collaborative innovation in biomedicine: ibm stuart henderson

© 2010 IBM Corporation

IBM Institute for Business Value: Life Sciences

2010 Biopartnering Study: Collaborative InnovationPartnering for success in life sciences

Stuart HendersonStrategy & Transformation – Life Sciences Innovation & Growth Practice

© 2010 IBM Corporation2

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Background

This is the sixth in the series of IBM Biopartnering

studies started in 1991, covering the top 24 biotech

and pharmaceutical companies (by revenue). This

point-of-view presents analysis of 242 study

respondents, with representation across pharma,

biotech and academia

Study Objectives:

Current trends in partnering as reported by industry

(biotechs/pharmaceuticals) and academia

The biopartnering capabilities and performance of the

top 24 biopharmaceutical companies

The drivers of successful partnerships


Companies that have been primarily in the “Innovation through rigor” model are increasingly moving to “Innovation through Collaboration”

“Bottoms up” approach

Content with “leading from

behind”

Fully uses employees

Recruited for creativity

and passion

Well-stated innovation

goals for individuals

Effective stage gate

process, pilots and trials

Clear metrics of success

and failure

Environments that

allow experimentation

Generates Large number

of ideas – mainly internal

Marketplace of

ideas (16%*)

En

vir

on

me

nt

Pro

ces

sP

eo

ple

Lea

de

rsh

ip “One man show”

Leader determines direction

of innovation & selection of

ideas

Adept at the teamwork

necessary to execute

leaders’ plans

Fast implementation of select

ideas

Portfolio maps and strategic

plans to link executive vision

to daily activities

Few inter-dependencies with

outside parties

Select ideas generated and

pursued

Involved Leadership

Sets priorities, raises

urgency, and allocates

resources

Small groups dedicated

to problem-solving

Strong team culture

Fewer ideas, with strong

formal vetting process

Strong focus on cross-

functional teams for rapid

execution

Diffuse product lines

impossible for a small set

of visionary individuals to

control

Rigorous scanning

Leadership sets framework

for collaboration

Ideas generated with

partners & customers

Collaborators

Empowered to make deals

with outside vendors

Robust stage gating and

implementation mechanism

Frequent pilots and trials,

involving partners and

customers

Understanding of customer

needs and partner

participation

White space innovations

Visionary

leader (22%)Innovation through

rigor (37%)

Innovation through

collaboration (25%)

Source: IBM Innovation Archetype research and analysis

* Percentage of the S&P 500

Changing Innovation Models


Companies that partner well – Preferred Partners – are displaying stronger financial performance

Companies that were ranked high

among study respondents across 2006,

2008, and 2010 – the Preferred

Partners – had better financial

performance compared to lower ranked

companies

Preferred partners:

– Averaged the highest return on

invested capital – over 70% than

the least desirable partners

– Gaining the most points in sales

growth – 133% over the least

desired partners

0

2

4

6

8

10

12

14

16

18

20

22

24

Preferred Partners Average Partners Least Desirable

Pe

rce

nta

ge

Net Sales CAGR (%) Avg 2006-2008 ROIC (%)

Average Sales Growth and ROI vs.

Biopartnering Performance

Preferred Partners = 7 highest ranked averaged across 2006, 2008 and 2010 study results;

Average Partners: average of 6 middle ranked; Undesirable Partners: average of 7 lowest

ranked. Average of annual ROIC % from 2006-2008.

Source: ROI - WorldScope Fundamentals, Thomas Reuters, August 18, 2010.

Average across 2006, 2008 and 2010 study rankings

Biopartnering Results and Trends

Partnering is a key component to overall success


Observations & Recommendations

Key observations:

Patterns seen behind performance:

– High performers have an explicit R&D externalizing strategy and an operating model that

utilizes both internal and external collaboration

– The risers are implementing a partnering strategy, starting with a focus on the basics

– The fallers and low performers appears to be narrowing or losing focus on partnering

Recommendations:

In the future, Biopharmaceutical R&D will be heavily networked and collaborative

Companies need to:

– Put in place an R&D Operating Model that has networks of collaborations at its core

– Establish an “infostructure” that can support extensive collaborations

– Evolve their collaboration skills set to meet the demands of a networked R&D model

