1. CULTURAL TRANSFORMATION
Beyond Operational Excellence
March 2014
Christian Houborg, Vice President
Sponsor of C.I. @ Lundbeck

2. VISION, MISSION & VALUES
2
OUR VISION OUR MISSION OUR VALUES
is to become a world leader
in psychiatry and neurology
is to improve the quality of
life of people suffering from
psychiatric and neurological
disorders
Imaginative – Dare to be different
Passionate – Never give up
Responsible – Do the right thing

3. LUNDBECK’S TRANSITION
3
FROM …
EUROPEAN
“ONE PRODUCT”
COMPANY
TO THE NEW LUNDBECK
GLOBAL GROWTH PLATFORM
• Expand in new geographic markets
A MULTIPLE PRODUCT COMPANY
• Deliver on late-stage pipeline
• Execute new product launches
• Drive growth of diversified portfolio

4. NOT FOR PROMOTIONALUSE
Lundbeck’s focus areas rank high
in terms of burden to society
Lundbeck has products within 7 of the 25 most burdensome illnesses
The world’s most burdensome illnesses
1. Cancer 14. Osteoarthritis
2. Depression and anxiety 15. Bipolar disorder
3. Ischaemic heart disease 16. Liver cimhosis
4. Cerebrovascular disease 17. Dementia
5. Chronic obstructive pulmonary disease 18. Endocrine disorders
6. Refractive errors in the eye 19. Macular degeneration
7. Hearing loss 20. Nephritis and nephrosis
8. Congential anomalies 21. Drug abuse
9. Alcohol dependence 22. Hypertensive heart disease
10. Diabetes mellitus 23. Epilepsy
11. Cataracts 24. Migraine
12. Schizophrenia 25. Rhematic heart disease
13. Asthma
*) Disability adjusted life years, Source: Lundbeck based on Global Burden of Disease 2004, WHO

5. NOT FOR PROMOTIONALUSE
WHY LUNDBECK?
5

6. THE CULTURAL TRANSFORMATION

7. 7
Ambition of Supply Operations & Engineering
In order to improve the overall competitiveness of Lundbeck
the ambition for Supply Operations & Engineering is to create:
The Best Supply Chain in
The Pharmaceutical Industry

8. NOT FOR PROMOTIONALUSE
2013
8 Years towards excellence…
Phase 1: Better for Less
Phase 2: Create Results – Together
Phase 3: Own the Future
Phase 4: Principle Driven Culture
Results: Be Ambitious and Take Action
2006
2008
2010

9. Phase 1: 2006
BETTER FOR LESS
Flow and Pull Value
Focus on Processes
Embrace Scientific Thinking
Assure Quality at the Source
Seek Perfection

10. 10
Value Stream Analysis (VSA) and Kaizen Events
Value Stream Analysis: Mapping of processes and activities across
departments (Current, Ideal and Future State)
Purpose: Create transparency and flow, visualize activities, identify what adds
value to your business – and what does not.
Bring attention to areas of improvements

11. 11
Value Stream Analysis (VSA) and Kaizen Events
EventEvent EventEvent
Kaizen Events: A group of employees across departments are dedicated for 3 -
5 days to solve a specific issue and/or constraints
Purpose: Secure continuous improvements by finding real solutions and
implementing them

12. 12
Example of a Kaizen Event
Reduction of setup time by 40%
70 Kaizen Events in 2007

13. 13
Establish Lean Support & Lean Academy
Project Organization established to facilitate Lean initiatives
All managers received training in Lean tools (mistake)
Lean Ambassador Program established to train employees in:
the ability to execute Lean events
systems
principles
tools
change management

14. 14
Implementation of Control Boards and Board
Meetings
Visualizing status, activities and results in all
departments
Short and frequent meetings with focus on
delegation of assignments

15. 15
Close link between training and learning by doing
Lean transformation was driven by events rather than daily
management
What characterized the “Better for Less” phase
Lean
Academy and
coaches
Lean Coaches as the driving force in implementing Lean
rather than Line organization

16. Phase 2: 2008
CREATE RESULTS – TOGETHER
Respect Every Individual
Lead with Humility

17. 17
What is good Leadership
Identification of:
Success stories involving good leadership
Good leadership characteristics
More than 100
carateristics
17 categories 24 behavioural
descriptions

18. 18
Developing Lundbeck Lean Leadership (3L)
Leadership Model
Lundbeck Lean Leadership
The Lean
Leadership
Foundation
Lean People
Leadership
Lundbeck
Lean
Acceleration
Sustaining
Lean
1 2 3 4
115 Leaders received 12 days training
during 2008 split on 4 modules
Personal
leadership
Relations
Business focus
Execution
Internal Leadership Program that
integrated traditional Leadership
development techniques with the
Lean principles

