Maximizing Your Lab’s Value to the Enterprise

Science has always been the paramount focus of laboratory managers. But that is no longer sufficient. Now, lab leaders need to be profoundly conversant with the business side of their operations as well.

So say lab sector researchers from Deloitte Consulting LLP, who note that lab managers and directors no longer have the luxury of concentrating solely on science while relying on other players in their organizations to administer processes and make strategic business decisions. In a 2011 business of science report that dealt with R&D leadership development, Deloitte consultants stressed that today’s higher stakes make it imperative that lab leaders strive for the utmost operational efficiency while doggedly pursuing additional revenue streams.

To address productivity challenges, management consultants McKinsey & Company’s 2009 “Successful Lab” initiative espoused productivity driven from the lab itself (bottom-up) after identifying several similarities in how 12 highly regarded academic researchers and 15 industry R&D labs successfully organized and managed their research.

The “Successful Lab” report noted, “Although the top labs were often conducting quite different types of research, elements of their approach in five areas—strategy decisions, talent management, portfolio and project management, problem solving, and collaboration—were remarkably similar.

“Be they in academia, the pharmaceutical industry, high technology, or industrial chemical manufacturing, top labs organize themselves to ensure that they have the right team working with a clear focus on a shared set of activities, and that researchers spend as little time as possible on administration and management. The result is higher productivity.”

Without a doubt, most lab managers and directors need to evolve business and operational strategies to resemble those identified in the “Successful Lab” approach. To stay in the game, lab administrators have to become quite adept at business critical decisions, such as the correct balance between in-house testing and outsourcing, which has implications for recruiting, hiring and overall staffing. They have to keep acute focus on the supply chain, on their budgets, and the purchasing of capital equipment and consumables. Opportunities for profitable collaboration such as in benchmarking or the sharing of scarce resources have to be explored with vigor.

In essence, there is a pressing need to apply key business principles in all aspects of laboratory operations. “There are lots of opportunities now for labs to achieve cost savings and actually improve their performance, turnaround times, and labor savings by using Six Sigma, Lean, and automation tools,” says Eleanor Herriman, managing director, advisory services, G2 Intelligence.

The quest for greater business success in the lab could be facilitated on a number of fronts, according to Herriman. “One of the keys could be training people to perform in multiple roles. This could help to balance workflow—staff who are too narrowly trained limit productivity and affect operational flexibility,” she says.

In the same vein, she says, “There is clearly a greater need for efficiency in the use of instrumentation; performing multiple tests on a single piece of equipment provided capability is not exceeded.” Noting that the end goal should not necessarily stop with sending out a report with test results, Herriman says that better use of laboratory information systems and the data generated is critical.

By some estimates, the pursuit of greater efficiency and additional sources of income by labs became most pronounced around the 2008 economic downturn. Kim Shah, director, marketing and new business development at Thermo Fisher Scientific, recalls a spike in the number of customers seeking assistance to improve the efficiency of their instrumentation and software systems, investments that were linked to both their labs and their corresponding business. Shah notes that most requests carried a note of urgency, “At that point they were not getting any additional money from their companies to make more investments.”

Around that time Thermo introduced its CONNECTS technology solution, which became an installed-base play for customers seeking substantive improvements, according to Shah. Designed around a combination of productivity technology, consultations, and implementation expertise, the solution facilitated or improved connections among instrumentation and software systems and decision-making entities, which resulted in greater efficiency and savings.

In addition, Thermo ramped up in two supporting areas: Integration Manager and Data Manager, which enabled customers to examine workflows, samples, and human interactions to identify error-prone or backlogged areas, essentially solving a key piece of their data flow problem.

About a year ago, Thermo Fisher worked in conjunction with the Gartner Group and some customers’ information technology (IT) teams to address emerging questions about the integration of mobile, robotic, and dashboard technologies, among others, into the laboratory environment—essentially, the paperless lab.

This concept goes beyond reducing paper, a laudable goal itself. As Shah notes, the real issue is the transformation of businesses so that labs become the center of many operations. “In the businesses we work with, the lab is the focal point. It is where the raw materials coming in are tested and where the quality of finished goods going out is controlled. It is the place where you make or break your company’s reputation.”

The key message is, “Think about automation, innovation, integration, and finally about business intelligence— those are the four pillars on which to base your strategies to achieve your goals,” says Shah.

