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Q U A R T E R L YNOVEMBER 19, 2012 M A S T E R C L A S S G A L L E R Y

T H E M E S
Is preaching innovation to drug makers
Age at Work
more relevant than ever? 1
Business Legitimacy
by oubslc Innovation Tags: continuous innovation, innovation management,
Care and Organisation marketing strategy, pharmaceutical industry

Change Management
Guest blogger:
Financial Management
Ourania Koumi, The Open University Business School
Governance MBA student

Innovation A rich pipeline of potentially marketable drug compounds

is the lifeblood of the pharmaceutical industry and the
Intercultural Working
first thing that used to come to mind, when as student, I
Internationalisation was applying to companies for jobs. When I was labouring day and night
against a lab bench playing paper chase, the thought never occurred to
Leadership me that one day I would be following the advice of my academic
teachers, that is to swap a career in academia for one in a drug
Management Now
company. They warned me that any new ideas I had would have to
REEF mould into more restrictive and complex norms, depending on company
size. I would have to adapt to corporate culture less forgiving to sudden
Strategic Marketing bursts of innovative trial and error approaches to decision making. But,
the magic world of reinvested profit back into research for new drugs
Strategy
could have put the worries of any researcher for funding to rest.
Systems Thinking
Of course, in my mind, innovation was only synonymous to successful
Trust drug development.

O U B S O N I later discovered only part of this held true. It is not enough that a
T W I T T E R company needs to invest in a costly 15 years of research to decide on a
potential new drug. Marketing a newly developed compound is a bumpy
Dr Cinzia Priola asks road, not for the faint-hearted. It involves many issues; an increasingly
"Can #HR play a role demanding regulatory approval process, and a short five-year period in
in fostering workplace which the compound needs to render profit for the company before
inclusion & equality?" patent expires. All bets are on, in a rapidly changing external market
bit.ly/2wk5jhN which pushes for more at a lower cost, driven by growing generics
#genderequity competition.
#gendergap
32 minutes ago Thus, examples of innovation are contingent on dynamic market
demands.
New or returning
student at OUBS or
Optimising Research & Development (R&D) spending:
@OU_Law ? Join the
The industry has been blamed for falling behind on drug design
live, interactive
innovation 1. Small biotech companies, which are beginning to
#studenthublive17
take over from big corporations in producing high quality,
Bootcamp 2 on
innovative compounds targeting niche disease areas, do so due
Tuesday bit.ly/2jNtQuE
to their focus on science, agile decision making processes,
4 hours ago
inspired talent management and rigorous financial restraint1.
Watch introductory As one example, Vertex is on its way to marketing yet another
videos about our compound shortly after the launch of a first innovative therapy
Research into for cystic fibrosis in Europe, while partnering with GSK and
Employment, Jansen to market new Hepatitis C compounds2.
Empowerment &
Futures group #REEF At the same time, bigger companies seem to be in a state of constant
Age at Work behaviour big data Business
bit.ly/2y91woW #HR regrouping, where there is room for improvement in communication
business growth business model business
#futureofwork and in the development of the right mixture of metrics, which can boost
productivity and reduce costs. As Knott hints at in her recent HBR models Business Perspectives
22 hours ago
article last May3, one reason why R&D spending does not correlate with Business School business strategy caring
RT @StudentHubLive: market value or growth lies in the way companies fail to measure organisation change change management
Join our friends from productivity of the R&D. Even with universal, uniform and reliable communication creativity culture Culture
@OUBSchool, metrics based on Edwards Demings TQM system, Knott points out that change data David Harrison digital marketing
@OU_Law, @OUWwYP big companies will have to reduce R&D costs to make up for patent digital strategy diversity economic growth
& @OU_Sport at our erosion, while simultaneously managing for increased R&D productivity. Evan Davis event Events Finance financial
live, online and But for most, the new metrics system may actually justify greater R&D management followers Governance highlights
interactive events budgets3. While R&D spending optimisation seems to be work in HondaHR Innovation Innovation
next week! ht progress3, there are still some successful open innovation strategies like Masterclass innovative James Fleck Ken Keir
22 hours ago Mercks initiative of employee idea crowd sourcing to encourage such
Knowledge management leaders leadership
transformational innovations 3,10.
Can introducing new management marketing strategy
legitimacy
technologies in the masterclass OpenLearn Open University
Companies that are
21st Century organisation organisational change
doing better, tend to
workplace have a organisational performance pharmaceutical
follow a mixture of
dark side? How can industry political astuteness practical-applied
strategic imperatives
#HR teams avoid this? public opinion questionnaire recruitment
coupled with optimal
bit.ly/2juOuQb regulation responsibility social media sport
risk averse financial
1 day ago
management steve jobs Strategic Marketing Strategy
Follow @OUBSchool in continuous Strategy masterclass Summary report Systems
innovation, e.g. Thinkers technology technology and
polypill design or innovation The Bottom Line tough times
administering an TripAdvisor Trust video video highlights
existing compound in webinar
Is continuous innovation key to success
a new drug delivery
within the pharmaceutical industry?
system, like
Ceglenes Abraxane F O L L O W B L O G V I A
approved to treat breast and lung cancer4. E M A I L

