Three Case Studies on Innovation Strategy
Three pharmaceutical companies — Able, Baker, and Charlie — are among the most successful pharmaceutical businesses in the world. Able and Baker are very large. Charlie is medium-sized, but growing fast. All three companies spend about the same percentage of their revenues on research. There the similarity ends. Each of them approaches research quite differently.
Charlie Company does no research. It looks for areas where a fairly simple development can give it a near-monopoly position in a small but important area.
Charlie Company does no research. All it does is develop. It will not tackle any of the products Able or Baker companies consider attractive. It looks for areas in medical and surgical practice where existing products are not doing a good job, and where a fairly simple change can greatly improve the doctor’s or surgeon’s performance. And it looks for fields that are so small that once there is a truly superior products, there is no incentive for anyone else to go in and compete.
Its first product was a simple enzyme—actually known for forty years—to make cataract operations virtually bloodless and greatly ease the eye surgeon’s job. All the work that had to be done was to find a way to extend the shelf life of the enzyme. The next product was a very simple ointment to put on the umbilical cord of infants to prevent infection and speed up healing. It has become standard in every maternity hospital throughout the world. The company later brought out a product to replace the toxic solution with which newborn babies used to be washed to prevent infection—again, primarily a matter of compounding rather than discovering. In each area, the world market is so limited—maybe to $20 million—that a single supplier, provided it offers a truly superior product, can occupy a near-monopoly position with a minimum of competition and practically no pressure on price.
ACTION POINT: Test your organization’s innovative strategy against that of Charlie Company
Management Cases
* Source: The Daily Drucker by Peter F. Drucker