MANAGEMENT INSIGHT - Listening to the Voice of Inexperience

It’s May 1940, and the German offensive has begun. Britain follows a path of appeasement. The Chamberlain government has collapsed, and all of Britain turns to one man: Lord Halifax. Lord Halifax is the man the system has created for this moment. A 20- year veteran of the House of Commons and Secretary of War under Chamberlain, he is on the forefront of the movement to appease the Nazis. He was bred to be prime minister.

But Halifax turns the position down. An astute politician, he realizes that whatever peace treaty is negotiated will be a ticking time bomb. Better to step into the shadows for a while, and swoop in to clean up later. His unexpected sidestep leaves the nation rudderless, and another man is hastily rushed in from the political hinterland. This man is everything Halifax is not. An advocate of confrontation, a political outsider, Winston Churchill is a risky choice for a nation on the brink of war.

The rest is, as they say, history. Churchill was exactly the right man for that moment, and became one of the greatest wartime leaders ever. Now the year is 1860, and America is a handful of quibbling states barely held together. The southern states move toward secession, but the Republicans don’t take the threat seriously. Even if they do leave, most surmise, they’ll be back. Just let them go.

Three men vie for the Republican nomination, and Abraham Lincoln, a man with little political experience beyond two losses in the senatorial races, is no one’s first choice. But he is everyone’s second choice, and when the three top contenders fail to produce a victory, he takes the nomination. The Democratic convention can’t even produce a candidate, so a political neophyte sweeps into power. Lincoln does what the Washington insiders would never have dreamed of: he refuses to give up the Union stronghold of Fort Sumter, SC, without a fight. Devising  strategy that forces the South to fire the first shot, he unites the North behind him. Abraham Lincoln became one of the greatest wartime leaders ever.

Sometimes, the best leader for the job is the one with the least experience, writes assistant Harvard professor Gautam Mukunda in, Indispensable: When Leaders Really Matter. There are two kinds of leaders, according to Mukunda: filtered and unfiltered. A filtered leader is one whose career was built on the inside, following the political or corporate ladder. An unfiltered leader comes from outside and happens into the job, often by chance or circumstance. Looking at historian rankings of the best presidents for the past 60 years, Mukunda found that the experienced contenders rarely outperformed their less-experienced counterparts. In fact, Mukunda found the inexperienced men were by far the most effective – though, he goes on to explain, they could also be the least effective.

Most lists of the five greatest presidents include Washington (unfiltered), Jefferson (filtered), Lincoln (unfiltered), T. Roosevelt (unfiltered), and F. Roosevelt (unfiltered). All of these men brought outside experience inside the White House and made extraordinary decisions because of their perspective. All, that is, with the exception of Jefferson, who was brought up for the top job, and whom Mukunda argues did not truly earn his spot among such distinguished company, since the Louisiana Purchase that brought him fame was an exchange that any President in his place would have accomplished. All the other great Presidents were men who did NOT do what the insiders thought should be done.

Political and corporate insiders – men like Jefferson – are highly interchangeable, says Mukunda. They are very often good, but very rarely great. These filtered leaders rule with competence, steady the ship, avoid risk, and chart a safe and secure course.

But who wants safe and secure? Don’t we all yearn for breakout leaders? Bring on Bill Gates and Mark Zuckerburg. Let’s make history! We want Charles Coffin, the man behind what General Electric is today – a man who incidentally came from the shoe business. We want Sam Walton, a military man until he opened his first variety store. Such men are unfettered by the norms of industry thinking and as a result, do things differently.

The pharmaceutical industry, I have often argued, is ripe for radical change. We can’t go on orienting an entire industry on the search for a blockbuster drug. The cost of development is too high, the success rate too low, and the run time too short since the advent of generics. We need leaders. Where is the Steve Jobs of the pharma world?

Not so fast, Mukunda would caution. Unfiltered leaders are at least as likely to blaze trails as they are to reduce the entire forest to ashes. Examples of unfiltered leaders gone wrong litter the world stage – think Hitler and Lenin – but the shelf-life of unfiltered business leaders is much shorter, so most just flicker out and vanish.

