The original posting of this article is here.
Be sure to check on the current issue of Explode Your Paradigm here.
I had lunch with a friend from my “Spinning” class recently. He had worked as an engineer for RCA Records in the late 60’s / early 70’s. RCA paid for him to go to law school at night. He received a law degree from Indiana University in 1974 and went to work as a patent counsel for RCA & GE Consumer Electronics. In 1987 GE sold the consumer electronics division and the RCA brand to Thomson Consumer Electronics. He eventually rose to become the General Counsel at Thomson and had the opportunity to live and work at their Paris headquarters for 4 years. He left Thomson in 1997 and worked for a private law firm for 10 years retiring in 1998.
What a career and story. At one point in his career my friend was in charge of managing and licensing to others hundreds of RCA patents. I remember as a child there were few companies that could hold a candle to the innovative power of RCA. I can still remember the picture of Nipper the dog staring at the gramophone with the inscription “His Master’s Voice.”
As many of us know RCA is now a shell of what it once was. Under Thomson the brand faltered, quality suffered, and competition increased.
I asked my friend, “What happened. How could a brand and a company that defined innovation fall from grace?” He explained that during the late 80’s and throughout the 90’s the company invested heavily in videodisk technology that did not pan out. It also built a lot of me-too products. Sony, Panasonic and others were developing better products at a lower price point. Brand loyalty decreased. Market share decreased. The brand (and the consumer electronics department) entered a death spiral that it could not recover. A few years ago Thomson sold the brand and products to a Chinese company.
My friend said the world changed and RCA could not keep up.
A quote that is one of my favorites is “The only thing that is constant is change.” About the only thing we can guarantee is that the world will be a different place in 5 years. In some markets it may be totally different next year or next month. It is a given the world will change and we need to keep up or we’ll found ourselves on the outside looking in like RCA.
So what should we do? What can you do now to keep your company competitive?
My advice to many clients and potential clients is to ask how do you compete? Are you (or your company) known for innovation and innovative products and services or are you a fast follower competing on price? If your company is known for innovation you need to be constantly thinking of how you can improve your products and services. You need to ask what will happen if your competition can sell their product for 50% of your price and/or the key technology that you are using to differentiate our products becomes worthless. What would happen if your customers were able to buy from you (or your competition) in a totally different way (think shopping on-line vs. going to brick and mortar stores, or think automatic downloading of movies instead of going to a video store to rent them)? How would this affect your business? How would you compete? You need to brainstorm solutions. You need to plan for change.
Sometimes the more successful we are today that harder it is to plan for change. A common argument is why spend valuable resources to improve or replace something that is working? How can you fault an executive team that is growing sales and profit?
In many cases the best time to plan for change is when things are going well.
I can guarantee that the world will change. I also guarantee that innovators in your marketplace are planning for that change. How you respond is up to you. If you are or want to be known for innovation how much of your time and budget are you spending on defining and leading your market?
Will someone say in a few years that the world changed and you could not keep up?
Until next time - all the best!
RolandB
Showing posts with label innovation. Show all posts
Showing posts with label innovation. Show all posts
Friday, July 2, 2010
Friday, April 30, 2010
Believe what they do, not what they say. Is Eli Lilly really committed to innovation?
I had lunch with Bernard Munoz recently. Bernard has worked at Eli Lilly for over 29 years. Over his career he helped run Lilly affiliates in Portugal, Austria and France while with the Elanco Animal Health group. More recently he is working as an advisor in the corporate strategy area at Lilly Corporate Center in Indianapolis.
We met at a business function a couple of weeks ago. Bernard introduced himself as a consultant in “disruptive innovation.” I worked at Lilly for over 10 years. I learned a lot about pharmaceuticals, about marketing, about how to build a business in places like Japan and Eastern Europe and about the value of a robust process. What I also learned from Lilly was that change happens slowly in a large company. The fact that Lilly now had an internal consultant tasked with to bringing change to the organization was invigorating. We agreed to meet again to discuss.
Over a plate of Greek food I learned a ton about the current happenings in the pharmaceutical industry.
Bernard has been intrigued with innovation his whole life. His passion is beginning to be noticed by others. In December 2009 he published a paper in Nature Review titled “Lessons from 60 years of pharmaceutical innovation.” He followed the number of new molecular entities (NMEs) that have been approved since 1950 and looked at the changes year to year both in the number of new entities approved and the expense to make it happen. From 1950 to 2008 the FDA has approved 1,222 new drugs. On average the number of new drugs approved each year over this period is roughly the same. In 2008 21 NMEs were approved.
