Evolving the Business Model
Despite the industry's emphasis on product and technology innovation, the most dramatic game changes have actually come from
business model innovation. In the early 1980s, Merck & Co. radically redesigned the industry's research development process
by focusing resources on potential blockbusters, significantly reducing developmental times and forging close relationships
with industry regulators. In just one decade, Merck's new development model resulted in eight products exceeding $100 million
in sales, twice the number of its nearest competitors. Merck transformed the industry and became a true game-maker. As a result,
it was named America's most admired company by Fortune magazine a record seven years in a row.
Pfizer changed the game again in the early 1990s using a blockbuster acquisition model. Pfizer acquired Warner-Lambert (2000)
and Pharmacia (2003) to obtain the blockbusters Lipitor and Celebrex, and supported these products with the industry's largest,
most aggressive sales force. These deals catapulted Pfizer from the industry's ninth largest company in 1990 to the world's
largest pharmaceutical company by 2003. However, the company's declining performance and its recent acquisition of Wyeth (predominantly
for newer biologic technologies) signal that the industry is ripe for the next game-changer.
There are numerous ways to generate game-changing companies, products, and competitive moves. These include:
» Embed game-changing into the corporate culture The most successful game-changing companies—from Apple to 3M—encourage, highlight, and reward novel thinking and innovative
ideas. These companies also seek to engage employees at all levels of the organization to think creatively and competitively.
For a particular business opportunity, one leading pharmaceutical company recently used "crowd sourcing" to elicit innovative
ideas over the Internet from over 15,000 global employees.
» Leverage game-changing analogues Analyzing and adapting novel approaches from other companies or industries can instigate game-changing. For example, Light
Sciences Oncology's application of light-activated cancer therapy builds upon similar models used in dermatology, such as
DUSA Pharmaceuticals' Levulan® Photodynamic Therapy for the advanced treatment of actinic keratoses.
» Conduct "game-changing sessions" Progressive companies utilize experienced consultants to facilitate brainstorming sessions at the intersection of competition
and innovation. Relying on a variety of proprietary techniques, these sessions can help to identify, prioritize, and select
game-changing solutions to gain competitive advantages.
» Create a separate business unit For established companies, creating new business models may conflict with their traditional ways of competing. Forming a separate
business unit is one way to overcome this conflict. For example, Novartis established Sandoz (as a generics company based
in Munich) separate from the corporate headquarters in Basel, and has built this division into the world's second largest
generics manufacturer. According to Novartis CEO Daniel Vasella, this unit, combined with the company's branded products,
vaccines, diagnostics, and consumer products divisions, enables the company to better serve large customers and "to offer
greater benefits to patients and healthcare providers while creating a more competitive growth platform for our complementary
» Establish game-changing partnerships Merck and AstraZeneca recently announced a unique collaboration to study two early-stage, complementary cancer agents as a
combination regimen for the treatment of solid cancer tumors. This approach could accelerate the products' development and
approval process while enhancing patient clinical outcomes.
» Acquire game-changers or game-changing technologies Roche identified and acquired Genentech for its novel biotechnologies and products.
» Perform competitive simulations Competitive Simulations, the new version of war games, often incorporate game-changing exercises that help create, test, and
validate game-changing ideas and competitive moves.
Stan Bernard is president of Bernard Associates, LLC, a pharmaceutical industry management consulting firm. He can be reached at SBernardMD@BernardAssociatesLLC.com