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Upon leaving university in 1973, Steve Dunn was met with the all too familiar problem of what to do next. Unsure of which career field appealed to him, he was pointed in the direction of a job vacancy at chocolate and confectionery giant, Mars. “They were looking for a salesman, and with a salary of £3000 and a company car, this represented an extremely good deal at the time,” he remembers. Steve subsequently spent the next seven years working with the company in the US and the Middle East before moving onto Kraft and then Grand Metropolitan, where he served as a board director for a number of the organisation’s businesses.
Roles in the telecommunications industry, retail restaurant sector and leasing market followed for Steve as he gradually built up his knowledge and expertise in management. “The reason for that career trajectory was really because I became good at fixing problems, so large organisations would put me into an ailing company to turn it around. I quickly found that I enjoyed that and became quite good at doing it.”
The diversity of these roles and industries also taught Steve an important lesson: “I think a significant point is that business is the same wherever you go, and if you build a good management technique then the product knowledge is usually very easily learned. So you have a portable skill set in terms of the way that you can look at a business and the way you can understand what a businesses’ issues are and deal with them.
“My management skills were probably best formed at Grand Metropolitan, now Diageo. I was a board director at Grand Metropolitan companies for seven years and it was a fantastic business at that time, led by excellent people like Alan Shepherd and Ian Martin who built a very good business and an exceptionally strong management team. I found that experience incredibly invigorating and built a lot of skills that I’m still using today.”
Steve believes that working with top people throughout his career has played an integral part in his success in management. “As a business leader you have to understand that what you do sets the culture for the whole business,” he explains. “So many business leaders get this wrong, they say one thing but do another, and people tend to watch what they do and not what they say. At Grand Metropolitan there were people who said and did the same thing and it was a tough, aggressive, edgy business but we got the job done and we did it very well. I think that rubbed off on me and I have tried to build that same kind of culture here, in terms of getting a board that will walk the talk and getting a culture that is about performance and getting the job done.”
The management skills that Steve accrued in these various roles were to stand him in good stead when he joined the struggling wholesale business, AAH Pharmaceuticals in 1999. Steve found a company with a series of cultural and operational issues, as he explains: “I inherited a business that was on a downward trajectory. It was losing market share, it was losing customers, and it had lost any sense of direction. I often tell the story because I didn’t think it could still happen in 1999, but when I joined we were based up in the north-west of England and we had director’s loos, a director’s dining room and offices with ‘keep-out’ on them, which seemed to me to be completely alien to the cultures I was used to. Therefore we had to take that business, shape it and ready it for the real world.”
The first step in achieving this was a relocation of AAH’s head offices to Coventry in the West Midlands, which allowed the business to begin changing its culture, offices and to a certain extent, people.
“We also had to define a vision – what are we here for? What are we trying to do? It isn’t a particularly outstanding vision, it says that we want to be recognised as being the best provider of pharmacy supply chain management solutions in the UK, but it gave us something to focus on and a direction,” comments Steve.
The introduction of new people and management techniques along with the creation of a new board quickly followed. “From there we’re now in a position where we’ve doubled the profitability of the business, we’re growing market share in all of the key sectors as well as overall, and we supply about a third of the drugs that the NHS uses both in primary and secondary care,” he adds.
Today, as a result, AAH is a £3 billion turnover company that ships 2.6 million items to UK pharmacists every single day. This is a rate of transactions comparable to that of a bank, but it goes unseen by most people as long as what-ever they need is at their local chemist when they need it.
Steve highlights culture change as the key to this remarkable turnaround in AAH’s fortunes: “We inherited a culture that was based on fear, people were afraid to put their heads above the parapet and scared to take decisions. The business had become stagnant because of that, it couldn’t do anything, it couldn’t move. We had to remove that climate of fear, we had to encourage people to be able to express themselves and to take decisions, even if they got them wrong, and we had to allow people to express themselves.
“To address that, we got people to work together to develop the vision and values that would define our business, we got people to take on board the fact that we had to change what this business was doing otherwise the business wasn’t going to be here. We achieved that with a lot of director input, by getting a new board in and ensuring that people support words with actions right across the business.
“If you read the text books that’s what they say you should do, so it’s not innovative in that sense, but it is difficult to do and lots of businesses fail to change their cultures. I think we have definitely succeeded, we now have a very strong customer facing culture.