Biopartnering Results and Trends


Over the last three studies (2006, 2008, 2010), top ranked partners have been consistent in their performance across three key elements, deal sourcing, deal making, and partnership management

Partnership Management Top 5 Rank

2006 Rank 2008 Rank 2010 Rank

Roche Genentech AstraZeneca

Amgen Eli Lilly Roche

Genentech Novo Nordisk Eli Lilly

J&J Takeda Takeda

AstraZeneca Merck GlaxoSmithKline

Deal Sourcing Top 5 Rank


Roche Genentech Eisai

Genentech Merck Eli Lilly

Amgen GlaxoSmithKline AstraZeneca

Abbott Roche GlaxoSmithKline

Novartis Boehringer Ingelheim Roche

Deal Making Top 5 Rank


Roche Genentech Roche

Amgen Merck Eli Lilly

Eli Lilly Roche GlaxoSmithKline

Genentech Eli Lilly AstraZeneca

J&J BMS Teva

Over the past 4 years, Roche has been the most

consistently highly ranked partner across all areas

of partnering performance

AstraZeneca, Lilly and GlaxoSmithKline have also

appeared in the top 5 rankings multiple times

The exception is Genentech1 which was highly

ranked in all categories in 2006 and 2008, but failed

to make the top 5 in 2010. Study results indicate

that Genentech has been able to maintain its high

overall rank through its reputation as the leader in

innovation and talent and a strong commitment to

partnership by its leadership

Source: IBM Analysis and Silco Research, 2010

(1) For the purposes of this study, Roche and Genentech were identified as separate

companies by the respondents. The companies merged in March 2009

Results and Trends

The top 5 performers in 2010, based on the

average of all study questions, were:

1. Roche

2. Genentech

3. AstraZeneca

4. Lilly

5. GlaxoSmithKline


68%71% 70% 69%

76%70%

82% 83%87%

90%86% 84%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Trust: “Its

commitment to trust,

reliability and an

ethical approach to

partners and

stakeholders”

Leadership: “Having

a strong leadership

and a commitment to

excellence”

Innovation: “Its

commitment to

innovation internally

and across

organisational

boundaries”

People: “Having an

ability to attract,

develop and keep

talented people”

Finance: “The

strength and

consistency of its

financial

performance”

Social: “Its attention

to social

responsibility”

Lowest Performer Average across all Highest Performer

These top ranking companies also lead the industry across other individual partnership drivers

% o

f M

axim

um

Sco

re (

2010)

Source: IBM Analysis and Silco Research, 2010. Level of Importance for each driver in partnerships were scored on a 1-7 scale with

7 being the highest. Companies were rated on their performance against drivers on a 1-7 scale with 7 being the highest.

Genentech leads companies across strength and dedication in leadership, innovation and people

Results and Trends

More Important Driver Importance Less Important


Academics also largely agreed with industry respondents on the importance of the top drivers

3.08

3.24

3.71

4.81

5.12

5.85

6.08

6.08

6.31

6.35

6.64

6.71

6.77

3.57

4.57

4.13

4.42

4.14

5.45

4.74

4.86

5.65

5.34

5.56

5.44

5.75

Geographical position

Sales and marketing channels

Distribution channels

Market presence

Manufacturing capabilities

Partnership management skills

Access to intellectual property assets

Prior relationships between parties

Development expertise

Reputation

Partnering culture

Deal on offer

Scientific expertise Scientific expertise, the deal on

offer, partnering culture, reputation

and development expertise were

leading drivers among academics

and industry respondents alike,

although academics scored each

area of a greater level of

importance

Prior relationship and access to IP

ranked significantly higher for

academics

Partnership management skills,

while rated nearly the same by

academia and industry, was much

lower in relative importance for

academics

On the other hand, commercial

channels and geography were

ranked higher by industryAcademia

Industry

Source: IBM Analysis and Silco Research, 2010. Average of level of Importance for each driver in partnerships, rated on a 1-7 scale with 7 being the highest.

