Wednesday, May 11, 2011

When Big Pharma Talks About "Reinvigorating Innovation". . . .

A long-time McKinsey & Co. guru has written on a theory of his, called "creative destruction" -- of corporate sacred cows. I may be a little off-kilter, but it seemed to resonate with me, as I thought about Merck -- and Pfizer, especially, of late.

That is to say that Pfizer has already set out -- down this "destruction" part of the path -- agreeing to shed businesses that are non-core. Do go read it all, in Forbes online edition, but here is a bite of it:

. . . .Q.: So how can managers improve their company’s ability to innovate? Are there rules of thumb for experimenting with budgets, or for testing new markets?

A.: Many nostrums have been out there for years. . . . [but] I’m convinced that for an existing company to innovate, they must first make the decision to get rid of something. Unless you get rid of it, it will always be more a more compelling argument to improve the old rather than commit to the new. That small decision over time adds up to a total deflection, and you are never as motivated to innovate as the unencumbered new entrant. I think this is enormously important.

Q.: What are some good examples of this?

A.: I spent a lot of time at a large healthcare company that had products in many fields. The company was doing upwards of $50 billion in annual sales. Yet for every 2 companies they bought, they had to get rid of 1 legacy business. That legacy business probably had 3 times the sales of the combined companies they purchased, and because of that they were always hungry to do something new. Creative destruction was the center of their management notion – they were going to get rid of things as a precursor to innovate. If you get rid of things, I am convinced that innovation is much easier.

On the other end of the spectrum, I ask: How did Polaroid and Kodak fail? It wasn’t that they didn’t see digital photography coming. They just couldn’t believe that the printed image was going to leave, and couldn’t pull the trigger. Could they have? Did they have the expertise? Yes. But they couldn’t get out. It wasn’t that they weren’t innovative – they were incredibly innovative, but they couldn’t pull the trigger on the destruction side. I see destruction as a precursor to innovation for an existing corporation. . . .

Do go read it all. Very provocative, as applied to big pharma's current malaise.


Anonymous said...

"...but they couldn’t pull the trigger on the destruction side"

I'm sorry for being cynical but isn't this a fancy expression of 'layoffs?'

I've commented on this in the past, IMHO this is type of pressure from WallStreet that is killing the companies.

Anonymous said...

In Oss reorganisation at Production in full swing, layoffs in progress, vacancies on critical postions not filled and organization not in place. Plan B approved bij Work Council and will be implemented july 1st. Means real R&D will be stopped, in fact it happened already.