It was a stalemate. Allergan’s top executives faced each other off, refusing to acknowledge the other’s sales figures. As each defended his end of the table unwilling to accept a version of the truth that the different numbers wove, the tension in the room rose. The standoff wasn’t the first. Finance had a set of sales figures, the logistics department had their own and sales insisted that both were wrong. The conversation between executives went something like this says K.T. Rajan, director operations IS and projects, Allergan India, “If you use my figures, let’s talk, otherwise there’s nothing to discuss.”
Over a hundred man years worth of business savvy sitting in a room and the company twiddled its thumbs unable to find an unanimous way ahead. That’s the thing with stalemates: nobody wins.
“You know what was interesting?” asks Rajan with a smile, “they were all right.”
His lightheartedness belies the seriousness of the situation. In the gridlock of numbers, it was hard for the company to move but like a fissure under pressure, a decision would be made — based on one executive’s figures. While that released the pressure, it always offended some of the top management.
“It built resentment,” says Rajan, “and it was coming to a boiling point.”
United We Stand, Divided We Fall
The 12-year-old Allergan India is a pharmaceutical that specializes in ophthalmic products. A joint venture between Allergan and Nicholas Piramal, the Rs 100-crore (US$20.2 million) company offers medication for conjunctivitis, dry eyes and glaucoma and has about 17 percent of the Rs 430-crore Indian ophthalmic pharmaceutical market.
Like other pharmaceutical business, Allergan knows the importance of an extensive downstream strategy. It prides itself on having the largest reach in the Indian ophthalmic industry with its network of 10,000 ophthalmologists. The company’s primary point of sale are 18 clearing and forwarding agents (CFAs). From there products go to the distributor, and the chain goes down a couple of tiers, to the wholesaler, retailer and chemist outlets. Between 900 and 1,200 distributors and about 1.2 lakh small distributors and stockists constitute secondary sales.
This vast network creates plenty of scope for data inaccuracies. “Because we are a national set up, there are enough chances of data deviating from the real figures. This is not a reflection on anyone. Everyone is doing their job fine, but each one is looking at sales from their own perspective,” Rajan says.
That formed one of the reasons why figures from different departments did not match, creating intelligence that was more confusing than enlightening.
“Typically, the pharma industry has so many units and so many representatives with diverse activities that accurate data collection is a problem. In my career with Johnson & Johnson, Bayer and Novartis, I have always been disappointed with the kind of data that was available,” says R. Raghu Kumar, MD, Allergan India.
The problem was that like FMCG organizations, the sale of pharma products takes place at different stages. For instance, when a CFA requests for a certain product, that purchase requisition is used by the finance team to get a heads up on what’s being sold. When a box of Restasis is being moved from Allergan to a CFA, a goods receipt is produced, which inventory-focused production staff use to gauge what’s being sold. And when a purchase invoice is finally created when a CFA pays for the goods — possibly a few months later — the sales team uses that data to track sales.
Layered over this mismatch in figures was the contrasting perspectives each department head brought. “As the production head, I think from an inventory point of view; how inventory builds up and how to reduce it. Rajesh, the director of finance, looks at invoicing; what sales was against budget, what it was against the forecast. When each person takes his own view, it makes things difficult,” says Rajan.
Without accurate sales data, it was getting hard to decide how much to produce, what promotions marketing should start on, or even for finance to finalize a budget or an expansion plan. The heat was on key areas including inventory, distribution production planning and dispatch planning.
Allergan’s current system, also made it hard to keep track of the lifecycle of an order: from when an order was made, through production and delivery and finally to payment. The cycle could take up to months from end-to-end. As the company grew, it became increasingly crucial to monitor parameters like DSO (Day Sales Outstanding), which is used to gauge the performance of every division and DOH (the Day’s On Hand), which is a measure of inventory.
“We have a huge transactions processing application called Empower. It addressed our basic transaction processing including supply, billing and material management. It looked at various storage locations, getting all the invoicing right, getting all the pricing masters right — humungous tasks by themselves. We got our basic reports in place but we realized that we needed a system to throw up certain reports. We needed people to mine the data from Empower,” says Rajesh D’Mello, director finance, Allergan India.
