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AstraZeneca’s New Path

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AstraZeneca s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley – PowerPoint PPT presentation

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Title: AstraZeneca’s New Path


1
AstraZenecas New Path Linking Business
Performance to Social Performance Cristin
Gendron Gabrielle Scheer Haas School of
Business, UC Berkeley April 25, 2007 AZ
Liaison Paul Nichol
2
Pharma Industry Suffers In Reputation
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
The mission of the pharmaceutical industry
revolves around patients. The goal is to create
medicines that treat and prevent their diseases,
ease their suffering and improve their quality of
life.
Goal
THE GREAT DISCONNECT
  • Americas pharmaceutical companies are not
    trusted by stakeholders or the general public.

Issue
3
Corporate Reputation DOES Matter
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
PricewaterhouseCoopers Study Recapturing the
Vision 2006
Lombardo Consulting Study AZ Corp. Reputation
Research 2005
Key Findings
Key Findings
  • Stakeholders inaccurately believe drugs make up a
    large of total healthcare costs
  • Pharma execs and stakeholders showed a gap in
    perceptions on issues affecting corporate
    reputation
  • Need for more transparency in industry
  • Low awareness of AZ and generally low
    favorability score
  • Most important thing to stakeholders ? industry
    acts responsibly ethically
  • Favorability drivers safety, pricing and
    honesty/transparency

Reputation Has Direct Link to Bottom Line 5
rise in reputation affords 3-5 increase in
market capitalization
Source PricewaterhouseCoopers
4
Project Scope Defined Expanded
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
Intended Scope Build CE Index
Intended Scope Build CE Index
Overall CSR/Business Strategy Measurement
  • Realized Scope
  • Build CE Index
  • Expand to overall CSR index
  • Provide strategic recommendations to match

CE Index
CSR Index
5
Competitive Landscape Analysis
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
Integration
Strategic Value
Resource Magnitude
Breadth of Activities
Scope of Activities
Metrics
CSR Stage
Legend High Medium Low
6
AstraZeneca SWOT Analysis
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
  • STRENGTHS
  • Proactive Approach to CSR
  • CSR Council
  • PAP
  • Scorecard
  • Stakeholder Engagement (BSR)
  • Corporate Reputation Survey (Lombardo)
  • Leadership support
  • BI unit creation
  • Risk Management
  • Code of Conduct (IRM)
  • WEAKNESSES
  • Lack of focus in CSR strategy
  • Lack of bigger picture
  • Functional Groups act in silos
  • Unaware of what other groups are doing
  • Lack of robust metrics
  • Disconnect between Global and US efforts
  • THREATS
  • Fear of damaging reputation from increased
    transparency
  • It takes time to see movement of business
    indicators
  • Difficult to show link between business
    indicators and CSR indicators
  • OPPORTUNITIES
  • To be a thought leader in CSR arena
  • To improve pharma industry reputation
  • To improve AZ reputation
  • To bolster sales

7
Summary of Recommendations
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
Strategy
Measurement
Communication
  • Create actionable links with mission and core
    competencies
  • Collaborate CSR activities within business units
    and stakeholders
  • Focus on value creation do a few things well
    rather than all things poorly
  • Leverage existing CSR strategies
  • Steps to create an index
  • CE Index
  • CSR Index
  • Not Communicating is NOT an option
  • Stories trump numbers 10 times out of 10

