CULTURAL TRANSFORMATION

Beyond Operational Excellence

March 2014
Christian Houborg, Vice President
Sponsor of C.I. @ Lundbeck
VISION, MISSION & VALUES

OUR VISION OUR MISSION OUR VALUES

is to become a world leader is to improve the quality of Imaginative Dare to be different
in psychiatry and neurology life of people suffering from Passionate Never give up
psychiatric and neurological Responsible Do the right thing
disorders

2
LUNDBECKS TRANSITION

FROM TO THE NEW LUNDBECK

EUROPEAN GLOBAL GROWTH PLATFORM

ONE PRODUCT Expand in new geographic markets
COMPANY

A MULTIPLE PRODUCT COMPANY

Deliver on late-stage pipeline
Execute new product launches
Drive growth of diversified portfolio

3
Lundbecks focus areas rank high
in terms of burden to society
Lundbeck has products within 7 of the 25 most burdensome illnesses

The worlds most burdensome illnesses

1. Cancer 14. Osteoarthritis

2. Depression and anxiety 15. Bipolar disorder

3. Ischaemic heart disease 16. Liver cimhosis

4. Cerebrovascular disease 17. Dementia

5. Chronic obstructive pulmonary disease 18. Endocrine disorders

6. Refractive errors in the eye 19. Macular degeneration

7. Hearing loss 20. Nephritis and nephrosis

8. Congential anomalies 21. Drug abuse

9. Alcohol dependence 22. Hypertensive heart disease

10. Diabetes mellitus 23. Epilepsy

11. Cataracts 24. Migraine

12. Schizophrenia 25. Rhematic heart disease

13. Asthma
*) Disability adjusted life years, Source: Lundbeck based on Global Burden of Disease 2004, WHO
NOT FOR PROMOTIONAL USE
WHY LUNDBECK?

NOT FOR PROMOTIONAL USE 5

THE CULTURAL TRANSFORMATION
Ambition of Supply Operations & Engineering

In order to improve the overall competitiveness of Lundbeck

the ambition for Supply Operations & Engineering is to create:

The Best Supply Chain in

The Pharmaceutical Industry

7
8 Years towards excellence

Phase 1: Better for Less 2006

Phase 2: Create Results Together 2008

Phase 3: Own the Future 2010

Phase 4: Principle Driven Culture 2013

Results: Be Ambitious and Take Action

NOT FOR PROMOTIONAL USE

Phase 1: 2006
BETTER FOR LESS
Flow and Pull Value
Focus on Processes
Embrace Scientific Thinking
Assure Quality at the Source
Seek Perfection
Value Stream Analysis (VSA) and Kaizen Events

Value Stream Analysis: Mapping of processes and activities across

departments (Current, Ideal and Future State)

Purpose: Create transparency and flow, visualize activities, identify what adds
value to your business and what does not.

Bring attention to areas of improvements

10
Value Stream Analysis (VSA) and Kaizen Events

Kaizen Events: A group of employees across departments are dedicated for 3 -

5 days to solve a specific issue and/or constraints

Purpose: Secure continuous improvements by finding real solutions and

implementing them

Event Event Event Event

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Example of a Kaizen Event
Reduction of setup time by 40%

70 Kaizen Events in 2007

12
Establish Lean Support & Lean Academy

Project Organization established to facilitate Lean initiatives

All managers received training in Lean tools (mistake)

Lean Ambassador Program established to train employees in:

the ability to execute Lean events
systems
principles
tools
change management

13
Implementation of Control Boards and Board
Meetings

Visualizing status, activities and results in all

departments

Short and frequent meetings with focus on

delegation of assignments

14
What characterized the Better for Less phase

Close link between training and learning by doing

Lean transformation was driven by events rather than daily

management

Lean
Academy and
coaches

Lean Coaches as the driving force in implementing Lean

rather than Line organization
15
Phase 2: 2008
CREATE RESULTS TOGETHER

Respect Every Individual

Lead with Humility
What is good Leadership

Identification of:
Success stories involving good leadership
Good leadership characteristics

More than 100 17 categories 24 behavioural

carateristics descriptions

17
Developing Lundbeck Lean Leadership (3L)

Leadership Model
Internal Leadership Program that
integrated traditional Leadership

Exe
ns
o

c ut
development techniques with the

ati
Rel

ion
Personal
Lean principles leadership

Business focus

Lundbeck Lean Leadership

The Lean Lundbeck

Lean People Sustaining
Leadership Lean
Leadership Lean
Foundation Acceleration

1 2 3 4

115 Leaders received 12 days training

during 2008 split on 4 modules 18
 Lundbeck Lean Leadership Style
A Lundbeck Lean Leader
should:

Have the combination of

Employee Group Facilitator The creator of a detailed knowledge of the
Involvement You have the Learning organization processes and the ability
responsibility to develop the employees
This is our goal: I will coach as
Leadership we go along Be coaching and asking
questions not giving
Style solutions