Trish Meek, director, product strategy, life sciences at Thermo Fisher Scientific, says, “We are involved with several paperless lab initiatives with several of our lab customers as well as with companies outside our base.” She says that several of their contract testing customers are already running their labs like businesses. “In our life sciences customer base, we see customers grappling with the question of how to become as operationally efficient as possible.”

Meek notes that the value of laboratories is fundamentally based on the data they create. She recognizes a shift now in life science labs from a preoccupation with the generation of results from a quality control (QC) perspective to greater interest in predictive analytics in addition to QC and process monitoring. She says that labs are able to take another look at their operations and figure out how they want to leverage existing technologies and fundamentally supply data to the business. The focus now is to be as operationally efficient as possible and to reassess the data being created in order to maximize their value to the business, according to Meek.

“The reason the paperless lab is coming into focus in recent times is that paper really represents a gap in the integration between systems,” says Colin Thurston, director, product strategy, process industries at Thermo Fisher Scientific. He says paper represents an error-prone,low-tech way to transfer information from one place to another, adding, “Paper is an indicator of an inefficient process.”

While the paperless lab is an attractive goal, “We are not there yet,” says Paula Hollywood, senior analyst, ARC Advisory Group. “The prospect is intriguing, and it would certainly help eliminate some manual errors, but until we get over the issue of security on the Internet, I don’t think we will ever be truly paperless,” says Hollywood.

One of the fundamental questions for lab managers is to figure out their product offering, according to Thurston. He says that the product is not just a tested sample; it is actually providing information to the rest of the business in an efficient, accurate, and timely manner and enabling the business as a whole to derive value from the information. If labs can be positioned as a key part of the future growth of businesses, then companies will continue to invest in them, says Thurston.

On the question of labs tapping additional revenue streams, Herriman says that there is tremendous value in the data generated by diagnostic labs, one of her specialties. Lab data combined with clinical data either from administrative claims or electronic medical records (EMRs) are “unbelievably potent,” she says. “Lab data is probably a greater predictor of health outcomes than any other data, and it is data that healthcare payers really need.

“It is important for lab managers and directors to realize the value of this data and not just give it away, essentially. Information and data in the healthcare world are key assets, and lab managers should add value and become purveyors of this tremendous, highquality asset,” says Herriman.

She notes that some larger healthcare operations are already using lab-generated data to enhance decision making in their care management processes. For diagnostic labs in general, she adds, “If you can impact outcomes, the reward will be much greater than if you are just delivering the results of tests. Labs need to examine how they can leverage their data and turn that into revenue. Find a way to provide customers with superior laboratory information and services and you will thrive—it’s that simple.”

Broadening the scope of the benefits of lab-generated data, industry analyst Hollywood says, “Make the information that labs produce useful not just in the laboratory but also to the enterprise so that you increase the value to the enterprise by making it visible and more valuable to the whole enterprise.”

Hollywood believes that a key aspect of lab efficiency revolves around asset management and the maintenance of equipment. “Maintenance is often seen as a stepchild and takes a back seat to operations. Until recently, it was seen as a cost center rather than a profit center. But this is shifting, and maintenance is becoming a partner of operations; keeping equipment well maintained increases its value to the enterprise.”

There seems to be a fundamental status issue with labs as a whole, according to Hollywood. “For a lab to become elevated in importance, the role it plays in the enterprise needs to be elevated to a strategic level.

“I don’t think that’s the case at the moment. I am thinking in particular of QA/QC labs in manufacturing environments—in that context, I don’t think it is viewed as a critical part of the enterprise,” says Hollywood.

She says that a good start to running labs as businesses is to raise their importance in the enterprise. “And, in the lab itself, raise the strategic value of maintenance to [being on a] par with operations.”

Hollywood says that today there’s considerable need for labs to be run in a more businesslike manner. “Lab managers may not necessarily be trained as managers. In labs within engineering operations, they tend to be process engineers, and they may be brilliant engineers but not necessarily good managers.

“Generally, it is not absolutely necessary for a laboratory manager to know how to run all the tests. What he needs to know is how to motivate people, how to keep the lab operational, and how to keep the supply chain moving,” says Hollywood.

She says that proper selection of equipment, software, and communication tools is crucial and will be even more critical in the future. “Laboratories are a critical piece in the generation of big data, and it is necessary to have the right tools to analyze the data and come up with meaningful findings. It is critical, but not just inside the lab; it needs to go outside the lab to elevate the value of that information to the entire enterprise.”