiatives, thus minimizing risk and avoiding unnecessary disruptions. Actions could include temporarily moving team members to new departments or setting up "innovation workshops" and "cross-disciplinary brainstorming sessions."
Finally: Track Key Indicators: Managers should collect and analyze key performance indicators, employee satisfaction metrics, and collaboration outcomes from these pilots. The strategies outlined here are directly informed by a study on the impact of spontaneous encounters at large conferences based on daily physical monitoring. Understanding the foundational principles of optimal collaboration can help tailor these strategies to your unique R&D environment.
Implementing effective strategies to improve R&D collaboration requires a nuanced understanding of both the existing organizational culture and academic research that informs best practices. By strategically designing workspaces, conducting pilot programs to gauge their effectiveness, and grounding these initiatives in solid research, managers can cultivate a balanced ecosystem that fosters both innovation and financial performance. This multifaceted approach paves the way for a more productive and financially viable R&D landscape.
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Quynh N. Nguyen is a PhD candidate in Chemistry at Georgia Institute of Technology and a member of the GA Tech PhD-2-Consulting Club. The research applications proposed in this article are solely the views of the author and do not necessarily reflect the views of the original academic journal article authors nor any individual member of our Editorial Board.