Learn others to learn

through their own
Control Bureaucratic Leader Task manager experiments and errors
follow the rules This is what you need
to do and in this order

General Management Processes

Leadership Focus

19
 Two roles of the Lundbeck Lean Leader

Strategic Mentor
Vision Tolerance
Values Learning
Goals Coaching
Policy Deployment Reflection
Innovation Role model
Breakthroughs Challenge
Customer focus

20
What characterized the CREATE RESULTS
TOGETHER Phase

Increased Leadership commitment and motivation for Lean

Created a strong network among managers

Increased knowledge and best-practice sharing

Managers became the driving force in implementing Lean

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The Shingo Prize

Business Week referred to the program as the

Nobel prize of manufacturing because it
establishes a standard for world-class excellence

The Shingo Prize is awarded to organizations that demonstrate a

culture where principles of operational excellence are deeply
embedded into the thinking and behavior of all leaders, managers
and associates
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We decided to face reality

The first responsibility of a leader is to

define reality. Max DePree

The Shingo Prize is a powerful way to

help your organization tell the truth
about itself (define reality) and know as
well as they can about where they really
are on their journey of continuous
improvement!

23
Phase 3: 2010
OWN THE FUTURE

Create Constancy of Purpose

Think Systemically
Self-inspection based on the Shingo model

Process

All managers were trained in assessment using the principles in the

Shingo Model of Operational Excellence
Managers paired up and assessed areas outside own division
Each assessment concludes with feedback on principles and systems,
and concrete Strengths and Opportunities

25
Development of Policy Deployment

Supply Operations & Engineering Clear link between target of

SOE and targets/activities at
Division division, department and
team level

Department
Targets and activities are
prioritized across functions

Team and departments

26
So how do we use Policy Deployments?
1. Top down break down

Supply Operations
& Engineering
Divisions
Departments

Teams
2. Bottom up review

27
All About People 2011 teams took ownership
of the Business System

Change Driving
Readiness Change
2006 2011 28
Ideas and Improvement Boards

Idea Boards: All departments

implemented idea boards.
Structured work with a target
for number of implemented
ideas

Purpose: Improve idea

generation and
implementation. The
employees are responsible for
We need a routine not just for doing the work, but
improving their everyday work for continually improving the work
Source: Liker & Rother

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First Shingo Silver Medallion in Europe

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What characterized the OWN THE FUTURE Phase

Just Do It environment

Empowered the employees to drive improvements and take

initiatives

All employees became the driving force in implementing

Lean
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Phase 4: 2013
Principle Driven Culture
OPERATING PRINCIPLES SOE SUPPORTING PRINCIPLES
Flow and Pull Value
Focus on Processes
Embrace Scientific Thinking
BETTER FOR LESS
Assure Quality at the Source
Seek Perfection

CREATE RESULTS Respect Every Individual

TOGETHER Lead with Humility

Create Constancy of Purpose

OWN THE FUTURE Think Systemically

BE AMBITIOUS AND Create Value for the Customer

TAKE ACTION
13.000 Ideas implemented
2013: Monthly Living Principles in 2013
Process
VP/DD/HoD/HoS/
TL

Extended Management
Video: Leadership Group: Align the message
explanation of the monthly
principle
Explain in
Departments/Teams

Improvement of the Month

 SOE STRATEGIC PRIORITIES 2014 - 2015
OUR VISION OUR MISSION OUR VALUES
is to become a world leader in psychiatry and is to improve the quality of life of people suffering from Imaginative Dare to be different
neurology psychiatric and neurological disorders Passionate Never give up
Responsible Do the right thing

The Best Supply Chain in the Pharmaceutical Industry

SUCCESS FACTORS / FUNDAMENTALS MUST-WIN BATTLES

People We want a safe workplace with good working environment and a no blame culture. A Launch New Products We face many new launches that are key to Lundbecks future
workplace where personal development and continuous improvements are high on the agenda. success. SOE plays a significant role in the planning and execution of the launches. In SOE we
Fundamentals : Implemented improvements, Lost time accidents prepare robust supply chains and launch with no delays.

Increase Productivity The production task will change dramatically in the coming years.
Cost We manufacture Lundbecks products at the lowest price possible without compromising our The forecast predicts an overall decline in volume primarily due to patent loss of Cipralex. On the
high quality and supply standards. other hand the number of batches and process orders will increase due to the new product launches.
Fundamentals: Cost of Sales, Stock Value We prioritize initiatives that secure high productivity despite the more complex product portfolio.

Increase Contract Manufacturing The contract manufacturing business is

Quality Patients and their safety depend on us making things right. We continuously pursue that important for SOE to maximize the capacity utilization and thereby reduce fixed costs for our internal
quality is built in to our processes in order to secure a robust supply chain production facilities. The external business can help us increase the turnover and cover our fixed
Fundamentals: Complaints, Recalls, Major observations costs.

