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Monthly Archives: September 2012

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20 09, 2012

Storytelling and Pharmaceutical Portfolio Management

By |2017-05-23T15:42:03-08:00September 20th, 2012|Blog|0 Comments

campfireHumans have always been and will always be storytellers. From the fireside tales of bygone millennia to today’s TV dramas and movies, the power of the narrative holds us in rapt attention as it both entertains and makes sense of the world around us.

How does this relate to pharmaceutical portfolio management? Essentially, portfolio management is about affecting change in an organization. But real, honest to goodness change is hard to bring about; what people will do to avoid change is the basis of many a sitcom. To initiate change, you need to make a compelling case against the status quo—you need to tell a great story. Your tale might unfold like this:

    Act I:    Set-up, or “How We Got to Where We Are”
    Act II:   Complication, or “We’re On the Road to Ruin (or at least mediocrity)”
    Act III:  Resolution, “The Happy Ending—if we do portfolio activities A, B & C”

It isn’t always safe or easy, but whether you are an analyst convincing your manager or an executive persuading the board, telling a story will help you make your case, and do so in an effective and entertaining way.

9 09, 2012

The “Good Enough” Business Model

By |2017-05-23T15:42:03-08:00September 9th, 2012|Blog|0 Comments

A product manager and an analyst are discussing the revenue forecast for a product in development. Poring over the financials, the manager asks:
     “Have you considered how SUPR-3 will impact sales of our other SUPR products?”
     The analyst replies confidently: “Yes! Right here you can see we are estimating SUPR-3 to take a 20% cannibalization of the existing SUPR product line.”
     “But a dollar of revenue from our earlier SUPR products is much less valuable, since we have fatter margins on the new product. Has that been factored in?” asks the manager.
     “Oh no, I didn’t think of that,” replies the analyst, taken off guard. “I’m on it.”  So away goes the analyst with a job to do: Add another input and another algorithm to The Model.
     Two days later the analyst meets with the manager once again: “You were right about the difference in profit margins–it reduced the impact of cannibalization by 20% and increased the net present value by 4%.”
“I thought so,” says a satisfied manager.” We are getting closer with this business case.”


Another factor to roll up with the model

They were “getting closer,” but the model still wasn’t “good enough.” Variations on this theme play out every few days for the next month, until there are a dozen more business factors explicitly considered in the forecast. Over a quarter or a year, they might add hundreds of factors as they think of questions, but never remove them as they find answers. Taking out a business factor goes against instinct, as if they were removing value, or intelligence, from the model.


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