Roche CEO shares five keys to successful innovation in medicine

Severin Schwan addresses MIT Sloan students at Dean’s Innovative Leader Series

November 21, 2013

Roche CEO Severin Schwan

Roche CEO Severin Schwan

The CEO of Roche—among the largest health care companies in the world—had much to say to MIT Sloan students about fostering a culture of innovation, even in the highly regulated world of pharmaceuticals. Severin Schwan’s Nov. 19 address on campus as part of the Dean’s Innovative Leader Series highlighted five elements: focus on a few guiding principles, beware of consultants and visionary leaders, celebrate failures, allow for duplication of efforts, and lead on behalf of the next generation.

Schwan began his career at the Switzerland-based Roche in 1993, rising through several positions before being named CEO in 2008. Globally, Roche is third in the world, across all industries, in spending on research and development, but Schwan’s remarks emphasized the point that fostering a culture that supports and encourages innovation is even more important than number of dollars spent.

Schwan isn’t likely to feel complimented if one were to describe him as a “visionary leader.” He raised eyebrows and no small amount of laughter from the crowd when he issued a plainspoken warning: “Beware of consultants and ‘visionary’ leaders.”

“My experience is, weak managers surround themselves with lots of consultants, advisors, mentors, coaches,” Schwan said, with the caveat that Roche uses consultants in limited ways. “It’s the weak managers who don’t know what they want. They’re insecure.”

On “visionary leaders,” he said: “They make for great stories that are told in books and on TV. I fundamentally believe that innovation, and leadership in general, by the way, doesn’t come from the top. I think it comes from the bottom up. What I prefer is to have thousands of people within the organization that follow their own passion, their own conviction, and follow their own brains. That’s how you make an innovative company.”

Schwan described innovation as a critical part of Roche’s success globally, given the cost of bringing compounds to market, the limited window of exclusivity as patents expire, and the high percentage of research and development projects that fail. In health care, he said, that failure rate is a testament to the complexity of the human body, and how much remains unknown in treating disease.

He relayed an anecdote of a researcher working on a new approach for cancer that no one believed would work. Convinced of the validity of his idea, Roche gave the scientist access to lab time over weekends. The result was Avastin, a compound effective in treating tumors that has generated $6 billion in sales.

“If you would have brought in consultants … they [would have come to the] conclusion: ‘We have to focus our resources on the most promising projects.’ I guarantee you, what you get is a kind of average conglomerate of opinions, and this Avastin project, for sure, would have been regarded as a waste of money and it would have been discarded.”

“Breakthrough innovation, very often, is going against the common opinion,” Schwan said. “If everyone had known this would work, then of course it wouldn’t be an innovation anymore. Everyone in the world would have been working on this model. As I look back, a wise decision of management at that time was that the company left open doors to innovation. And it paid off, many, many times.”

Schwan’s fifth and final point was “Lead for the future.” He gave the credit for success on his watch to the decisions of his predecessors.

“I hope that one day, a successor of mine will come back to MIT and refer to some of the contributions that I initiated,” he said.

The Dean’s Innovative Leader Series continues Monday, Feb. 10 with a talk from Mostafa Terrab, SM ’82, PhD ’90, chairman and CEO of Moroccan phosphate company OCP Group.