“Capital isn’t so important in business. Experience isn’t so important. You can get both these things. What is important is ideas. If you have ideas, you have the main asset you need, and there isn’t any limit to what you can do with your business and your life.” Harvey Firestone (founder of the Firestone Tire and Rubber Company)
Though self-explanatory, the above lines hold the key for a lasting competitive advantage for a firm i.e. INNOVATION. Darwinian ‘Survival of the fittest’ principle is evident in globalization and the increased competition is forcing businesses to create that unique value proposition that helps them achieve the much desired sustained competitive advantage. Organizations which differentiate themselves via ‘innovation’ across business practices and organizational boundaries are the ones that will survive and thrive.
The winds of change are blowing over the life science industry landscape too. In the rapidly evolving global economic and the healthcare environment, pharmaceutical companies are exploring opportunities beyond their boundaries to drive growth and safeguard their business from the negative market drivers such as patent cliff, pricing pressures and increase in the drug development costs among others.
The monolithic product discovery, development and commercialization model gave way to a networked operating model starting late nineties, in which an entire constellation of service providers was leveraged throughout the product lifecycles. While there is talk of an evolving business model that is more patient outcomes centered, there is still some value to be extracted from the networked operating model. “Open Innovation” seems to be the final frontier of that value creation. The central idea behind open innovation is to free the problem definition and solving process from the organizational boundaries. The concept´s essence is fairly simple – to collaborate with subject matter expertise available from academia, freelancers, niche service providers , competitors, regulators, financiers and of course, customers, The concept’s relevance is driven more by necessity than choice – pipeline productivity gaps, severe competition, macroeconomic pressures, complex healthcare microeconomics and increasingly restless shareholders. The existence of an inverse relationship between the R&D expenses and the number of successful drugs has forced the Big Pharma to question the feasibility of their current model of closed-ended innovation. In short, radical times call for radical solutions.
Open-innovation has become the need of the hour. The number of mobile, free-agent knowledge workers is increasing. Employing them through standard channels may not always be the right approach. At the same time, companies are always in a race to employ the best talent. The supply dynamics and the competition for talent necessitates collaboration models that allow sharing of scientific, clinical, commercial expertise across organizational and geographic boundaries
Some of the live examples of ‘Open innovation’ include Amyris Biotechnologies and GSK.
The synthetic biology innovator Amyris Biotechnologies collaborated with OneWorld Health & Sanofi-Aventis for the development of a technology platform for the anti-malarial drug artemesinin. This collaboration depicted a true example of ‘open innovation’ as the knowledge was equally shared among all of them with individual benefits. Amyris was responsible for its strain engineering expertise, Sanofi-aventis for fermentation & chemistry process development and OneWorld Health for the achievement of public policy and global access goals. Amyris retained the intellectual property rights for the synthetic biology processes developed for other applications and Sanofi-Aventis received the royalty-free license for the commercialization of the technology for malaria.
GlaxoSmithKline too explored the path for open-innovation and created a Centres of Excellence for External Drug Discovery (ceedd) team of about 25 people in GSK R&D. This team works across all the therapeutic areas and is responsible for the discovery & development of the drugs through partnerships with biotech firms, small or midsized pharma companies & the research institutions. Some of the successful alliances are with the companies such as the Max Planck Institute of Biochemistry (2010, Type II diabetes), OncoMed Pharma (2007, Oncology), Targacept (2007, Neurology) & Prosensa (2009, Neuromuscular & Neurodegenerative Disorders)
Hurdles abound. The companies should not forget the barriers to sowing the seeds of ‘open innovation’ e.g. probable implications on intellectual property, weak leadership and incentives for collaboration. Before its implementation the companies must also assess whether it really is required and if the answer is yes, the design of such collaboration initiatives must be aligned with the business strategy followed by a possible change in the organizational culture.
In conclusion, the drug development costs have increased and it takes time for its commercialization with no absolute rate of success. In such a complex scenario, chances still exists for the pharmaceutical companies to attain flexibility if they chose to share the intellectual property rather than hoarding it within the internal boundaries of the organization. Though the tough times might have arrived for the Big Pharma but it can hope for a glorious future if it is able to reinvent itself and leverage the value creation potential that ‘open innovation’ represents.