“I often say that what we had to do was teach an elephant to dance because the changes in our market place are so intense at the moment that you have to be extremely quick on your feet, extremely flexible and our old business wasn’t. Our new business is and that is shown in the fact that we are growing and taking business off our competitors,” he adds.
Despite their success in turning around AAH fortunes, Steve and his team have had little opportunity to rest on their laurels, with a raft of changes to the pharmaceutical market keeping them on their toes. Most recently the government has reiterated its desire for pharmacists to play a greater role in healthcare, and consequently this year has shifted the way they are paid to reduce the emphasis on dispensing and instead reimburse them for providing services. “This is a seismic change for pharmacists because they’ve never done this before,” explains Steve. “Pharmacists are not necessarily trained to deal with that kind of change and they’re certainly not trained to deal with this service provision. So, we as their key supplier, are having to develop specific solutions for this new need, including IT and protocol-type solutions, which will allow them to be able to deliver the services that the government wants and get paid for it. Individually they wouldn’t be able to do that and are already working all the hours available just to run the existing pharmacy.”
As a direct result of changes to the market like this, IT is an increasingly important area for pharmacists. In addition to the standard wholesale services it provides, AAH also develops, manufactures and sells an array of dispensing systems. The company’s 130 employees in this area of the business ensure it is continually devising beneficial IT systems for it customer base. This additional string to AAH’s bow means the organisation is effectively a wholesaler, marketing support organisation and IT support agency. “Pharmacists want a one-stop-shop, they don’t want to be hunting around trying to find where the answer is, they need someone to bring it to them. That’s what we do and is how we’ve been successful. People think wholesaling revolves around lorries and people in brown coats shifting boxes around, that’s not our business, our business is highly technology focused, highly IT based and is about providing solutions to our customers’ needs.”
Steve feels that these various changes in the pharmaceutical sector will make AAH’s role in supporting the UK’s pharmacists even more critical. “We’ll need to be a lot more proficient at providing medicines management partnership solutions for our pharmacists, helping them deliver the services that the government wants. We’ll have to expand our IT activity to achieve this, and currently we are the only supplier of IT authorised by the National Programme for IT to supply equipment to pharmacies for the new ETP protocols. We have also been working very closely with the National Programme, which is a £6 billion investment in IT in the NHS, so that the pharmacy end of that IT chain is properly specified and delivers what that programme needs it to deliver.”
Flexibility within its warehouse operations is also vital to AAH and therefore represents another area of significant investment for the business going forward. Currently carrying around 25,000 SKUs within its organisation, picking 2.6 million items a day and making 110,000 deliveries a week, AAH’s reputation is built on flexibility and excellent customer service. “If a pharmacist orders something from us we will have picked it within 40 minutes and be in a position to send that out to him. We make two deliveries a day to pharmacists, hospitals and retail, and that’s a service that I can’t see anybody else in the world offers in any other industry.”
£50 million invested
Steve continues: “Our ability to get products our to our customers fast will remain hugely important and we’re investing a lot of money at the moment in IT to make that even more flexible. Over the last five years we’ve invested approximately £50 million in re-equipping our warehouses and that’s an ongoing programme.”
Now six years on from his appointment, I asked Steve whether AAH’s success in recent times means it has met the company’s original vision. “The thing about a vision of course is that you never achieve it, it’s like a rainbow, you never get to it, but it focuses the business,” he says. “We have definitely made progress towards it, we are recognised as being a much better business than we were by our customers and we are extremely good at identifying customers’ needs and providing solutions to them.”
Steve’s role has also evolved in line with the company, as he explains: “It’s a very hands-on business but I have got some very good people and I try very hard to let them get on with what they’re good at. I see my job as three-fold really – one, setting strategy and the pace at which we move, two, dealing with government and three, flying fighter cover, letting the bombers get on with bombing the enemy, my job is to keep the bad guys away and stop the team getting distracted by things that are irrelevant.
“I continue to learn and build on my management skills even now. When you get to the top of the organisation it becomes more difficult because you tend to define the organisation. Despite this, I try to learn and evolve. The great thing about this business is that it’s very fast paced, so if you take decision you can know tomorrow whether you were right or wrong. If you were wrong you’ll know why and can learn from that,” he concludes.
VTR
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