19. 19
Lundbeck Lean Leadership Style
Group Facilitator
”You have the
responsibility”
Bureaucratic Leader
”follow the rules”
Task manager
”This is what you need
to do and in this order”
Leadership Focus
ProcessesGeneral Management
Leadership
Style
Control
Employee
Involvement
The creator of a
Learning organization
”This is our goal: I will coach as
we go along”
A Lundbeck Lean Leader
should:
Have the combination of
detailed knowledge of the
processes and the ability
to develop the employees
Be coaching and asking
questions not giving
solutions
Learn others to learn
through their own
experiments and errors

20. 20
Two roles of the Lundbeck Lean Leader
Strategic
• Vision
• Values
• Goals
• Policy Deployment
• Innovation
• Breakthroughs
• Customer focus
Mentor
• Tolerance
• Learning
• Coaching
• Reflection
• Role model
• Challenge

21. 21
Increased Leadership commitment and motivation for Lean
Created a strong network among managers
Increased knowledge and best-practice sharing
What characterized the “CREATE RESULTS –
TOGETHER” Phase
Managers became the driving force in implementing Lean

22. 22
”Business Week referred to the program as the
Nobel prize of manufacturing because it
establishes a standard for world-class excellence”
The Shingo Prize
The Shingo Prize is awarded to organizations that demonstrate a
culture where principles of operational excellence are deeply
embedded into the thinking and behavior of all leaders, managers
and associates

23. 23
We decided to face reality
“The first responsibility of a leader is to
define reality.” – Max DePree
The Shingo Prize is a powerful way to
help your organization “tell the truth”
about itself (define reality) and know as
well as they can about where they really
are on their journey of continuous
improvement!

24. Phase 3: 2010
OWN THE FUTURE
Create Constancy of Purpose
Think Systemically

25. 25
Self-inspection based on the Shingo model
Process
All managers were trained in assessment using the principles in the
Shingo Model of Operational Excellence
Managers paired up and assessed areas outside own division
Each assessment concludes with feedback on principles and systems,
and concrete “Strengths” and “Opportunities”

26. 26
Supply Operations & Engineering
Division
Department
Team
Development of Policy Deployment
Clear link between target of
SOE and targets/activities at
division, department and
team level
Targets and activities are
prioritized across functions
and departments

27. 27
So how do we use Policy Deployments?
Supply Operations
& Engineering
Divisions
Departments
Teams
1. Top down break down
2. Bottom up review

28. 28
All About People 2011 – teams took ownership
of the Business System
Change
Readiness
Driving
Change
2006 2011

29. 29
Ideas and Improvement Boards
Idea Boards: All departments
implemented idea boards.
Structured work with a target
for number of implemented
ideas
Purpose: Improve idea
generation and
implementation. The
employees are responsible for
improving their everyday work
”We need a routine not just for doing the work, but
for continually improving the work”
Source: Liker & Rother

30. 30
First Shingo Silver Medallion in Europe

31. 31
What characterized the “OWN THE FUTURE” Phase
”Just Do It” environment
Empowered the employees to drive improvements and take
initiatives
All employees became the driving force in implementing
Lean

32. Phase 4: 2013
Principle Driven Culture

33. OWN THE FUTURE
OPERATING PRINCIPLES SOE SUPPORTING PRINCIPLES
BE AMBITIOUS AND
TAKE ACTION
CREATE RESULTS –
TOGETHER
BETTER FOR LESS
Create Constancy of Purpose
Think Systemically
Create Value for the Customer
Respect Every Individual
Lead with Humility
Flow and Pull Value
Focus on Processes
Embrace Scientific Thinking
Assure Quality at the Source
Seek Perfection

34. 2013: Monthly Living Principles Process
Extended Management
Group: Align the message
Explain in
Departments/Teams
Video: Leadership
explanation of the monthly
principle
Improvement of the Month
VP/DD/HoD/HoS/
TL
13.000 Ideas implemented in 2013

35. SOE STRATEGIC PRIORITIES 2014 - 2015
OUR VISION
is to become a world leader in psychiatry and
neurology
OUR MISSION
is to improve the quality of life of people suffering from
psychiatric and neurological disorders
OUR VALUES
Imaginative – Dare to be different
Passionate – Never give up
Responsible – Do the right thing
People We want a safe workplace with good working environment and a no blame culture. A
workplace where personal development and continuous improvements are high on the agenda.
Fundamentals : Implemented improvements, Lost time accidents
Reliability We secure high delivery performance in all areas of SOE. Throughout the supply
chain we deliver the expected output on time.
Fundamentals: Fill Rate, Stock Outs
Quality Patients and their safety depend on us making things right. We continuously pursue that
quality is built in to our processes in order to secure a robust supply chain
Fundamentals: Complaints, Recalls, Major observations
Cost We manufacture Lundbeck’s products at the lowest price possible without compromising our
high quality and supply standards.
Fundamentals: Cost of Sales, Stock Value
BETTER FOR LESS
Flow and Pull Value
Focus on Processes
Embrace Scientific Thinking
Assure Quality at the Source
Seek Perfection
OWN THE FUTURE
Create Constancy of Purpose
Think Systemically
CREATE RESULTS
– TOGETHER
Respect Every Individual
Lead with Humility
BE AMBITIOUS AND
TAKE ACTION
Create Value for the Customer
OPERATING PRINCIPLES
In order to become the best, we focus on more than mere results. The way
we act and behave in our daily life will determine whether we achieve our
ambitions or not. With Operating Principles and SOE Supporting Principles
we secure that we have the right behavior – and with the right behavior, we
improve our chances of achieving our ambition.
Launch New Products We face many new launches that are key to Lundbeck’s future
success. SOE plays a significant role in the planning and execution of the launches. In SOE we
prepare robust supply chains and launch with no delays.
Increase Productivity The production task will change dramatically in the coming years.
The forecast predicts an overall decline in volume primarily due to patent loss of Cipralex. On the
other hand the number of batches and process orders will increase due to the new product launches.
We prioritize initiatives that secure high productivity despite the more complex product portfolio.
Increase Contract Manufacturing The contract manufacturing business is
important for SOE to maximize the capacity utilization and thereby reduce fixed costs for our internal
production facilities. The external business can help us increase the turnover and cover our fixed
costs.
Reduce Spend The loss of exclusivity for Cipralex and Ebixa will decrease our revenue in the
coming years, and at the same time significant costs are needed to develop and market our new
products . In this period Lundbeck must carefully control the spend base, and in SOE we will prioritize
spend reduction initiatives.
SUCCESS FACTORS / FUNDAMENTALS MUST-WIN BATTLES
The Best Supply Chain in the Pharmaceutical Industry