He documents that over the same period the cost of developing new drugs is rising at the exponential rate of 13.5% per year. Same number of products out each year, costs rising exponentially. If nothing changes this is an unsustainable situation.
Many large pharmaceutical companies estimate they need to produce an average of 2–3 NMEs per year to meet their growth objectives. The paper states that none of them has ever approached this level of output. The historical level is close to 1 per year. Bernard’s research points out that statistically the chance to getting to this level with the current pharmaceutical industry’s business model is very low.
There have been a few spikes and troughs over the years. Bernard’s conclusion is that this may have been more a function with the number of companies with applications outstanding. The more companies, the more applications, the more approved NMEs. His paper goes on to demonstrate that M&A activity in the pharmaceutical industry actually negatively affected the number of NMEs approved. In his words 1+1=1.
Bernard argues that we need to increase the number of companies developing NMEs. A larger number of companies accelerate the acquisition of knowledge creating what economists call a spillover – an industry wide benefit that enables all companies to be more effective. He also argues that the pharmaceutical industry needs to fundamentally change the way they develop new products.
Bernard and William Chin, formerly a colleague at Lilly and now at Harvard Medical School published a paper in Science Translational Medicine also in December 2009 titled “A Call for Sharing: Adapting Pharmaceutical Research to New Realities” that points out that today’s innovation increasingly stems from the aggregation of numerous small contributions. The authors argue that companies should compete in areas that offer a viable return on investment, and share where pre-competitive collaboration helps all of us discover new therapies more efficiently and effectively. The authors issue a call for the pharmaceutical industry and governmental agencies to “join hands and intensify sharing in order to help repower pharmaceutical innovation.”
To summarize the pharmaceutical business model is broken and it needs to be fixed. This is something many of us in the industry have been discussing for years. Costs are increasing, pricing pressure is increasing causing sales revenue per NME to decline and the number of new products being developed is not keeping pace with what is required. How much longer will investors continue to support pharmaceutical research? How can we keep the engine that is driving a large section of the economy alive and well?
Bernard told me he has been getting calls from groups in industry and in government requesting information about his ideas. Momentum is growing for change.
Great news - don't you think? Well here is the rest of the story
A senior executive at Lilly told Bernard Munoz this week that his job was being eliminated as of September 7, 2010!!
It is no secret that Lilly is facing patent expirations on a number of their most popular products. The company is cutting jobs. I have friends who have left the company and others who are looking over their shoulder not knowing if their job will be there tomorrow. What concerns me is that it appears Lilly has eliminated the position of a successful executive that has made and is making a name for himself discussing how to move the pharmaceutical industry forward. Lilly could have a voice at the table and they are choosing to turn it down.
Why? I think it is much better to participate in the discussion and be a part of potential solutions rather than wonder what will happen.
John Lechleiter, the CEO of Eli Lilly and Company, in an editorial published in the Wall St. Journal on May 14, 2009 wrote “U.S.-based private industry is the heart and soul of this innovation drama, investing $58 billion in research and development for new medicines in 2007 alone…. Biomedical innovation is not incompatible with the health-care reform goals of universal access, quality improvement and cost control. On the contrary, without new, more effective medicines -- along with new devices and diagnostic tools, and better treatments and surgical techniques -- it will be impossible for larger numbers of Americans to obtain better health care at a manageable cost.”
I think Lechleiter gets the message that Munoz and Chin are preaching that industry, universities and government need to come up with creative solutions to get better medical solutions to the marketplace. I don't know if the message is flowing down to his staff. I wonder if the bureaucracy at Lilly will wise up and get it before more innovators like Bernard Munoz are forced to do their work outside of the company.
Is Lilly committed to innovation?? The proof is in what they do - not what they say.
If you would like to read either of the papers referenced above please follow the links or send me an email at rjbydlon@earthlink.net.
I am interested in your thoughts. Please comment below.
Until next time – all the best!
RolandB
We met at a business function a couple of weeks ago. Bernard introduced himself as a consultant in “disruptive innovation.” I worked at Lilly for over 10 years. I learned a lot about pharmaceuticals, about marketing, about how to build a business in places like Japan and Eastern Europe and about the value of a robust process. What I also learned from Lilly was that change happens slowly in a large company. The fact that Lilly now had an internal consultant tasked with to bringing change to the organization was invigorating. We agreed to meet again to discuss.
Over a plate of Greek food I learned a ton about the current happenings in the pharmaceutical industry.
