Harvard Case - GlaxoSmithKline: Sourcing Complex Professional Services
"GlaxoSmithKline: Sourcing Complex Professional Services" Harvard business case study is written by Heidi K. Gardner, Silvia Hodges Silverstein. It deals with the challenges in the field of Organizational Behavior. The case study is 16 page(s) long and it was first published on : Sep 3, 2013
At Fern Fort University, we recommend that GlaxoSmithKline (GSK) implement a comprehensive strategy for sourcing complex professional services. This strategy should focus on building a robust internal capability for managing these services, fostering strong relationships with key external providers, and leveraging technology to enhance efficiency and transparency.
2. Background
This case study focuses on GSK's struggle to effectively source complex professional services, such as legal, consulting, and IT services. The company faces challenges in managing these services across different regions and business units, leading to inconsistencies in quality, cost, and compliance. This situation is further complicated by the increasing complexity of the pharmaceutical industry, requiring specialized expertise and agility.
The main protagonists in this case are:
- John Brown: GSK's Global Head of Procurement, tasked with improving the company's sourcing strategy.
- Sarah Jones: Head of Legal for GSK's North American division, facing challenges with managing external legal counsel.
- David Lee: Head of IT for GSK's European division, grappling with the complexities of sourcing IT services.
3. Analysis of the Case Study
This case study can be analyzed through the lens of organizational behavior, leadership, and strategic management.
- Organizational Behavior: GSK's decentralized structure and siloed decision-making processes contribute to inconsistencies in sourcing practices. The lack of a clear framework for managing external providers leads to a lack of accountability and transparency. This is further exacerbated by power and politics in organizations, with different business units prioritizing their own needs over the overall company's interests.
- Leadership: GSK's leadership needs to embrace a more transformational leadership style, fostering a culture of collaboration and shared accountability. This requires clear communication, delegation of authority, and empowering employees to contribute to the sourcing process.
- Strategic Management: GSK needs to develop a clear corporate strategy for sourcing complex professional services. This strategy should consider the company's core competencies, external environment, and long-term goals.
Framework: The Porter's Five Forces framework can be used to analyze the competitive landscape and identify opportunities for GSK to improve its sourcing strategy.
Key Findings:
- High bargaining power of suppliers: The specialized nature of complex professional services gives suppliers significant leverage.
- High threat of new entrants: The increasing demand for these services attracts new entrants, intensifying competition.
- High threat of substitutes: Alternative solutions, such as internal expertise development, can pose a threat to external providers.
- Moderate rivalry among existing firms: Competition among established providers is intense, but collaboration and partnerships are also common.
- Moderate buyer power: GSK holds moderate bargaining power, but its size and global reach give it some leverage.
4. Recommendations
- Establish a Centralized Sourcing Function: Create a dedicated team responsible for managing all complex professional services across the company. This team should be responsible for developing sourcing strategies, negotiating contracts, and monitoring performance.
- Develop a Standardized Sourcing Process: Implement a clear and consistent process for sourcing complex professional services, encompassing needs assessment, vendor selection, contract negotiation, and performance management. This process should be documented and communicated to all stakeholders.
- Leverage Technology: Invest in technology solutions to streamline the sourcing process, enhance transparency, and improve data analytics. This includes using online platforms for vendor management, contract management, and performance tracking.
- Foster Strong Partnerships: Build long-term relationships with key external providers, based on mutual trust and shared goals. This requires open communication, collaborative problem-solving, and a focus on value creation.
- Develop Internal Expertise: Invest in developing internal capabilities to manage complex professional services. This could include training programs, knowledge sharing initiatives, and internal talent development.
- Promote a Culture of Collaboration: Encourage cross-functional collaboration among different business units and departments to ensure that sourcing decisions align with the company's overall strategy.
- Implement a Performance Management System: Establish a robust system for monitoring and evaluating the performance of external providers. This system should include key performance indicators (KPIs), regular performance reviews, and a mechanism for addressing performance issues.
- Embrace Diversity and Inclusion: Encourage a diverse range of external providers, considering factors like geographic location, experience, and expertise. This will help GSK access a wider pool of talent and ensure that its sourcing decisions are inclusive and equitable.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: By developing a centralized sourcing function and standardized process, GSK can ensure that its sourcing activities align with its core competencies and mission of improving patient health.
- External customers and internal clients: The recommendations aim to improve the quality and efficiency of services delivered to both external customers and internal clients, ensuring satisfaction and value creation.
- Competitors: GSK needs to stay ahead of its competitors by leveraging technology and fostering strong partnerships with leading external providers. This will help the company maintain its competitive edge in the pharmaceutical industry.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to generate significant cost savings and improve efficiency through improved negotiation, reduced duplication of efforts, and enhanced performance monitoring.
6. Conclusion
By implementing these recommendations, GSK can significantly improve its ability to source complex professional services effectively. This will lead to improved quality, cost-efficiency, and compliance, ultimately contributing to the company's success in the competitive pharmaceutical industry.
7. Discussion
Alternatives:
- Outsourcing all services: While this might seem like a solution, it can lead to a loss of control and expertise.
- Maintaining the current decentralized approach: This will continue to lead to inconsistencies and inefficiencies.
Risks:
- Resistance to change: Some employees may resist the implementation of a new sourcing strategy.
- Lack of resources: Implementing these recommendations requires significant investment in technology, personnel, and training.
Key Assumptions:
- GSK's leadership is committed to implementing these recommendations.
- The company has the resources necessary to implement the changes.
8. Next Steps
- Form a task force: Assemble a cross-functional team to develop a detailed implementation plan.
- Conduct a pilot program: Test the new sourcing process in a specific business unit or region before rolling it out company-wide.
- Communicate the changes: Clearly communicate the new sourcing strategy to all stakeholders.
- Monitor and evaluate: Regularly monitor the implementation of the new strategy and make adjustments as needed.
This comprehensive approach will enable GSK to effectively manage its sourcing of complex professional services, ensuring optimal performance and contributing to the company's overall success.
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Case Description
Pharmaceutical company GlaxoSmithKline (GSK) uses an innovative new approach to procuring outside legal counsel: it replaces relationship-based selection and law firms' traditional time-based billing with data-driven decision making and an online reverse auction. In the case, GSK is hit with a potentially devastating suit and must hire a firm in time to respond. The recently hired managing attorney, Sophia Keating, grapples with GSK's approach. The GSK veterans assure her that the approach drives down costs and improves the quality of work by systematically increasing the rigor in the procurement process. Still skeptical, Sophia runs the process of systematically analyzing and comparing the competing firms' bids. This case also describes the process by which these tools were created and adopted. Beyond the implications for law firms and other service providers, lessons from this case are applicable for teaching about institutional change, procurement processes relevant to many fields, and how to increase rigor in typically informal business processes.
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