Pharmaceutical giant AstraZeneca has had a difficult recent history and like many businesses it faces some tough challenges in the near future. Jon Kirby, CIO at the Anglo-Swedish organisation, is part of a new leadership team facing up to those challenges.
On 1 October 2012, Pascal Soriot took over as AstraZeneca chief executive, an appointment which market watchers hope will stabilise the company that lost its CEO in April 2012 and continue the transformation needed following the 28 per cent drop in second quarter profits reported in July 2012.
AstraZenecais Britain’s second largest pharmaceutical manufacturer. Listed on the London Stock Exchange, the company specialises in treatments for major diseases in six key areas of healthcare: cancer, cardiovascular, gastrointestinal, infection, neuroscience, and respiratory and inflammation.
A merger between Sweden’s AstraAB and the UK’s Zeneca group formed today’s FTSE 100-listed organisation in 1999, and while Britain, Sweden and the US remain its core operating hubs, the company has a growing presence in emerging markets and is very much a global corporation, operating in more than 100 nations.
“AstraZeneca is a pure-play pharmaceutical company – we have not diversified into areas like pet foods or toothbrushes,” CIO Kirby explains of the company that reported revenues of $32bn in 2011.
Drug patents form a vital revenue pillar for pharmaceutical firms, and AstraZeneca, like many of its market rivals, see a lot of their patents expire every year. As a result, Kirby explains that pharmaceutical manufacturers must constantly improve their research and development (R&D) capabilities to bring new drugs to market.
“We are driving improvements in R&D, productivity and the quality of the pipeline to get new products to market and help the business development when there are mergers and acquisitions,” he says of the management team.
“The industry faces a lot of real challenges. Regulators around the world are becoming a lot more challenging towards the ethics and benefits of a drug, so that brings new problems: drugs have to be differentiated and approved by the regulators, so physicians will have less control over what they prescribe,” he says of the economic challenge that governments and health services are tackling.
“Healthcare is a burden on countries and there is increased access to generic medicines. So AstraZeneca has to focus on how it effectively develops, sells and markets. This is a highly complex business, and unnecessarily so in some cases,” he says.
Kirby became CIO in 2010 following an internal move from procurement. One of his first tasks was to realign the IS function so it was central to responding to the challenges AstraZeneca faces and could deliver competitive advantage.
“IS has not always been fully aligned and not seen as a source of competitive advantage. Yet there isn’t a single part of the business strategy that cannot be done without IS,” he explains.
“We are an information-driven business, so we have positioned ourselves a lot more effectively now. Information is the core thing, not the technology, and that is what is driving the way we work. So we have a much more business- and information-led strategy rather than technology-led,” he says.
Changing to an information-led operation from a technology-led one has required Kirby to carry out some major operations on the leadership team within IS. Some of Kirby’s messages are tough and would have been difficult to live through for all concerned, but when you look at the dire straits companies like Yahoo, Nokia, Kodak and HP find themselves in today, the longer term consequences for people, the economy and society are harder than these difficult decisions Kirby has had to make.
“We had a lot of good technology people. The challenge that IS had was a leadership and business outcomes issue.” Kirby explains that these good technology people did not feel valued, perhaps didn’t communicate well within the organisation and faced constant criticism over technologies like email. This created motivation problems within IS.
“That created a parent/child relationship, as IS was too eager to please, rather than help the business change and bring in new ideas,” he says.
“They were not as skilled at people development as they needed to be. But there was excellence in execution and managing the costs base,” he says.
“The first thing I did was make sure that I had the right leadership team, and that meant changing 80 per cent of the team within six months. Now we have a much stronger blend of experience in technology, business and working styles.
“IS leaders have to be leaders of people first rather than being experts in the subject matter.
“The common thread was a passion for people. They have to be people that could embrace pace and ambiguity and they had to have a strong alignment with the business. For me that was the same in procurement. You have to have a business conversation first and then fall back on the subject knowledge.
“We have spent a lot of time making sure that what we now do matters to the CEO and CFO. They have given positive messages that they see IS as important to the company,” he says of the two-way support required and delivered.
“We have pillars or foundational capabilities that sit across our future state architecture; collaboration, externalisation, consumerisation, on-demand, information visibility and exploitation, information lifecycle management, application lifecycle management and end-to-end process management. We also have business area-specific requirements, such as within R&D where we have many data sources that need to be analysed, integrated and fed back to the scientists,” he says of the information challenge and opportunity.
