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Published: November 25, 2008

 
 

Beyond Borders: The Global Innovation 1000

Concurrently, over the past decade or so, there have been a number of exciting biological discoveries, such as the human genome project, the advancement of peptide-based therapeutics, and stem cell research, that have shed new light on human biology and furthered our understanding of complex diseases. The innovation potential in drug development is enormous, though highly risky. Hence the growing research interest in so-called biologics — large-molecule drugs designed to solve complex medical problems, such as cancer. Says Usama Malik, senior director of corporate strategy and innovation at Pfizer Inc.: “If you look at the top 100 drugs, somewhere between 30 and 35 percent of them are now biologics…in a few years more than 25 percent of the industry’s drug pipeline will be comprised of biologics.”

Thus, the industry is facing major changes. The patents of many blockbuster drugs will expire in the next three years, eroding tens of billions of dollars of top-line revenues. The billions of dollars poured annu­ally into innovation have returned little over the last decade. And future innovation will be driven not by scale or process, but rather by breakthrough science, a better understanding of human biology, and validation of new disease targets. Therefore, the industry’s business models and its models of R&D practice must be up­dated to fit the new realities.

According to Malik, “The industry will increasingly invest in new models that leverage the entrepreneurship seen in the smaller pure-play biotech firms that have shown higher productivity over the last decade and a half, while taking advantage of the scale and scope of Big Pharma, in development, on the regulatory front, and in the commercial markets.” These new research models bring the smartest researchers, scientists, and academics, both inside and outside the company, together in small groups — usually of fewer than 100 people — and give them the freedom to operate and to develop their culture of innovation and productivity. The ultimate goal is to enable them to develop new and meaningful drugs with better success.

To that end, Pfizer and other companies are rethinking their innovation efforts from top to bottom, splitting their research teams into smaller and more focused groups, and breaking down the barriers between internal and external research. A year ago, Pfizer founded its Biotherapeutics and Bioinnovation Center, a federation of small, cutting-edge biotech companies that maintain their own brand, culture, and operating mechanisms, while fostering strong collaboration within and outside the company. Headed by Pfizer’s Corey Goodman, the center employs a portfolio approach that Pfizer expects to build on around the world, wherever the best talent and the best science can be found.

Ultimately, of course, this shift in focus is designed to improve health — to discover new drugs in a calculated number of promising areas of medical research. In that sense, it is not unlike HP’s plan to make big bets in a few areas of technology research. The effort to globalize this process will certainly bring more new good ideas to an industry that is actively looking for them.

The Future of the Global R&D Footprint
As the evidence from these top innovation spenders shows, when corporations move to globalize their R&D efforts, there is much to gain. The research and engineering talent to be found in emerging markets is growing rapidly in sophistication, training, and skills, a trend that will accelerate as these markets become more developed. Companies seeking new sources of ideas are sure to gain from that growing talent pool. And as those emerging markets evolve and grow, they will become more attractive to companies looking to do business there. That in turn will make it incumbent on them to understand those markets and develop more products locally, if they hope to remain competitive with other global competitors as well as with increasingly sophisticated local players.

 
 
 
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Resources

  1. Vinay Couto and Arie Y. Lewin, Next Generation Offshoring: The Globalization of Innovation (Duke Center for International Business Education and Research, 2007): Examines trends in global offshoring practices and analyzes why and how companies go about globalizing innovation and seeking talent globally, and what challenges they face.
  2. Vinay Couto, Arie Lewin, Mahadeva Mani, and Vikas Sehgal, “Offshoring the Brains as Well as the Brawn,” Booz & Company/Duke Center for International Business Education and Research, July 2008: Shows how providers of outsourcing services are increasingly performing innovation work, such as new product development and R&D.
  3. Kevin Dehoff and Vikas Sehgal, “Innovators without Borders,” s+b, Autumn 2006: Provides comprehensive insight into the market for offshored engineering and technical services.
  4. Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-First Century (Farrar, Straus and Giroux, 2005): Bestseller analyzing the progress of globalization with an emphasis on geo-economic trends.
  5. Thomas Goldbrunner, Yves Doz, Keeley Wilson, and Steven Veldhoen, “The Well-Designed Global R&D Network,” s+b Resilience Report, 05/15/06: A study of cross-boundary innovation networks worldwide showing low-cost, high-value ways they can be designed.
  6. Barry Jaruzelski and Kevin Dehoff, “The Customer Connection: The Global Innovation 1000,” s+b, Winter 2007: The 2007 study, identifying two primary success factors in innovation strategy: aligning the innovation model to corporate strategy and listening to customers every step of the way.
  7. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Smart Spenders: The Global Innovation 1000,” s+b, Winter 2006: The 2006 study, uncovering a small group of high-leverage innovators who outperform their industries.
  8. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Money Isn’t Everything: The Global Innovation 1000,” s+b, Winter 2005: The 2005 study, revealing the value of an innovation dollar — and the basics of a better strategy.
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