Innovations Management in Biotechnology A Relationship Marketing View

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Innovations Management in Biotechnology A
Relationship Marketing View

• Malin Brännback, Professor
• Åbo Akademi University

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Introduction

• This talk will be very much about innovations
  management from a customer management perspective
  i.e. a relationship view
• sometimes also understood as a stakeholder view
• both popular Nordic schools of thought
• Stakeholder Stymne and Rhenman 1964,1965
• Relationship marketing Grönroos, 1979,
  Gummesson, 1985

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Market Management

• What is the purpose of
• business
• To create a customer!
• Marketing and Innovations
• Market-oriented as opposed to production-oriented
• is not the same as being responsive to every
  fleeting whim of the customer

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Levitt (1960)

• Marketing shortchanged as a result of top
  management being wholly transfixed by the profit
  possibilities of technological RD.
• Too much attention is paid to RD.
• The realities of the market gets shortchanged.
• ..Consumers are unpredictable, varied, fickle,
  stupid, shortsighted, stubborn, and generally
  bothersome

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Levitt (1960)

• In high technology production-orientedness worked
  so well because these firms were pushing into new
  frontiers. The companies dont necessarily have
  to find, but fill markets!
• This worked well during the dot.com era too
• ..and seems to have blurred the view of some
  biotech would-be entrepreneurs

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New York Times 5.10.2003

• Why are the pipelines drying?
• Why arent drug companies, which have merged to
  become even bigger been able to capitalize on
  their mergers
• How likely is it that this will get any better?
• The entire story really speaks about managing
  relationships without actually using this word
  even once.
• Mergers, RD and the trouble of pulling it all off

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When it really is about - putting together
ACTS to make better EPISODES and better
RELATIONSHIPS
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Sometimes the world of Biotech seems like
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Biotechnology One of the Worlds oldest emerging
industries

• Most investors think Biotech is the newest whim
  on earth!
• From a historical perspective NOT SO!
• Biotechs genesis go back to some 5000 BC when
  farmers noticed that certain crop grew better in
  some conditions than others
• A follow-up took place around 1000 BC when
  farmers cross-bred the best of two breeds the
  female horse and the male donkey creating a new
  animal, the mule.
• The mule became the first genetically engineered
  species.

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Modern biotechnology

• 1950 Watson and Crick discovered the structure of
  DNA not the secret of life, but a secret of
  life
• 1973 Boyer and Cohen recombined DNA
• 1978 Eli Lilly and Genentech announce they are
  creating genetically engineered insulin
• 1980, the first IPO Genentech
• 1982, FDA approval of synthetic insulin
• 2000 first Finnish IPO Biotie Therapies
• 2001 mapping of the human genome
• ..
• ..

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Biotechnology defined

• Simply biotechnology encompasses any technique
  that employs biological systems for practical
  purpose, and by this standard the industry is
  thousands of years old!
• "New" Biotechnology the use of the cellular and
  molecular processes to solve problems or make
  products

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Lets listen to the world of biotech as told by
a BIOTECH entrepreneur -the words of an MD
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The World of the Bioentrepreneur

• The business of biotechnology is still very young
• Many who start commercial biotechnology
  enterprises are scientists
• Many entrepreneurs repeat the mistakes of their
  predecessors

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The World of the Bioentrepreneur(in the words of
one MD)

• Markets in healthcare and agriculture evolve
  rapidly
• trade globalizes and digitizes
• knowledge grows and stuns
• technology transforms
• The business models are still evolving
• Today there are some 75 profitable biotech
  companies in the world!

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Phases of a Biotech Company -Starting Out
(according to the MD)

• A budding bio-entrepreneur seeks to transform new
  scientific discoveries into viable commercial
  opportunities
• Focus business plans to achieve sustainable
  growth with changing circumstances sometimes
  without a plan
• IPR and patents are cared for more than people
• Acquisition of business and managerial acumen
  when there is time

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Phases of a Biotech company Growing Pains

• Considering a public listing.
• Attracting and retaining personnel.
• Forging strong relationships with corporate
  partners.
• Managing risk.
• Preparing for clinical development.
• Facing institutional investors resistant to
  providing funds for biotechnology companies with
  low valuations and a lack of liquidity.

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Phases of a Biotech Company - Maturity

• Companies that are publicly listed and have
  products nearing approval
• Face the challenge of turning bottom-lines black
• Public relations strategies
• Cultural problems

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Drug Development Process a flowchart of
relationships
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Discovery to Market Process(a technology-based
view)
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Sharing the income in the pharmaceutical business
reasons for focusing on relationships
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What is wrong here?
What is missing?
Where is the customer? The relationships??
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Fundamental Terminology
MARKET
The set of all actual and potential buyers of a
product
POTENTIAL MARKET
The set of consumers who profess a sufficient
level of interest in the market offer
AVAILABLE MARKET
The set of consumers who have interest, income,
and access to a particular market offer
TARGET MARKET
The part of the available market the company
decides to pursue
MARKET DEMAND
The total volume of a product that would be
purchased by a defined customer group in a
defined geographical area in a defined time
period in a defined marketing environment under a
defined marketing program
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Relationship Marketing according to The Nordic
School of thought

• originated out of service marketing applied to
  B-to-B
• offers a process view of consumption
• is an analytical tool
• puts the customer in the centre

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The relationship view

• Implicitly builds on Drucker but also the notion
  of value chains (Porter)
• Accordingly
• A customer is a customer even between
  transactions

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What is significantly different with this approach

• Yes, the view of consumption
• Outcome consumption is changed to
• Process consumption which partially is due to
  the fact that services are produced and consumed
  simultaneously
• Well how does this occur then?

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Process consumption
process consumption
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Basic elements of RM
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D
I
D
Dialogue process
I
Interaction process
Public Relations activities
Sales activities
Episodes in an interaction process including a
number of acts
Mass Communication activities
Direct Communication activities
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Value system
The direction of transaction-based value creation
The two-way value process within a relationship
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The Value Proposition
Technology Product
Market
Value Proposition
Problem
Benefits
Management
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Drug Development Process
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Relationships in networks!
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Academic Research Community
Knowledge Network Gap
SME
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A relationship view - conclusions

• Allows for identifying and managing act,
  episodes, sequences, and ultimately the very
  complex network of relationships
• The disintegrated drug development model is a
  model of these pieces it become essential to
  understand the relevant business models from a
  relationship point of view