8
Link Strategy w/ Mission Competencies
Strategic 1
Recommendations
Measurement
Communication
Mission Statement Discovering, developing, and
delivering innovative, meaningful healthcare
solutions Putting the health of patients first
- helping to empower and inform Rewarding work
environment that inspires our employees
CSR Strategy Striving to make the right
decisions Being open and honest Creating a
healthy workplace Providing access
Core Competencies Research and
Development Commercialization Six Key Therapeutic
Areas
SourceAZUS CSR Summary Report, 2006
9
Link Actionable Items to Strategy
Strategic 1
Recommendations
Measurement
Communication
Product Pipeline
Philanthropic
CSR Strategy Striving to make the right
decisions Being open honest Creating a
healthy workplace Providing access
Environmental Impact
Sales Marketing
Clinical Trials
Pricing Strategy
Publish ALL Clinical Trial Results
Human Resources
Access to Medicines
Information Transparency
Patient Safety
Animal Rights
SourceAZUS CSR Summary Report, 2006
10
Integrate CSR Internally Externally
Strategic 2
Recommendations
Measurement
Communication
Media
Patients
Activists
Investors
Employees
Providers
Community
Regulators
11
Focus on Value Creation
Strategic 3
Recommendations
Measurement
Communication
PATIENT SAFETY
PRICING
VALUE CREATION
INFORMATION TRANSPARENCY
BENEFIT TO CORPORATE REPUTATION
HUMAN CAPITAL
ACCESS TO MEDICINES
PHILANTHROPY
RISK MITIGATION
ENVIRONMENT
ANIMAL RIGHTS
LEVEL OF CSR INVESTMENT
12
Leveraging Existing CSR Strategies
Strategic 4
Recommendations
Measurement
Communication
AZ US can leverage established best practices
from other sources to help inform internal CSR
strategies
Other Companies
Other Pharma Companies
NovoNordisk
AstraZeneca (Global)
13
Summary of Recommendations
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
Strategy
Measurement
Communication
  • Create actionable links with mission and core
    competencies
  • Collaborate CSR activities within business units
    and stakeholders
  • Focus on value creation do a few things well
    rather than all things poorly
  • Leverage existing CSR strategies
  • Not Communicating is NOT an option
  • Stories trump numbers 10 times out of 10
  • Steps to create an index
  • CE Index
  • CSR Index

14
Steps in Creating a CSR Index
Strategic
Recommendations
Measurement CE
Communication

The goal is to put a measure on the CSR
activities AZ US has undertaken
  • STEPS
  • Select indicators
  • Ensure a common scale among indicators
  • Adjust indicators for favorability
  • Weight indicators appropriately

Adapted from Jay Aldens Measuring the
Unmeasurable
15
Proposed CE Index
Strategic
Recommendations
Measurement CE
Communication
16
Corporate Sustainability Index
Strategic
Recommendations
Communication
Measurement - CSR
17
Summary of Recommendations
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
Strategy
Measurement
Communication
  • Create actionable links with mission and core
    competencies
  • Collaborate CSR activities within business units
    and stakeholders
  • Focus on value creation do a few things well
    rather than all things poorly
  • Leverage existing CSR strategies
  • Not Communicating is NOT an option
  • Stories trump numbers 10 times out of 10
  • Steps to create an index
  • CE Index
  • CSR Index

18
Communication is Critical
Strategic
Recommendations
Measurement
Communication 1
Within pharma, AstraZeneca is not very well known
by the general public
Hypothesis AZ can fly under the radar FALSE!!
Pharmaceutical industry has an unfavorable
reputation
NOT communicating is NOT an option! Use stories
to communicate CSR activities Examples of
companies who chose not to communicate and found
that it was the wrong strategy Nike and McDonalds
19
Tactical Recommendation Implementation
Strategic
Recommendations
Measurement
Communication
20
Implementation Guidelines
Strategic
Recommendations
Measurement
Communication
  • Phase I PRIORITIZE
  • Reassess priorities to maximize value creation
  • Revise CSR strategy to ensure it is appropriate,
    action oriented and consistent with objectives
  • Benchmark and leverage existing CSR leadership
  • Phase II EXECUTE
  • Begin integrating key focus areas within business
    units, core operations, communications
  • Bolster top-down buy-in via consistent and timely
    communication with executives
  • Phase III MEASURE
  • Validate appropriate indicators for CSR index
  • Establish baselines and set clear goals
  • Phase IV MONITOR
  • Adhere to plan of reevaluating strategy and
    metrics on a regular basis given changing
    industry and business operations/needs

21
Project Benefit
  • This project proved beneficial in both an
  • academic and business environment.
  • Internal Value (to class/team Cristin Gendron
    Gabrielle Scheer)
  • Access to Paul Nichol, a leader in AstraZenecas
    CSR efforts
  • Informative and friendly interactions with all
    contacts (AZ and BSR)
  • Participation in CSR Council Meetings
  • Educational and professional development
    experience
  • Gained understanding of the critical elements of
    successful CSR program
  • Learned about the importance of a robust
    compliance and ethics program
  • Developed benchmarking methodology
  • External Value (to AstraZeneca)
  • Provided an independent, outside assessment of
    AstraZeneca and competitive landscape within
    Pharma CSR
  • Provided some benchmarking metrics as an
    opportunity for AstraZeneca to learn from peers
  • Provided strategic recommendations in addition to
    measurement suggestions

