For industries that depend on innovation, sustaining it is a constant challenge. This is particularly the case in biopharmaceuticals, where turning molecules into medicines is notoriously fraught with risk, and failure.

When one of us (Vivek) and his team launched Roivant Sciences in 2014 and began developing treatments for Alzheimer’s disease — they were determined to learn from the pharma industry’s innovation issues and build a more sustainable innovation engine. After extensive assessment, they settled on two initiatives: realigning incentives for employees and systematically introducing outside talent and practices.

These two actions cost almost nothing compared to vast sums often spent — and arguably, often wasted — on efforts to foster innovation. Yet they have already generated tens of millions of dollars in value for Roivant. We believe these same measures can be successfully adopted and adapted by other companies in pharma and other sectors that seek to avert, or reverse, innovation stagnation.

Roivant was addressing some sobering realities: In 2016, only 22 new drugs were approved by the U.S. Food and Drug Administration (FDA), the lowest numbersince 2007. Year-on-year price increases for existing therapies have allowed the industry to maintain profitability, but those short-term fixes have come at a heavy cost: decreased public satisfaction with the industry and increased political scrutiny. In a recent Gallup poll, the pharmaceutical industry was the most widely disliked private industry, ranking even lower than lawyers.

Roivant’s first response was to address misaligned incentives. While virtually all pharma companies say they encourage risk, in reality the failure of individual drug-development programs frequently results in career damage or even job loss for the research teams involved.

This occurs despite the fact that the reasons for failure frequently have less to do with the quality of the teams working on the programs and more to do with the underlying science. As a result, teams are perversely incentivized to protect and prolong dubious drug-development programs, diverting resources from more promising avenues of research.

To combat this phenomenon, Roivant launched a program of rewarding teams for raising red flags about programs they feel should be halted. To further align individuals around the success of the company instead of specific programs, every employee at Roivant or one of its subsidiaries receives stock options. And barring individual performance issues, all members of research teams are promised new roles within the Roivant family of companies if their particular program or subsidiary does not succeed.

Roivant’s second innovation initiative was to forcefully inject an openness to fresh thinking and outside practices. This may sound obvious, but it was in sharp contrast to typical patterns in the pharma industry of recruiting from within, resistance to new thinking, and sclerotic bureaucratic structures.

From its inception, the company consciously recruited scientists who rebelled against big pharma bureaucracy and were open to new ways of working. One industry publication has termed Roivant’s team of scientists “a Justice League of pharma veterans [assembled] to upend the industry.”

Meanwhile, the company recruited non-scientist talent from finance, consulting, tech, academia, and political campaigns and inserted them into drug-development roles. Their mandate: Come up with fresh ideas for making the notoriously expensive and time-consuming drug-development process more efficient.

The catalysis between the “Justice League” of seasoned veterans and the new non-scientists has had a powerful, positive impact. For example, senior scientists explained to one of the new non-scientists that a primary obstacle in enrolling elderly patients for dementia trials has historically been getting patients to and from clinical-trial sites. Transportation is a significant issue for this patient population. Missed clinic visits lead to worse data quality and costly delays.

The newcomer to pharma drew on outside experience to envision a novel solution: forging a global partnership with Lyft. The result of providing door-to-door car service was improved enrollment, lower costs, and faster results: The 1,150-patient pivotal trialrecently completed recruitment in just 15 months, beating the industry norms for recruitment for similar studies.

However, these prescriptions for innovation at Roivant have also led to some unexpected challenges. Veteran scientists were sometimes alienated by brash newcomers who, in the words of one employee, “didn’t know what they didn’t know.” Meanwhile some of the strongest potential non-scientist recruits were deterred from joining out of concern they might not fit in or would fail in their new roles.

In response to findings from employee surveys and interviews, Vivek and his leadership team rolled out steps aimed at continuing to foster innovation while defusing latent tensions. Among the actions: an upgraded and bespoke recruitment process to screen for personalities that would be compatible with Roivant’s unusual mix of scientist and non-scientist talent, as well as a new two-month onboarding program tailored to each new hire that includes a one-hour session with Vivek to align around the company’s principles and culture.

The company also borrowed from other industries to implement an “opt in/opt out” program for new recruits. It gives recent hires the option to exit gracefully with generous severance and job search assistance if Roivant does not work for them after a three-month check-in. In response to concerns about the intense pace of the Roivant work culture, the leadership implemented a vacation policy whereby employees can take of as much time as they see fit — an approach more common in tech than pharma.

Today, Roivant has sustained its unconventional innovation climate, as reflected in a late-stage drug pipeline that rivals many more-established peers in therapeutic areas as diverse as neurology, women’s health and endocrinology, dermatology, urology, and rare diseases. At the same time, action on employee feedback has helped create a more sustainable environment and a more collaborative culture.

Some of the lessons we gleaned from this experience: bold actions on incentives, and bringing in external talent and practices are the keys to building an innovation culture. However, as with all innovation, executives must also stay alert to unanticipated negative consequences and take strong action to mitigate them. Roivant’s leaders succeeded in making it a powerful innovation engine, but then they realized that they needed to adjust the company’s culture to keep it that way.

By Vivek Ramaswamy & Ken Banta

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