Redesigning an Organization to Achieve ~ $1 Billion in Savings

The Obstacle

A global biotechnology company realized that it had to embrace major structural changes to achieve financial stability. The firm was amid significant portfolio changes, including patent expiry on its main product and a pivot to investment in new disease areas. Revenue had slid significantly in the previous three years.

With a new CEO at the helm, the leadership team developed a plan to get back on a growth path by shifting its resourcing away from legacy areas into new areas of growth, filling talent expertise gaps, and making the organizational structure more efficient and effective. The company engaged BCG to transform the organization and help it reduce operating expenses to free up resources that it could invest in future growth.

Our Approach

BCG developed and implemented a comprehensive org reset plan that included both labor and non-labor components. In collaboration with the company’s leaders, we designed a new operating model that refocused energy on strategic priorities, gave business units greater autonomy, and then helped the client implement a talent enhancement program to make sure it had the right leaders in place to fulfill its mission and strategy.

Our experts performed an analysis of the client’s organizational structure, which revealed:

• There were too many mid-level managers with too few direct reports—creating an environment conducive to micromanagement, inefficient decision-making, and unclear communication.
• The accumulation of organizational layers had caused labor costs to balloon far beyond other cost drivers.

BCG helped the company tackle these challenges via a clean-sheet approach that prioritized reinvention over incremental improvements and sought to streamline the entire enterprise rather than just optimize specific areas. By clarifying P&L responsibilities, we provided additional incentives for leaders to drive down costs and match resources to strategic growth initiatives. We also deployed  OrgBuilder by BCG X—our software platform that enables organizational transformation and facilitates  change management—to make sure the client could put its most capable employees where they would add the most value. This enabled hundreds of employees to work together on designing their next-gen organization. A cascading design approach empowered the leaders closest to the work to make the key decisions to drive better outcomes and achieve sustainable benefits.

The Results

In less than six months, BCG helped the biotech firm implement a new operating model that reallocates resources to areas of its business with the greatest growth potential. Already, the client’s new streamlined organizational structure has delivered nearly $1 billion in gross cost savings. At the same time, the organization has become more agile. Local leaders who are closer to patients and customers have been empowered to make decisions and move talented team members to where they can have the greatest impact.

Even as the company has embraced greater autonomy at the local level, it has improved its ability to track talent decisions centrally via a unified system that provides a single source of truth. Looking ahead, the company is well positioned to fulfill its strategic plan and pursue its growth targets. The organization has been able to reduce its structural costs by 20% while adopting a future-proofed operating model that should enable it to adapt and flourish as the market and regulatory environment evolve.