Reliability We secure high delivery performance in all areas of SOE. Throughout the supply
Reduce Spend The loss of exclusivity for Cipralex and Ebixa will decrease our revenue in the
coming years, and at the same time significant costs are needed to develop and market our new
chain we deliver the expected output on time.
products . In this period Lundbeck must carefully control the spend base, and in SOE we will prioritize
Fundamentals: Fill Rate, Stock Outs
spend reduction initiatives.

OPERATING PRINCIPLES
In order to become the best, we focus on more than mere results. The way
we act and behave in our daily life will determine whether we achieve our
ambitions or not. With Operating Principles and SOE Supporting Principles OWN THE FUTURE BE AMBITIOUS AND CREATE RESULTS BETTER FOR LESS
we secure that we have the right behavior and with the right behavior, we
improve our chances of achieving our ambition.
Create Constancy of Purpose
Think Systemically
TAKE ACTION TOGETHER Flow and Pull Value
Focus on Processes
Create Value for the Customer Respect Every Individual
Embrace Scientific Thinking
Lead with Humility
Assure Quality at the Source
Seek Perfection
Results
BE AMBITIOUS AND TAKE
ACTIONS

Create Value for the Customer

 PEOPLE
The greatest result was overcoming the wall of:

LackTrust
of Trust
Solution Mode
Blame Culture
ValueSilo Thinking
Stream Thinking

...a very large percentage of those we had evaluated were experts at

implementing tools of Lean but had not deeply embedded them into their culture
Robert Miller, Executive Director of the Shingo Prize, 2010 37
Reliability - Delivery Performance

Fill-Rate
100,00%

99,90%

99,80%

99,70%

99,60%

99,50%
2005 2006 2007 2008 2009 2010 2011

Fill-rate

38
Cost - Cost of Sales as % of revenue

Cost of sales as % of revenue

20%
19%
18%
17%
16%
15%
14%
13%
12%
11%
10%

Excl. One-off items, trading goods & Inc.

39
Quality Diviations per batch

Index on Non-Planned Deviations per Batch

100

90

80

70

60

50

40

30

20

10

0
2005 2006 2007 2008 2009 2010 2011

40
Adding value to patients

Pharmaceutical Industry Lundbeck

Cost of Sales
percentage 25% 20%

R&D
percentage
16% 21%
Source: Future Pharma Five Strategies to Accelerate Source: H. Lundbeck A/S Annual Report 2011
the Transformation of the Pharmaceutical Industry by
2020. KPMG 2010

41
8 Years towards excellence

Phase 1: Better for Less 2006

Phase 2: Create Results Together 2008

Phase 3: Own the Future 2010

Phase 4: Principle Driven Culture 2013

Results: Be Ambitious and Take Action

NOT FOR PROMOTIONAL USE

QUESTIONS?
FGP set to win its OEE MWB

Approach is guided by shared

commitment to ambitious business
goals

Support management in building

stronger Lean systems, thinking
and behaviour

NOT FOR PROMOTIONAL USE 44

Living Principles 2014
Recognition of Principle Based Behavior

Linking Operating Principles to the daily work

Articulate living by the Principles

Articulate principle based behaviour

To give recognition
MATERIAL: RECOGNITION CARD
- FOR RECOGNITION OF GOOD BEHAVIOUR
Living Principles 2014 - TOOLS
Overview of the principles.
Can also be accompanied by the 10 descriptions of the
principles

Support to articulations and

discussions about the good
behaviour,
- and to recognition of it!

Support to collection of the good examples.

Can also be used to collect recognition from other teams and
employees

Henrik Support to structured recognition of the good behaviour.

Anne
Make sure relevant teams/persons recieve the recognition.
It was kind of you to help me
finalize my task even though
Support to the discussion about witch principles links to the
you had done your part.. good example.
EXAMPLE ON RECOGNITION BASED ON LIVING PRINCIPLES
(example on how to use the Living Principles 2014)

Manager
Employee
What went
well since our Why?
last meeting? What happend
Hm

1
Who helped you?

2 Henrik helped me, he

helped me getting the
task done instead of
going home early
What have
made you The other day I got
happy? help to complete my
tasks so I didnt
have to work
overtime
EXAMPLE ON RECOGNITION BASED ON LIVING PRINCIPLES
(example on how to use the Living Principles 2014)

What principle(s)
relate(s) to this
behaviour?
Hm.. There are
more than one..

3 Which
principles
are
relevant?
At least Respect
every individual and
Think systemically
4 Henrik
Anne

It was kind of you to help

me finalize my task even-
though you had done your
part..

Which is the
most relevant? Please, Henrik
That must be
This is for you!
Respect every Thanks Anne
individual I had already
forgotten that