Still, they’re there if you look for them. Pfizer’s Jeff Kindler may be such a example. A Harvard law grad and litigator who later became general counsel at McDonald’s, Kindler was known as an aggressive, combative fighter. He cleaned house at McDonald’s, and his success caught the eye of Pfizer, which offered him general counsel of their 330-strong legal team and the promise of better things to come. This was Pfizer’s heyday, when its stock was made of helium, multiplying in value tenfold in a decade. The press bestowed the company with accolades like “best managed” and “most admired.”

Kindler accepted the post, and despite his newness to the industry, quickly outmaneuvered his rivals to take the top job in 2006. He promised to energize and modernize the company.

Instead, he oversaw a 35% decline in share value. While it would be unfair to blame him for the failure of the two blockbuster candidates that Pfizer was pinning its future on, his flip-flopping style did little to improve a bad situation. He closed six R&D facilities and halted research in 10 disease areas, while at the same time setting a goal of launching four new internally developed drugs a year by 2010. Desperate to shrink the company, Kindler laid off 20% of the US sales force, then grew the company exponentially with the purchase of pharma giant Wyeth. He split research into two, creating a separate unit for biological drugs and built an expensive new facility in San Francisco, then reversed the decision 30 months later.

Bruce Roth, the scientist known as the father of Lipitor, said, “When every 18 months you throw the organization up in the air and are shifting therapeutic areas or closing sites, you have this period of turmoil when everybody in the organization is paralyzed. You need some continuity to do science.” Ironically, Roth lost his job when Kindler closed Roth’s site in Ann Arbor, and is now VP of Chemistry at Genentech.

Today, Pfizer is run by the steadier hand of Ian Read, a company insider and filtered leader who has a Chemical Engineering degree and began his Pfizer career in 1978.

Unfiltered leaders are high risk, high reward. Most of the time, what we really need, Mukunda argues, are the industry insiders – the Tim Cook’s and the Neville Chamberlains. Such men, formed and shaped by their own industries, will tend to make the same decisions regardless of which one of them you put on top. And that’s fine, most of the time. After all, the man who led Pfizer through the glory years of Lipitor and Viagra was an industry man if ever there was one. William Campbell Steere, Jr. rose up the ranks after starting in the company as a drug salesman in 1959. And there was never more of an inside man than George Merck, the man who’s largely credited with making Merck what it is today. Merck took over his father’s company as just one more link in chain of chemists and pharmacists that stretched back three centuries.

Mukunda’s thinking can be generalized to leadership throughout the organization, not just in the top spot. We, as scientific companies should be especially open to unfiltered thinking, despite the risks, because innovation often finds its inspiration off the well worn path.

Angiogenisis research owes its genesis to an unfiltered thinker named Judah Folkman.

Folkman was a surgeon who was drafted by the navy and asked to look into the possibility of developing whole blood substitutes that could be used in transfusions. To test potential substitutes, he needed access to tissues that would grow outside the body, and he chose cancer cells. During his research he noticed something odd. The tumors that fed on the blood substitutes he and his partner developed stopped growing at 1 mm in diameter. When transplanted back into living animals, however, the cells resumed reproduction. Folkman deduced that cancer cells needed the circulatory system to grow. He theorized that the cancers expressed an unidentified factor that caused capillaries to grow toward them, and that the tumors might be stopped from growing by supressing that factor.

This was the mid 1960s, and the filtered thinking within the oncology world was virtually entirely focused on the hunt for chemicals to kill cancer cells. Blood vessel research was unheard of, and he found almost no support for it within the oncology community. Folkman begged for money for most of his career, but the men and women he had to look for funding and to publish his papers were conventional researchers. After countless refusals, when he finally received a small grant from the National Institutes of Health, he mistakenly received a document with the handwritten note, “This is the limit. We do not want Folkman to build an empire,” scribbled in the margins.

As this negative sentiment from cancer researchers built, he was eventually forced to give up his coveted position as Chief of Surgery at Boston Children’s Hospital. His colleagues there deemed his research “irrelevant” to the job of surgeon.

