How do small biotech firms “do” strategy, and how can they “do it better”?
In a nutshell this was essentially the topic of my doctoral thesis. I am a scientist-turned-bioentrepreneur and am passionately interested in the process of turning science projects into successful products and businesses. Why? Because I find the science of biotechnology fascinating, and I am excited about the promise it holds for improving the lives of individuals and populations if it can be turned from an idea into a product. And I also believe that those who take the risk and invest in these promises should be rewarded.
The biotech sector has struggled to provide attractive returns, with high rates of company failure and tens of billions of dollars of accumulated losses. The reasons for this are not clear. It may be that biotech science is not financially viable – high regulatory costs and long timelines of getting biotech products to market often overwhelm the financial returns. It may be that the timelines and risk appetite of investors are at odds with the needs of biotech firms. Or it could be that biotech firms need better business strategies to overcome these challenges.
The last suggestion is the perspective I take. When I embarked on my doctoral research, I wanted to find answers to how we can improve the process of taking an innovation, adding knowledge, reducing risk and turning it into a form that can earn a return for the owners of the innovation. Discussions about strategy in the academic literature
reminded me of the famous Indian legend and poem about the nine blind men and
the elephant. Similarly many practitioners in the biotech sector seemed
to have a partial understanding of strategy based on their individual
Earning a return on investment in biotech need not involve taking an innovation all the way through the development process to a physical product or delivered service. Often financial returns can be earned at earlier points in the value chain – for example a patent (an idea with intellectual property protection) may be licensed, or a drug that is still in clinical development may be licensed or sold, thereby earning a financial return for its owners.
Over a series of blog posts I am going to talk about how biotech firms “do” strategy – how the strategic issues that firms face shape their choice of business model, the strategic decisions and trade-offs that firms make and the implications of those choices.
Then over a further few posts I am going to suggest ways in which biotech firms can “do it better.” I’ll talk about organisational practices that support better investment strategy – the strategy that underpins getting a return to investors. I hope you’ll add your thoughts and comments as we go along, because the one thing that became obvious in my research was that no single biotech entrepreneur has all the answers. The answers are held across the community of entrepreneurs, and they have often been learned the hard way.
Upcoming posts will cover:
• The basics – defining investment strategy, business model and value chain
• The market for ideas vs product markets
• Common business models in the biotech sector (e.g. RIPCO, FIPCO, NRDO, FIPNET, VIPCO)
• How and why common business models are associated with certain types of technological innovation
• Strategic issues facing biotech start-ups and how biotech firms tend to do commercialisation strategy in this context
• Key strategic choices – what, when and how to commercialise
• What to commercialise – trade-offs and implications
• When to commercialise – trade-offs and implications
• How to commercialise – transaction mechanisms
• Organisational processes for improving investment strategy
• Amplifying value and reducing risk
Then we’ll see where we get to from there!