Kirby is enthused by the opportunities, especially the externalisation of R&D, which he and many others in his sector see as critical to the future of pharmaceutical manufacturers.
“The externalisation of our R&D and partnerships across our commercial teams cannot happen without secure and rapid collaboration so that we have meaningful ways to share,” he says of the increasing need for partnerships with niche companies or specialists.
“Collaboration is the biggest challenge we have. It was very difficult to have a conversation because the stability of the email, for example, was not there. That has been rectified through this fundamental change to our operating model that was necessary and courageous move that as a company we are very proud of,” Kirby says of his IS team.
“Now there is much more synergy as we take a leaner approach to the company. IS has to make sure we are working across collaboration to deliver the business outcomes.”
Not only was the structure of the IS department revolutionised, but Kirby has completely modernised the IT sourcing of AstraZeneca too.
“Historically we had a big single-source relationship, but that had issues with performance and our control of it. We had these monolithic infrastructures that met the needs of nobody. There was no strategic control over key elements, with no transparency. That meant AstraZeneca was not making the right investments to drive services and the IT costs didn’t support the business needs.
“So we have moved from a single provider outsourced model to a multi-source model with some level of in-sourcing, removing dependency on a single supplier and bringing the critical strategic and control layers into AstraZeneca, providing transparency across all activities. We’ve also implemented an incentive mechanism across the supplier ecosystem that is accretive to all parties based on absolute performance,” he says. The transparency means Kirby’s team can segment users by their needs and provide the ability to scale up or down provisions as and when needed.
“We can have a conversation with the business on the cost and functionality it requires; IS can tell departments their infrastructure, application and storage costs. So then they have choices and they like that conversation. Our supplier partners are part of that conversation too.
“Previously we did not have sight over the age of the infrastructure with the single-source relationship and that was causing those infrastructure issues,” Kirby explains.
Today Kirby’s supplier base includes Wipro, HCL, Computacenter, BT and AT&T for infrastructure, while Accenture, Infosys, Cognizant, support application development and maintenance, with other suppliers such as Microsoft, Oracle and SAP supporting the overall environment.
Asked about his reasons for bringing parts of the service provision back in house, Kirby says: “IS understands the processes of AstraZeneca and how they hang together.”
It is not just Kirby’s IS team that is pushing the technology boundaries.
“We have a lot of scientists with an incredible knowledge of IT and they know how they want the systems to operate and they are very demanding,” he says. Indeed, Kirby has taken advantage of this knowledge base by taking on a former scientist with major credibility across the firm as his head of IS in R&D.
“That has created very clear lines and goals that we want to set out and achieve. We want to make sure the scientists are able to do what we pay them for – making drugs, not trying to perfect IS. So we have eliminated a lot of the ghost IT.
“This was one of the most important recruitments. He has built a good team around him and it is making a real difference,” says Kirby.
Each head of IS reports both to Kirby and to the chief of their respective business line.
“IS has to sit on these strategic teams. Their peers must understand how we understand their needs and bring them innovation through the IS network that feeds into the group,” he says of the federated structure.
“It is worked that way to be sure that the business units have ownership of their information strategy. This way it translates into the P&L, customer loyalty and speed to market for that division.
“Also AstraZeneca has a really strong culture and ability to have dual reporting lines and it works well. A completely centralised group would not deliver the impact we are currently seeing.”
Kirby says AstraZeneca IS has a “core operating cost of $1bn” with capex added on top of that. The IS team consists of 1300 in-house employees, including dedicated informatics teams within business areas. The UK accounts for roughly 500 of the 1300, and this is alongside staff who belong to outsourced providers. Kirby is also considering SaaS.
“Cloud is a key part of my technology strategy going forwards. What is important though is the information management as confidentiality is something that is important to this business.
“For the next 12 months we will transform the service performance to make it a utility like electricity. Our architecture needs to make sure we can deliver the critical business performance to drive new solutions.
“I think pharmaceuticals has been quite parochial with technology. We have existing relationships with suppliers that have been engaged with our business at a sales point rather than at the R&D point,” he says. As an R&D-led company, Kirby wants AstraZeneca to engage with the R&D teams of its IT suppliers, as these vendors are also R&D-led companies.
“We are engaging more closely with them and want to take them with us on our improvements to business process and in return get a period of exclusivity. This way we develop a more meaningful relationship. Their R&D wants to talk to customers, so once we get to them it builds confidence for both parties that they are working with the right people.”