Without a secure source of funding, in 1974, Folkman was forced to look for new sources. In 1974, he created the first partnership between a corporation and a university for biomedical research. His resources now secure, the personal campaign against him continued. His innovative new funding agreement led a science magazine to investigate him. At the height of the animosity, when Folkman rose to speak at a conference for experimental biologists, a hundred audience members stood and walked out.

Folkman fought on long past the endurance of most people, and mankind today owes him a debt. His out-of-the-box thinking led to one role of the Ras gene, which is part of the Ras-Mek-Erk pathway that supports tumor growth, and a decade later, Folkman’s thinking is widely accepted and central to the treatment of a growing number of diseases, including blindness caused by macular degeneration and the use of interferon to heal hemagiomas. His research is credited with the development of angiostatin, endostatin, vasculostatin, caplostatin, and lodamin. Genentech’s Lucentis and Avastin are both FDA-approved angiogenesis inhibitors based on Dr. Folkman’s hypothesis, and there are more than 50 angiogenesis inhibitors in clinical trials.

All this, from a man with no formal background in oncology, who came up with the idea and had it thoroughly and vehemently rejected by the oncology insiders. Folkman’s story is also recounted in another book The Emperor of All Maladies: a Biography of Cancer by Siddhartha Mukherjee. This is a real feelgood book for those of us in the industry, highlighting not how far we have to go to cure cancer, but how much we have already accomplished. Just the history of the butchery surrounding mastectomies will be enough to keep us all working late nights. And the introductions of new oncology medicines throughout the book point to the value of chemistry over surgery.

So here’s the upshot: the filtered leader can be counted on to do a reasonable job, with reasonable consistency. The unfiltered leader is a high-risk proposition, but when that bet pays off, the course of history changes.

How can you apply Mukunda’s reasoning to your own organization? I can only tell you how this book has influenced me. I want both types of leaders in my organization. Mostly, I want filtered leaders. But I also appreciate the perspective of someone who comes from outside the industry, particularly in my management team. Our new CFO is not from the industry, and his questions and insights have been eye-opening. The problem is, unfiltered leaders are harder to fit in most areas of the organization. For one thing, headhunters always try to give me the most filtered possible candidate. They see it as their mission to give me someone with experience doing exactly what I need them to do, which is the definition of a filtered candidate. Many times, that’s great. I don’t really want resumes from leaders in microbiology when I’m looking to fill an analytical chemistry position. I credit the system with finding me a new clinical packaging BD who will greatly enrich that side of the business with her wealth of industry experience.

If I want a less-filtered candidate, I have to search a little harder. Start-ups are often run by unfiltered leaders, because these businesses are high risk, and it can be hard to find comfortably well-paid and experienced executives to get off the couch and get into the dirt. Consultants can also provide a splash of outside perspective from time to time.

But I can also do something Mukunda doesn’t talk about, and that’s to create a culture that’s open to new ideas. I want to run the kind of company that, should a Sam Walton or Mark Zuckerberg get hired here, he would feel comfortable staying. I want an inside culture that leaves all the windows open and lets the outside in.

I’m still probably going to put the filtered leaders at the helm most of the time, but I’ll also work to create access to different perspectives; and to make sure that the voice of inexperience isn’t silenced by the organization’s natural filtration process. Then, when 1940 looms or 1861 approaches, I hope to God that I can recognize it for what it is, and let the unfiltered leader deliver.

Derek G. Hennecke is President and CEO of Xcelience, a CDMO in formulation development and clinical packaging located in Tampa, FL. Mr Hennecke launched Xcelience as a management buyout in 2007, and the company has more than doubled in size. Prior to starting Xcelience, Mr. Hennecke worked for DSM as a turnaround manager in the global drug development community, managing an anti-infectives plant in Egypt, technical and commercial operations in a JV in Mexico, and a biologics facility in Montreal. He developed the formulation and business strategy of several drug compound introductions such as clavulanic acid, erythromycin derivatives and Tiamulin. A Canadian, he covets the Florida sun, but can’t be kept away from the rink for long. He is an avid fan of the Tampa Bay Lightning.