22
Acknowledgements

Lastly, we would like to acknowledge the entire
CSR Council for taking the time listen to our
recommendations.
23
Appendix
24
CSR Is So Much More
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
Reputation
building trust in a company is a long uphill
climb, but losing it can have dramatic effects on
share price and customer loyalty
Retention Recruitment
employees want to work for responsible companies
who care for their workforce and contribute to
society
Operational Efficiency
CSR can improve the bottom line through material
efficiency, and energy and waste minimization
Increased Sales
cause-related marketing, eco- and ethical labels
and new product innovation can influence the top
line.
Source Quantifying the Business Case, Chris
Tuppen
25
Reputation is Key to Business Outcomes
Strategic
Recommendations
Communication
Measurement - CSR
Source Adapted from Harris Interactive, 2003)
26
CSR Continuum Growth Stages
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
Low

High
Integration
N
Nn
P
M
N
Nn
Strategic Value
P
M
P
Resource Magnitude
Nn
M
N
Nn
Scope of Activities
P
N
M
Nn
N
Metrics
M
P
Legend M Merck N Novartis Nn
NovoNordisk PPfizer
27
Defining the Stages of CSR
AstraZeneca US
Pharmaceutical Industry
Project Approach
Recommendations
  • The characterization of CSR in various stages
  • deny practices, outcomes or responsibilities
  • ("It's not our job to fix that")
  • adopt a policy-based compliance approach as a
    cost of doing business ("We'll do just as much
    as we have to") Merck, Pfizer
  • embed the societal issue into core management
    processes
  • ("It's important to the business") Novartis
  • integrate the societal issue into core
    business processes ("It gives us a competitive
    edge") NovoNordisk
  • promote broad industry participation in CR
  • ("We need to make sure everybody does it")

Defensive
Compliance
Managerial
Strategic
Civil
Source Simon Zadek, The Path to CR, 2004)
28
Benchmarking Merck
Merck
Integration
Strategic Value
Resource Magnitude
Breadth of Activities
Depth of Activities
Metrics
Source Merck CR Report, 2006
29
Benchmarking NovoNordisk
NovoNordisk
Integration
Strategic Value
Resource Magnitude
Breadth of Activities
Depth of Activities
Metrics
Source NovoNordisk Annual Report 2006
30
Benchmarking Novartis
Novartis
Integration
Strategic Value
Resource Magnitude
Breadth of Activities
Depth of Activities
Metrics
Source Annual Report 2006, Corporate Citizenship
Report
31
Benchmarking Pfizer
Pfizer
Integration
Strategic Value
Resource Magnitude
Breadth of Activities
Depth of Activities
Metrics
Source Corporate Citizenship Report, 2005
32
Link Strategy w/ Mission Competencies
Strategic 1
Recommendations
Measurement
Communication
Mission Statement Discovering, developing, and
delivering innovative, meaningful healthcare
solutions Putting the health of patients first
- helping to empower and inform Rewarding work
environment that inspires our employees
CSR Strategy Striving to make the right
decisions Being open and honest Creating a
healthy workplace Providing access
Core Competencies Research and
Development Commercialization Six Key Therapeutic
Areas
SourceAZUS CSR Summary Report, 2006
33
Examples of Strategic CSR
Strategic 1
Recommendations
Measurement
Communication
EXAMPLE 1 HEWLETT PACKARD
EXAMPLE 2 PEDIGREE
  • Strategic alignment of business interests and CSR
    program
  • Pedigree Pet Adoption Drive
  • Provide Food for Adopted Dogs
  • Education on Adoption
  • Front page of main website
  • CLEAR LINK
  • Misalignment of competencies and CSR strategy
  • 50 of purchase price goes to LiveStrong
    Foundation pure monetary donation
  • Difficult to find on website
  • UNCLEAR LINK

?
34
Move Towards Game Changing CSR
Strategic 3
Recommendations
Measurement
Communication
SWEET SPOT
GAME CHANGING CSR REQUIRES GREATER INVESTMENT BUT
CAN DRIVE PEER DIFFERENTIATION
OFFENSIVE CSR
BENEFIT TO CORPORATE REPUTATION
SOCIETAL EXPECTATIONS
DEFENSIVE CSR
GAINS PLATEAU ONCE COMPANY NEARS SOCIETAL
EXPECTATIONS
LEVEL OF CSR INVESTMENT
35
CSR Indicators
Strategic 3
Recommendations
Measurement
Communication
Patient Safety
Exp/Net Sales Ratio
Pricing / Access
Human Rights
Net Sales Growth
Information Transparency
Reputation
Philanth- ropy
Brand Net Sales Growth
Access to Medicines
Environ- ment
Contribution Growth
Human Capital
36
Why Measure? Measurement Goals
Strategic
Recommendations
Measurement
Communication
  • Align investment with value
  • Inform management decisions
  • Help you maintain the integrity of your work ?
    Let the numbers do the talking
  • Contribute to reporting, communication, and
    branding

