Life Back West

[True Stories] Facts – and Fiction – of the Effective Use of Virtual Teams

Virtual teams continue to be popular but the reality is that not all virtual teams are created equal – nor are many even “teams.” The news from recent research is hardly comforting; “1 in 3 executives believe virtual teams are badly managed.”

The post below, first published as a white paper by Dr. M. J. “Jo” Whitehouse and me in late 2007 is based on our direct experience with several start-ups in the challenging biotech drug development world, provides a clear roadmap to the steps to take – as well as the steps to avoid – in using the potential and leverage of virtual teams effectively. While equity market changes have had impact, the lessons learned then to virtual teams apply even more so today.

Journalist (and noted biopharma observer) Daniel S. Levine wrote in the San Francisco Business Times that one of the biggest limiters to successful drug development is the high cost of getting to a point where investors realize a return.

The question he raised is “can you get a company to liquidity for less than $100 million in investment?” Since having a successful early drug development path is a key factor to achieving a liquidity event, Levine’s observation is prescient. Since having a successful early drug development path is a key factor to achieving a liquidity event, Levine’s observation is prescient.

While there may be other areas that provide obstacles and challenges, moving drug candidates through early stage drug development phase faster and cheaper1 – and better – than anyone else is critical for achieving success.

A simple – though not simplistic – way to think about the impediments to the successful early stage development of a drug candidate is to group them into four areas 1) access to capital, 2) strength of technology with respect to medical/commercial need and intellectual property (IP), 3) strategic development plan that efficiently demonstrates proof of concept, and 4) the ability to execute the development plan.

While the areas are clearly interrelated, looking at them as distinct items provides insight into ways that firms can raise their odds of successful early stage drug development, gain competitive advantage, and achieve a subsequent satisfactory return on investment.

Outside of capital funding and selecting the most promising technology – which this paper does not address – firms gain competitive advantage by doing the obvious – assuring the company has the skills and expertise [i.e., appropriate talent] required to create, implement, and execute efficient development plans.

Given the well-chronicled challenges of hiring the right employees in the right geographic location with the right technical/ domain expertise at the right time, any approach that increases speed in this area (i.e., talent that meets requisite requirements secured faster) advantages.

Talent, then, is also a limiter to the cost and speed of clinical trials. There’s a high return if your talent can design intelligent, well constructed early stage trials that cover the host of functional issues AND incorporate short term tactics and long term strategies.

Competitive advantage can also be gained when talent operates more efficiently and effectively.

In response to the issues of cost or time to hire talent, some firms have shifted to outsourcing some or all of their development work to either outside vendor organizations or loosely termed geographically dispersed “virtual teams” made of employees and or consultants.

A common move has been to outsource the clinical trial aspects to Clinical Research Organizations (CROs), but any number of other outsourcing configurations exist. Challenges ranging from minor to significant have been reported with these approaches to date.

One key issue with outsourcing most or all aspects of early stage drug development is the ability of all parties to forge a strong, sustained, predictable and dependable relationship.

For outside vendors – absent longer-term relationships, good vendor management skills on the part of the retaining company, and some mechanism for the outside vendor to have proverbial “skin” in the game – relationships with the outsourcing vendor and the client company are often characterized by bumpiness in the form of differing expectations, varied abilities to manage and be managed, and inconsistent communication.

Rather than becoming “inside” vendors with a close, near “in-house” relationship where speed could be gained, many vendor relationships are maintained with a common arms length separation from the core project development team.

That separation is unhelpful for purposes of achieving a quick lift off and downstream close, dependable partnering. Indeed, to avoid these issues, some firms have gone to the far end of the spectrum and have fully outsourced activities – and some equity – to companies like RRD International who manage the entire early stage drug development process.

The challenge organizations confront with their use of “virtual teams” is different, and is captured by team performance experts Douglas Smith and Jon Katzenbach’s observation that while many groups may be virtual, they are seldom teams.

Research by Smith and Katzenbach, along with work done on high performing groups by Bill Fisher and Andy Boynton (who dubbed outperforming teams “virtuoso teams”) makes it clear that effective and successful virtual teams have qualities that make them coveted, and produces output that provides significant advantages.

The fact, however, is that most organizations who sponsor such “virtual teams” are not gaining real value due to the way the teams are staffed, managed and resourced.

For high performing teams, members must have the ability to work both as individuals and as well as effectively collaborate within the team setting. In particular, virtual team members must be able to exist with Smith and Katzenbach’s “working group fundamentals”:

Such high performing teams produce, in brief, an output that is greater than the sum of their individual parts.

It’s worth noting though that when such high performance from virtual teams is called for, business as usual won’t suffice in terms of how the team is managed.

That team “management” is best done by a skillful project lead, who has the development domain skills needed and the “jazz leader like” abilities required to head the high performing virtual team. Leads that lack the ability to lead within this setting will hamper not help the team’s progress. And since quick lift-off, and sustained speed is desired, this requirement is paramount.

Finally, virtual teams must be resourced appropriately, which specifically means a support system for the team consisting of outside coaching and resources such as finance, legal, and administrative help for doing the things required to help get the teams off to a good, fast start and sustain them:

Given issues with hiring employees quickly, competitive advantage is gained by increasing speed and effectiveness by firms that are able to form virtual teams rapidly by utilizing a portion of time from top-level consultants.

Similar to the production teams found in movies or music, and similar to SWAT found in businesses that are assembled and disassembled for a project, the advantages are:

One of the premiere US- headquartered venture capital firms that invests exclusively in emerging life sciences companies has recent significant experience within their investment portfolio that supports the virtual team approach. This firm’s experience illustrates the ways in which companies have an increased chance of success and a higher return to investment while simultaneously reducing risks of failure through using high performing virtual teams.

In particular, development plans can move forward under this model to next milestone during value creation. In two recent experiences their virtual early drug development teams delivered performance results that were superior compared to their experience with more conventional “hire and build” teams.

Without delving into proprietary specifics, virtual teams reached clinical proof of concept faster, and with similar or less cost (measured at proof of concept milestone) than the conventional route. On the qualitative front, clinical trial design, IND filings, and development plans were perceived to be of same or superior quality (comprehensiveness of design, high leverage for opportunity, appropriate mitigation of risk, and favorable investment return) than their experience with the conventional development model.

Performance of the virtual teams within the portfolio companies has not gone unnoticed, as potential partners to the these virtual team portfolio companies have marveled at the work. When presenting results of proof of concept studies to a potential partner, the CEO of a potential partnering company noted “It would take three times as many people and twice as long to achieve these results in my organization”.

While this venture firm has used the high performing virtual team approach selectively, the approach has clearly advantaged them. The VC firm is moving forward with institutionalizing the approach through establishing a more structured and defined process with formally dedicated resources and a network of preferred consultants / providers.

While the approach of utilizing high performing virtual teams composed of consultants may be appealing, it’s not for everyone.

It requires, for example, an established network of contacts and positive associations throughout the broad spectrum of functional specialists (legal, project management, regulatory, manufacturing, chemistry, medical, etc.).

Since setting up the team – not unlike a jazz combo – is based upon who you know, who you enjoy working with, who commands mutual respect and who you trust – only those firms and people who have those type of relationships can utilize the approach.

It also requires what has been previously mentioned – project leads skilled in both the human and technical side, outside resources to help both project lead and the assembled individuals with teaming effectively, and an approach to formation and ongoing team management and maintenance that is beyond many organizations’ abilities.

For firms that are able to utilize the approach, high performing virtual teams provide a compelling alternative development route to the high cost, long time horizon problem stifling many organizations early stage drug development process.

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