It was then that they realized there was a fair amount of inefficiency in the system. “It was taking some time to get data, understand it, and explain to people what exactly we were looking for. Given our headcount, we were a bit apprehensive to ask them to do more analysis. We realized that we were not getting efficiencies from our system. We wanted analysis, more dimensions from sales data, like sales according to time, zone, by area sales officer and by manager. That’s when we decided to introduce a business warehouse so that we could look at data from various dimensions, and generate as many reports as we wanted,” says D’Mello, tracing the need for RUBIC (Re-usable Business Intelligent Components).
The association with Rubik’s cube is no accident. The cube represented the two things Allergan wanted from its IT team: a single version or block of truth and multiple sides to look at it.
Beating BI Blues
Allergan wasn’t alone in its bid to gather more intelligence from is systems. Business intelligence is an important priority for Indian CIOs. In the 2008 State of the CIO Survey, BI emerged as the topmost priority for CIOs in 2009. Given the economic slowdown, more companies, it seems, want to find new blue oceans to introduce their products.
The argument is hard to get around — especially in a downturn. The big three analyst firms, Forrester, Gartner and, IDC agree that BI is one of five technologies that IT must continue to invest in even during a recession.
BI can “help companies identify and retain their most-profitable customers,” says Andrew Bartels, principal analyst at Forrester. And it also ensures other benefits. Gartner fellow and VP Jackie Fenn says that companies always need analytics. In the supply chain, for instance, analytics that trigger alerts like delayed payments, can deliver real value to companies.
Both these benefits apply to Allergan. Which is why like most companies, Allergan, chose to implement BI: to give the business more actionable information. But, Allergan also needed BI to create a platform that its executives could collectively work off.
The year 2006 saw a decision to implement a BI solution that could throw up solutions to this problem. In 14 months, with Mindtree (who had helped build Empower) as their technology partner, Rajan set up RUBIC. The tool had an SQL 2005 server at the backend and an extraction transformation loading (ETL) tool in the middle. The ETL extracts and cleans data then coverts it into a standard format. It then puts the data into a local ERP that feeds the data warehouse. The warehouse is fed from various transactional level systems. A number of analytics, static and dynamic query capabilities were built on this.
Reports are available through a presentation layer (on Windows Share Point), and allowed a comprehensive representation of various key business performance indicators.
Data cleansing was an extremely important part of getting the application in place. Inconsistencies in names, geographies and figures that existed in static tables had to be standardized. In many cases, these were not errors, just different depictions of data. “A distributor may be listed in different names for different categories of products,” says Rajan.
The system went live in early 2007, and senior and second-tier management across sales, finance and logistics were given access to the system, with strict security applications guarding access.
The biggest advantage to RUBIC, says Rajan, is that data can be sliced multi-dimensionally. “The three key dimensions you can look at are product category, geography and time,” he explains. “The cube browser is meant for multi-dimensional analysis. For example, primary sales can be broken up by region, by month or by product.
It’s user-driven and can be used for deeper analysis. By viewing data in different ways, we are able to better understand our strengths and drawbacks.” In addition, reconciliation problems disappeared, as if by magic.
The magic, however, did not come easy.
The foremost challenge was getting CXOs out of their comfort zone, says Rajan, who knows a thing or two about being out of comfort zones. As one of the top three candidates of the The Times of India’s ‘Lead India’ campaign that sought community leaders to take on politics, he was put through a grueling process of personal interviews, public debates, and group discussions.
“It’s about maturity and people stepping out of their comfort zone,” says Rajan talking about the change he needed to bring about to tip RUBIC’s chances of success. The reluctance of his peers was understandable. Hypothetically, if the production planning team went by the figures finance wanted, they would have to listen to a version of the truth that could bloat inventory and get production in trouble. “We were trying to point out that while all of them were correct, but in the common interest of the company, we should be talking about the same figure,” Rajan says.
His strategy used a mix of the threat of future problems and personal rapport. “It’s a big advantage that I am not seen as an IT person. My role consists of operations, which includes supply chain management. Being a CIO is about 25 percent of my function,” says Rajan. Users instinctively guessed that they could lose some face because of RUBIC.
“Since the solution exposed the inefficiencies of individual departments or business units, it required a lot of maturity and courage to explicitly acknowledge the situation. We had to come to a common understanding and adopt a shared vision. Collective bonding had to be developed and we leveraged each other’s strengths. Over time people became open to giving and taking feedback in the interest of running a high quality business operation,” he says.The fact that Rajan spearheaded Empower, Allergan’s first transaction management system, also helped build confidence. “People who have seen [what it could do] kind of tasted blood,” Rajan says.
