Eli Lilly and Company: Innovation in Diabetes Care

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Eli Lilly and Company Innovation in Diabetes Care
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Which company is the worlds dominant producer of
insulin?

• Which company is a major competitior, and had
  dominance in Europe (1995)?
• Which company was building a new plant in the
  U.S. for production of insulin cartridges for its
  pen (1995)?

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• Worlds dominant producer of insulin
• Missed significnat growth opportunities in
  diabetic care products.
• Market share eroding.
• In 1995, a major competitior (Novo) had dominance
  in Europe, and is building a new plant in the
  U.S. for production of insulin cartridges for its
  pen.
• Lilly was working on its own line of insulin pen,
  hoping to reverse its decline in the worldwide
  market.

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What is the purpose of this case?
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• The purpose of this case is
• To help students identify a certain regularity in
  the patterns of product competition as markets
  mature, and
• To recognize that the basis of competition often
  evolves from functionality, to reliability, to
  convenience., and finally to price.

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• The initial shift from functionality to
  reliability is a result of product innovation
  overshooting market need.
• We can see that product performance often
  progresses at a faster pace than what the market
  is able to absorb, creating the possibility for
  markets to become over-satisfied.

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• In this condition, reliability becomes the new
  basis for competition.
• When the markets needs for reliability are
  satiated the basis of competition often shifts
  again, this time towards convenience.
• In this stage products that are disruptively
  simple and convenient become most successful.

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The Basis of Competition in the Disk Drive
Industry
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Tell us something about Eli Lilly
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Eli Lilly

• The Eli Lilly case describes the companys
  efforts to develop a series of innovative
  products and services in diabetes care.
• It invested over a billion dollars to create a
  line of genetically engineered human insulin that
  were 100 pure and structurally equivalent to
  human insulin. The markets reaction to this
  technological miracle was tepid, however, because
  it was satisfied with the insulin that were
  already available on the market.
• The case gives students the opportunity to
  explore why a very competent company could
  overshoot its market so badly. The facts lead us
  to point our finger at Lillys main customers
  (high end diabetes specialists), who provided
  misleading indications of the needs of consumers
  in the main stream market.

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Tell us something about Novo
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Novo

• In contrast to Lillys technology oriented
  struggles to innovate in this market, its main
  competitor, Novo Nordisk, introduced a line of
  insulin pens which made injection simpler and
  more convenient for patients with diabetes. The
  basis of competition in diabetes care had shifted
  towards convenience, and Novo caught the wave,
  nearly doubling its share of the insulin market.
• The reading on how the basis of competition
  shifts enables students to evaluate different
  innovative options facing Lilly, and suggests how
  Lilly can take advantage of the markets thirst
  for convenience.

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Classes of Innovation
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• Improvements in insulin,
• Delivery devices (pens and injection devices),
• Meters and technology to measure blood glucose
  levels,
• Development of products or services for education
  and behavioral change among patients with
  diabetes.

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Consumers-demand trajectory v. technology-performa
nce trajectory
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Managing Innovation

• Consumers-demand trajectory v. technology-performa
  nce trajectory when the later overshoots the
  former, dynamics of product competition shifts.
• In managing innovation, discerning when the
  technology trajectory has overshoot the market is
  very important because it heralds a change in the
  criteria that consumers use to choose amongst
  products.

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In 1995, the lions share of the cost of diabetic
care was not in insulin or other related products
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Rather, it was in the treatment of complications
caused by patients not taking care of themselves.