Source Kellie McElhaney, 2007
37
Defining Compliance in Pharma Industry
Strategic
Recommendations
Measurement CE
Communication
  • Compliance in the pharma industry
  • Government price reporting
  • FDA promotional and reporting regulations
  • Fraud Abuse regulations
  • Good Manufacturing
  • Laboratory or clinical practices
  • Clinical trial requirements
  • Employment antitrust and trade laws
  • Safety, Health Environment (SHE) regulations
  • And the list goes on

38
Creating a Compliant Ethical Culture
Strategic
Recommendations
Measurement CE
Communication
External Laws and Regulations
Internal Policies and Procedures
Adherence to external laws and regulations
Compliant with external regulations promotes
ethical culture
Compliance Ethics Program
Compliance Vision To be recognized and respected
as a premier compliance ethics function that
enables AZ to win the right way by delivering
innovative proactive solutions that put patient
health first
Compliance Mission To implement a best-in-class
compliance program that addresses the key
compliance risks facing the business and
establishes and embeds an ethical corporate
culture
Communication
Communicate about two sets of rules, why theyre
important consequences for violations
39
Rationale for Weight Adjustments
Strategic
Recommendations
Measurement CE
Communication
  • High Weighting
  • ERC Ethics Survey and Compliance linked to
    Performance sections are critical because they
    directly support the views/beliefs of employees
  • Scorecard and Audit Reports provide critical
    objective assessments of Compliance and Ethics
    Program performance and outcomes
  • Medium Weighting
  • Corporate Board Oversight is relatively important
    as it shows that the company is serious about
    having the CE programs integrated into the
    company fabric and that there is top leadership
    buy in
  • Helpline Data is important because it comes
    directly from employees (similar to ethics
    survey) but has been weighted for mix of negative
    and positive favorability
  • Low Weighting
  • Training Metrics are important, however, they
    should not be given too much priority because
    these are presumed a baseline exercise

40
Building the CE Index Example
Building CE Index Example
Strategic
Recommendations
Measurement CE
Communication
  • Assume ERC Ethics Survey score ranges from 0 to
    250
  • Set Max Value 100, therefore set 250 100
  • Assume AZ US value came back at 175
  • Set up a proportion, where 175/250 x/100
  • Therefore, x 70
  • Set weightings 10 for high, 5 for medium
    and 1 for low
  • Sum Weighted Scores

CE Index Weighted Sum
41
Benchmark Johnson Johnson
Strategic
Recommendations
Measurement CE
Communication
  • The core value in building out a comprehensive
    CE program is integration.
  • is a company that has
    made their internal message simple follow The
    Credo

Integrity Credo-based Actions Leaders at
JJ live Credo values build trust tell the
truth initiate transparency into problems and
demonstrate genuine caring for people
42
Economic
Strategic
Recommendations
Measurement - CSR
Communication
Red font indicates items overlapping with CE
index
43
Environmental
Strategic
Recommendations
Communication
Measurement - CSR
Red font indicates items overlapping with CE
index
44
Social
Strategic
Recommendations
Communication
Measurement - CSR
Red font indicates items overlapping with CE
index
45
CSR Indicators Link to Business
Strategic 3
Recommendations
Measurement
Communication
Reputation
Patient Safety
Exp/Net Sales Ratio
Innovation
Pricing / Access
Net Sales Growth
Employee Recruitment
Productivity
Information Transparency
Brand Net Sales Growth
Access to Medicines
Training Investment
Employee Retention
Contribution Growth
Human Capital
Market Share
46
Communications Strategy Considerations
Strategic
Recommendations
Measurement
Communication
  • You cannot not communicate
  • If you do not communicate your CSR, you cannot
    leverage maximum business benefits (consumers,
    employees, partners, investors, new markets,
    etc.)
  • If you do not manage your CSR communications
    strategy, someone else will do it for you!
  • There are risks, as with every communications
    strategy, but there are worse things for which to
    be criticized (than trying to do good)
  • Communicate more broadly than to only consumers

Source Kellie McElhaney, 2007
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