Spending Effectively Matters

I recently read two articles -- one disturbing and the other fascinating -- in The New York Times about the search for effective cancer treatments.

The disturbing article asserts that the National Cancer Institute has spent $105 billion since Nixon declared war on cancer in 1971, with only small changes in death rates across all cancers. The article discusses how the agencies that spend money on research projects choose conservative research approaches that create incremental learnings at best and are unlikely to produce breakthrough therapies. Meanwhile, researchers with novel approaches who don't receive funding because their approaches are "uncertain" risk damaging their careers.

The fascinating article mentions how researchers in Australia are testing an approach with a one-two punch. The first mechanism introduces toxin-containing bacteria cells that are coated with antibodies such that they attach to receptors on the surface of the cancer cells. The cancer cells' response of attacking the bacteria by engulfing them draws the toxins in. The second mechanism suppresses genes in the cancer cells that would normally help build resistance to the toxin over time. It's amazing how these researchers conceived of a way to trick cancer cells to let in "Trojan horse" toxins that, once inside, slow or stop the cancer cells' defenses. Now, imagine if scientists were to develop an approach with 10 mechanisms of action that would beat cancer cells into remission.

With regards to spending more effectively in procurement, how do we avoid the disappointing level of progress and innovation seen with cancer research spending? Let's look at one facet of procurement spend -- generating business/user requirements for procured goods and services. How do we get away from the norm of reproducing the same old requirements and instead generate breakthroughs for the company? Here's an actual procurement business requirements generation example that is helping deliver medicines to patients more quickly.

When pharmaceutical companies develop new medicines they need to test drug dosage forms (e.g., tablets) to see how they dissolve and release their medication into the body. One laboratory machine they use simulates the human digestive system. It contains six clear glass "vessels" that look a bit like lab beakers and are the size of the stomach. These vessels are kept at body temperature via a water bath. The equipment contains paddles inside the vessels that turn the contents slowly in order to simulate the churning of the stomach. Scientists can check to see the rate at which various tablet "candidates" release the medicine.

The challenge to the procurement category manager and lab manager was to generate breakthrough user requirements that a supplier could utilize to create a new generation of this machine that would help scientists do their work far more efficiently and effectively. To meet the challenge, the procurement manager involved the users -- nearly 60 scientists -- in designing their ideal machine for accomplishing this task.

Here are some of the design features the scientists generated:
- The vessels would be wrapped in a transparent heating film that keeps them at body temperature instead of the conventional heated water bath. This change eliminates hazardous waste water, as well as the 20 minutes it takes to heat the water to body temperature.
- Instead of the current six vessels, it would be designed as a tower that holds 12, 18, or 24 vessels within the same footprint on the laboratory bench-top.
- For easy servicing, the tower could be opened like a side-by-side refrigerator.
- Enable the 24 vessels to run independently so that if one or more of the experiments in the 24 vessels fails, the others will continue uninterrupted (vs. all failing).
- Enable the user to receive a text, phone call, and/or e-mail if any experiments fail.
- Enable the user to monitor and operate the system remotely from anywhere in the world.

The bottom line is that this equipment design speeds the drug development process while saving money; it enables scientists to obtain higher-quality test results in half the time or less, freeing them to work on other projects during much of that run-time.

It's one thing to buy more efficiently (i.e., using fewer resources), but what may well be one of the next big opportunities in procurement is to buy more effectively (i.e., changing the nature of what we’re buying so that it has greater impact). More procurement organizations need to challenge the status quo rather than habitually "buying like we've always bought". We spend much more effectively when we engage people, especially the users, in building on each others' ideas in imagining how they would ideally like a product or service to work.

Fortunately, there's a potent "prescription" for accomplishing effective spend and breakthroughs in general. It's called idealized design, and this method will be detailed in a future blog entry.

- Jason Magidson

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