Enter your email

Technology boosts productivity at less cost: Business
address to follow this
analytics also present a hot new technological innovation,
blog and receive
useful in contributing to cutting costs and improving
notifications of new
productivity across the value chain of new product
posts by email.
development and marketing. For example, Vertex designs
clinical trials in record time using analytical business tools to
Join 2,289 other
help minimise errors in trial design and consequently cut costs,
followers
optimising the probability of high quality end trial outcomes5.

Organisational restructuring to offset patent erosion : Enter your email address

The more successful companies have followed what
Christensen calls disruptive innovation strategy in organising a Follow
separate business unit, or independent subsidiary company, to
continue marketing their own branded generics, e.g. Novartiss
Sandoz6. In that way, although the subsidiary is functionally
and organisationally separate from the mother company, the
profits are kept in house6. A hybrid of that strategy is to
flexibly diversify business activity according to the needs of the
market, as Abbott did after buying Piramal to start selling
cheap, generic drugs in India7 .

Marketing strategy optimisation: Fast and effective new

customer segmentation and targeting can also be achieved by
the use of social media platforms, an effective way of bringing
the company closer to its customers and consumers. A social
media platform developed to inform, educate and interact with
patients was developed by Lilly & Co, which combined
YouTube, Facebook and Twitter and was launched in
September 20108, despite regulatory impediments that the
company faced. Over the last 3 years, more than 74%9 of
companies have adopted this addition to their communication
strategy, thus bridging the gap between the company and its
end-users, in the hope of drawing marketing and competitive
intelligence insights and improving corporate image.

Pipelines may have helped thus far6, but investors are not optimistic
that results may be as encouraging in 2013. It may be that under
extreme pricing pressures the innovation imperative for drug
companies in Europe and the US seems impossible to tackle, while sales
of new products hardly cover losses from patent erosion in a competing
generics market and an external environment driven by regulatory and
pricing pressures. Rather than a deviation from the classic Ansoff
framework, Nagji and Tuff10 suggest that a winning strategy may be a
combination of innovative approaches at the right equilibrium.
Managing existing drug/expiries, expanding adjacent new to the
company business, and developing new drugs covering the ever
growing epidemiological needs, especially in the emerging markets,
within the same company, may be mandatory.

Total innovation management has worked for Technology and

Telecommunications markets10. It may be the right survival tactic for
pharmaceutical companies, as just having a pipeline of new drugs, just
maintaining existing customers with face-to-face sales calls, just relying
on marketing to cover for R&D delays, or selling in just Europe or the
US, does not seem to cut it in todays drug market.

References
1. Pharma 2020: Which Path Will you Take?, (2007)
PricewaterhouseCoopers Pharmaceuticals: ConnectThinking: 1-48

2. Vertex Q3 2012; http://investors.vrtx.com/releases.cfm

3. Knott A., (2012) The trillion dollar R&D fix, HBR, May: 77-82

4. Abraxane SPC; http://www.abraxane.com/hcp/

5. http://www.accenture.com/SiteCollectionDocuments/PDF/HLSCoA.pdf

6. Novartis Q3 2012 Results;

http://www.sandoz.com/media_center/news/2012/press_releases/2012_10_25_Q3_results.shtml

7. The Economist (2012) Battling borderless bugs: Western and

emerging-market drug firms are invading each others turf, 12 Jan:
Business print edition; http://www.economist.com/node/21542410

8. Ghinn, D. (2012) Pharma gets social, Jan:

http://www.pharmaphorum.com/2012/07/17/pharma-social-lillypad-
provides-platform-lillys-corporate-engagement/

9. Cognizant Report (2012) 74% of Pharma companies have adopted

Social Media; Jan:
http://www.cognizant.com/InsightsWhitepapers/Adaptive-Social-Media-
in-Life-Sciences.pdf

10. Nagji, B. & Tuff, G. (2012) Managing your Innovation Portfolio, HBR
May: 5-11

Photo credit: Micah Taylor via photopin cc

Disclaimer: The views posted in this article are the result of personal
reflective thinking on the already published articles, analyses and
reports stated in the References; the current conclusions hypothetical
and subject to change in light of new, openly published evidence. The
author is currently an MBA student at The Open University and bears no
relationship, commercial or otherwise, with the companies mentioned,
which she has used randomly to exemplify innovation strategies.

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