Bernard has been intrigued with innovation his whole life. His passion is beginning to be noticed by others. In December 2009 he published a paper in Nature Review titled “Lessons from 60 years of pharmaceutical innovation.” He followed the number of new molecular entities (NMEs) that have been approved since 1950 and looked at the changes year to year both in the number of new entities approved and the expense to make it happen. From 1950 to 2008 the FDA has approved 1,222 new drugs. On average the number of new drugs approved each year over this period is roughly the same. In 2008 21 NMEs were approved.
He documents that over the same period the cost of developing new drugs is rising at the exponential rate of 13.5% per year. Same number of products out each year, costs rising exponentially. If nothing changes this is an unsustainable situation.
Many large pharmaceutical companies estimate they need to produce an average of 2–3 NMEs per year to meet their growth objectives. The paper states that none of them has ever approached this level of output. The historical level is close to 1 per year. Bernard’s research points out that statistically the chance to getting to this level with the current pharmaceutical industry’s business model is very low.
There have been a few spikes and troughs over the years. Bernard’s conclusion is that this may have been more a function with the number of companies with applications outstanding. The more companies, the more applications, the more approved NMEs. His paper goes on to demonstrate that M&A activity in the pharmaceutical industry actually negatively affected the number of NMEs approved. In his words 1+1=1.
Bernard argues that we need to increase the number of companies developing NMEs. A larger number of companies accelerate the acquisition of knowledge creating what economists call a spillover – an industry wide benefit that enables all companies to be more effective. He also argues that the pharmaceutical industry needs to fundamentally change the way they develop new products.
Bernard and William Chin, formerly a colleague at Lilly and now at Harvard Medical School published a paper in Science Translational Medicine also in December 2009 titled “A Call for Sharing: Adapting Pharmaceutical Research to New Realities” that points out that today’s innovation increasingly stems from the aggregation of numerous small contributions. The authors argue that companies should compete in areas that offer a viable return on investment, and share where pre-competitive collaboration helps all of us discover new therapies more efficiently and effectively. The authors issue a call for the pharmaceutical industry and governmental agencies to “join hands and intensify sharing in order to help repower pharmaceutical innovation.”
To summarize the pharmaceutical business model is broken and it needs to be fixed. This is something many of us in the industry have been discussing for years. Costs are increasing, pricing pressure is increasing causing sales revenue per NME to decline and the number of new products being developed is not keeping pace with what is required. How much longer will investors continue to support pharmaceutical research? How can we keep the engine that is driving a large section of the economy alive and well?
Bernard told me he has been getting calls from groups in industry and in government requesting information about his ideas. Momentum is growing for change.
Great news - don't you think? Well here is the rest of the story
A senior executive at Lilly told Bernard Munoz this week that his job was being eliminated as of September 7, 2010!!
It is no secret that Lilly is facing patent expirations on a number of their most popular products. The company is cutting jobs. I have friends who have left the company and others who are looking over their shoulder not knowing if their job will be there tomorrow. What concerns me is that it appears Lilly has eliminated the position of a successful executive that has made and is making a name for himself discussing how to move the pharmaceutical industry forward. Lilly could have a voice at the table and they are choosing to turn it down.
Why? I think it is much better to participate in the discussion and be a part of potential solutions rather than wonder what will happen.
John Lechleiter, the CEO of Eli Lilly and Company, in an editorial published in the Wall St. Journal on May 14, 2009 wrote “U.S.-based private industry is the heart and soul of this innovation drama, investing $58 billion in research and development for new medicines in 2007 alone…. Biomedical innovation is not incompatible with the health-care reform goals of universal access, quality improvement and cost control. On the contrary, without new, more effective medicines -- along with new devices and diagnostic tools, and better treatments and surgical techniques -- it will be impossible for larger numbers of Americans to obtain better health care at a manageable cost.”
I think Lechleiter gets the message that Munoz and Chin are preaching that industry, universities and government need to come up with creative solutions to get better medical solutions to the marketplace. I don't know if the message is flowing down to his staff. I wonder if the bureaucracy at Lilly will wise up and get it before more innovators like Bernard Munoz are forced to do their work outside of the company.
Is Lilly committed to innovation?? The proof is in what they do - not what they say.
If you would like to read either of the papers referenced above please follow the links or send me an email at rjbydlon@earthlink.net.
I am interested in your thoughts. Please comment below.
Until next time – all the best!
RolandB
Subscribe to:
Posts (Atom)