Results and Trends


Our research indicates three critical elements need to be in place to drive superior performance as a collaborator

Partnership

Management

Deal

Making

Deal

Sourcing

Ensure that the company is able to utilize

external R&D

1. Put in place a Strategy and Target Operating Model

for partnering with collaboration at the core

Element Recommendation

+

Ensure that the company is able to utilize

collaborations

2. Build a collaborative “infostructure” to support the

Target Operating Model

Go beyond partnering and start building

the collaboration organization of the

future

3. Experiment with and learn to use the components of

the Networked R&D model

Become a Partner of Choice … … and a Top Performing R&D Organization

Licensing

Innovation Sourcing

Mergers &Acquisitions

Enterprise R&D Collaborative R&D

Internally focused

Internal hurdles

Ingest & Transform

Science driven internal hurdles

Ingest and Co-exist

Networked R&D

Integrate into the Network

Organization

Processes

Investment criteria

Internal focus plus some external collaborations

An Innovation Network that extend beyond the

enterprise

Managed by functions

Fixed Functional (Chemistry, Tox, etc)

Fixed Therapeutic AreasPlus supporting functions

Managed by Therapeutic Areas

Managed by Projects

Flexible Project TeamsPlus select large scale support

functions

Traditional In- and Out-Licensing

Small Function

Empowered In-LicensingLarge Function

Culture

Science driven external comparative hurdles

Embedded in the Organization

Small orchestrating function

“We are the World” “We are Part of the World” “The World is our Laboratory”

Recommendations


Recommendation #1: Establish a Strategy and a Target Operating Model for R&D with collaboration at the core

Establish a Strategy and Target Operating

Model for collaboration that allows the

company to take advantage of external R&D

– An explicit strategy for collaboration is

fundamental to engaging external sources

of innovation and product opportunities

– A Target Operating Model that supports

the strategy is fundamental to

implementation

The strategy should also be backed by an

ongoing corporate commitment

– Collaborating successfully is hard and

takes an ongoing and deep organizational

commitment

Target Operating Model that Supports Partnering

Partner

Experience

Performance

Metrics

Roadmap for Implementation

Business Goals and Strategy

Target

Operating

Model

Culture

Skills,

& Capabilities

Sourcing

& Scouting

Assets &

Locations

Organization&

Governance

ProcessesTechnology

Recommendations


Recommendation #2: Build a collaborative “infostructure” to support the Target Operating Model

Recommendations

Build an infostructure to support collaborations

Utilize this system of tools fully to change how collaborations are managed

Establish the processes, organization and culture to around this infostructure

Extend the infostructure outside the enterprise

– To closely collaborate with partners

– To create a competitive advantage in sourcing and using partnerships

12

A model that sources innovation externally should be supported by a

Collaborative Infostructure

Recommendations


Recommendation #3: Start learning and implementing the fundamentals required to move to a Networked R&D model

Licensing

Innovation Sourcing

Mergers &Acquisitions

Enterprise R&D Collaborative R&D

Internally focused

Internal hurdles

Ingest & Transform

Science driven internal hurdles

Ingest and Co-exist

Networked R&D

Integrate into the Network

Increasingly Outward Focused R&D Target Operating Model(A Target Operating Model defines the best deployment of elements to achieve a strategy)

Organization

Processes

Investment criteria

Internal focus plus some external collaborations

An Innovation Network that extend beyond the

enterprise

Managed by functions

Fixed Functional (Chemistry, Tox, etc)

Fixed Therapeutic AreasPlus supporting functions

Managed by Therapeutic Areas

Managed by Projects

Flexible Project TeamsPlus select large scale support

functions

Traditional In- and Out-Licensing

Small Function

Empowered In-LicensingLarge Function

Culture

Science driven external comparative hurdles

Embedded in the Organization

Small orchestrating function

“We are the World” “We are Part of the World” “The World is our Laboratory”

No one company can support sufficient internal innovation to meet pipeline requirements

To be competitive, Pharma needs to utilize a highly networked externalized R&D model

Recommendations


Contact Details

Stuart T Henderson

[email protected]

Blog: www.pharmarandd.blogspot.com

Twitter: stuarthenderson

mailto:[email protected]

http://www.pharmarandd.blogspot.com/

collaborative innovation in biomedicine: ibm stuart henderson

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