Rajan’s combination of people and business skills worked. “It is refreshing to see that even as a smaller organization we were able to get data fast enough for us to take decisions. That’s a big change. We may be small but our database is pretty robust,” says Raghu.
In Full Technicolor
Rajan’s solution paid off in a big way. While the rest of the pharmaceutical industry grew between 5 and 6 percent in the last fiscal, Allergan India registered 20 percent growth, Rajan modestly acknowledged that some of that lead is thanks to RUBIC.
It also improved the company’s day sales outstanding (DSO) and its inventory levels. Post-RUBIC, DSO levels dropped by 10 percent and Allergan achieved what few of its pharma peers have managed: it maintains an inventory of less than 20 days. The industry average, says Rajan, is about 45 days.
He also points to a billing graph to demonstrate one of RUBIC’s victories. “In most pharma companies, billing cycles have a hockey stick shape. A significant portion of the month’s billing takes place during the last week — as much as 80 percent in some cases. In our case, a big chunk of the billing happens in week one,” he says.
Multi-dimensional reports also ensure the health of Allergan’s stocks. “We can move stock to optimize inventory. In our industry, the health of stock is very important. We have to offer the right product, with right shelf life, at the right time,” he adds.
And when a product’s time is running out, RUBIC steps in, helping the company in a way that is specific to its industry. “In pharma,” says Rajan “when a product is six months from expiry, a trader returns the goods. Instead of junking these, we distribute them as samples. We monitor products that are 270 days from expiry, 180 days and 90 days. If it’s near 90 days, we ensure that it is used immediately by giving it to camps or hospitals where there is fast turnover.”
However, instead of the regular 18 CFAs Allergan normally works with, the final accounting for these near-expiry medicines has to be done directly with hospitals, camps and other outlets — making the inquiry-to-cash process more complicated. RUBIC gave Allergan an accounting system that worked as a good tracking device.
Figures aside, the biggest advantage RUBIC offers Allergan is the power of informed decision-making. “Earlier, a little bit of guesstimate and a little bit of gut feeling would have seen a decision through. Today, all decisions are data driven,” Rajan says.
In addition, the dynamic nature of RUBIC’s analyses ensures that employees are more informed and consequently are more productive. “The head of finance is able to ask much better questions of the functional heads. At their level, they are already aware of the figures, even before there are questions from the top. And that sense of control adds to their productivity. When I want information, my questions are more pointed, and employees know what I want — they are no longer shooting in the dark. RUBIC adds to employee productivity,” Rajan says. During 2008, he adds, productivity among Allergan’s sales people increased by 16 percent.
As head of production, Rajan is also proud of his increased control over inventory. “We are able to monitor inventory up to the secondary and tertiary level. Now, we know in which cycle a downturn will affect us and can turn a situation to our advantage. That, in turn, adds value to our production planning and working capital.”
Allergan’s products have also witnessed a 28 percent growth in promoted brands, says Rajan. Secondary sales grew by 23 percent and the introduction of new products added 10 percent to the company’s kitty.
The MD Kumar re-iterates, “RUBIC has really helped. You can see what is happening and you can dig deeper when you think something is not looking right. We’ve come very far in terms of being able to capture data and perform analysis that adds value to our decisions.”
3D is Only the Start
RUBIC is here to stay. As Rajan points out, with Empower his people learnt first-hand what automation could do to process efficiency. With RUBIC, they saw what real-time multi-dimensional data could do to decisions. The way forward can only be further process optimization and the addition of more functions.
Over time, there is an option of extending the availability of data to ranks below the CXO level. “It’s the next step in making data available to the next level of managers,” says D’Mello. “Of course, this would depend on the technology available at that point. We need to make more informed decisions within a secure environment,” he says.
He is also looking forward to adding functions to the system. “We would like to include more data, perhaps add retail audit data, maybe even prescription data. We can make intelligence richer with those dimensions,” he says.
But he also wants to temper some of that enthusiasm and guard against over-using the application. “It is important that it should not be clogged. Loading so much on it will only lead to trouble, one wouldn’t know where to look, and then accuracy and efficiency of the reports may suffer.”
That’s the sort of ownership that every CIO dreams of. But when you have a solution that makes CXOs more productive, and puts you ahead of the competition, it’s hard not to love. And as the dark downturn clouds loom, Allergan is going to keep twisting and turning their RUBIC searching for new solutions.