36. Results
BE AMBITIOUS AND TAKE
ACTIONS
Create Value for the Customer

37. 37
Value Stream Thinking
Solution Mode
TrustLack of Trust
PEOPLE
The greatest result was overcoming the wall of:
”...a very large percentage of those we had evaluated were experts at
implementing tools of Lean but had not deeply embedded them into their culture”
Robert Miller, Executive Director of the Shingo Prize, 2010
Blame Culture
Silo Thinking

38. 38
Reliability - Delivery Performance
99,50%
99,60%
99,70%
99,80%
99,90%
100,00%
2005 2006 2007 2008 2009 2010 2011
Fill-Rate
Fill-rate

39. 39
Cost - Cost of Sales as % of revenue
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
Cost of sales as % of revenue
Excl. One-off items, trading goods & Inc.

40. 40
Quality – Diviations per batch
0
10
20
30
40
50
60
70
80
90
100
2005 2006 2007 2008 2009 2010 2011
Index on Non-Planned Deviations per Batch

41. 41
25%
16%
Pharmaceutical Industry
20%
21%
Lundbeck
Cost of Sales
percentage
R&D
percentage
Adding value to patients
Source: Future Pharma – Five Strategies to Accelerate
the Transformation of the Pharmaceutical Industry by
2020. KPMG 2010
Source: H. Lundbeck A/S Annual Report 2011

42. NOT FOR PROMOTIONALUSE
2013
8 Years towards excellence…
Phase 1: Better for Less
Phase 2: Create Results – Together
Phase 3: Own the Future
Phase 4: Principle Driven Culture
Results: Be Ambitious and Take Action
2006
2008
2010

43. QUESTIONS?

44. NOT FOR PROMOTIONALUSE
FGP set to win its OEE MWB
44
Support management in building
stronger Lean systems, thinking
and behaviour
Approach is guided by shared
commitment to ambitious business
goals

45. Linking Operating Principles to the daily work
Articulate living by the Principles
Articulate principle based behaviour
To give recognition
Living Principles 2014
Recognition of Principle Based Behavior

46. MATERIAL: RECOGNITION CARD
- FOR RECOGNITION OF GOOD BEHAVIOUR

47. Living Principles 2014 - TOOLS
Overview of the principles.
Can also be accompanied by the 10 descriptions of the
principles
Support to articulations and
discussions about the good
behaviour,
- and to recognition of it!
Support to collection of the good examples.
Can also be used to collect recognition from other teams and
employees
Support to structured recognition of the good behaviour.
Make sure relevant teams/persons recieve the recognition.
Support to the discussion about witch principles links to the
good example.
It was kind of you to help me
finalize my task even though
you had done your part..
Henrik
Anne

48. 1
What went
well since our
last meeting?
Hm…
2
What have
made you
happy?
The other day I got
help to complete my
tasks so I didn’t
have to work
overtime
Why?
What happend –
Who helped you?
Henrik helped me, he
helped me getting the
task done instead of
going home early
EXAMPLE ON RECOGNITION BASED ON LIVING PRINCIPLES
(example on how to use the Living Principles 2014)
Manager
Employee

49. 3 4
What principle(s)
relate(s) to this
behaviour?
Hm.. There are
more than one..
Which
principles
are
relevant?
At least Respect
every individual and
Think systemically
Which is the
most relevant? That must be
Respect every
individual
It was kind of you to help
me finalize my task even-
though you had done your
part..
Henrik
Anne
Please, Henrik –
This is for you!
Thanks Anne
– I had already
forgotten that 
EXAMPLE ON RECOGNITION BASED ON LIVING PRINCIPLES
(example on how to use the Living Principles 2014)