July 2002 was a sombre time for many at Dr. Reddy's Labs' (DRL) drug research foundation in Hyderabad. That was when the team that had busted its guts on the discovery and development of an anti-diabetic product, got to know that the Phase III clinical trials had been aborted by DRL's licensee Novo Nordisk. Compound DRF 2725 had failed to make it past the penultimate stage of drug approval.

"DRF 2725 could have been a blockbuster drug," says a wistful Ranjan Chakrabarti, the head of the scientific team that worked on the molecule. P. Rajender Kumar, who worked on the manufacturing process, is less restrained: "It was like an unseeded guy making it to the finals of Wimbledon and losing."

That was when chairman Anji Reddy did what any good motivational leader would have done. He met and spoke to the despondent scientists. The message: "It's all part of the game." Reddy's attitude is emblematic of the culture of innovation (last fiscal DRL spent 8% of its total revenues on R&D) the top management is trying to build. "Innovation is key - you have to give them the freedom to experiment, make mistakes," says Satish Reddy, managing director and COO, DRL.
Space is something all DRL employees get.The space to express themselves and to maybe, just maybe, innovate. "It is not just scientific innovation. That itself has to be backed by the right kind of intellectual property management and legal knowledge," says Saumen Chakraborty, vice-president (human resources).

As you read this, G. Rajkumar, general manager (learning and development), is working on programmes to give the technical staff intellectual property skills as well as project management skills. Says Rajkumar: "What is amazing about this place is the way initiatives get linked to future business strategy." That strategy is the worst-kept secret in the pharma industry: make DRL a discovery-led global pharma company.

The single-minded pursuit of that goal has created a workplace where hierarchies matter little. Imran Jafar, saw this first-hand three months back when he took a bus from Bangalore to Hyderabad to meet Satish Reddy and CEO G.V. Prasad in person before making up his mind whether to join DRL after graduating from IIM-Bangalore. "The one thing that stands out about this place is the open culture. The top guys are very approachable."

This environment is leading not just to innovation in the labs (DRL has four molecules in the pre-clinical trials stage and three in clinical trials), but also to experimentation in other pockets. One example is DRL's 'S' teams: scientific advisors who went out in the field to brief doctors on issues like new molecules and new treatments.

The freedom to express themselves openly is probably what allows S. Eswaraiah, senior manager (R&D) at bulk actives unit III in Bollaram, to voice a concern shared by many old-timers. "The top guys don't have the time to listen to us like they used to earlier."

Reddy agrees that the top management has to be more visible. "There was more connection when we were a smaller business." The pressure of growing from a 2,100-employee company in 2000 to 5,062 in 2003 (as on May) may be starting to tell. How that pressure is handled could well be key to retaining the talent that DRL needs.