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Bioscience Strategy

ALS 354

Dr. Jay Chok

Professor of Entrepreneurship and Strategy

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Introduction

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Jay and his family

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External

Choice of industry

Geographic location

(nation / region)

Period in history

Internal

Firms capabilities

Firms reputation / brand

Firms leadership /

culture

Examples of internal and external factors

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How to know that you have a

functioning strategy?

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Having a formula for being

above average consistently is

really hard!

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Having a formula for being above

average consistently is really hard!

Change in Forbes 100 List Over 70 Years

-80

-40

0

40

80

120

1917 1987

New FirmsOriginal

100

Firms

49 Failures

18 Survivors

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Why are successful,

enduring strategies rare?

Problem Other people are just as smart as you are.

The world changes, so no one formula lasts

forever. Implications

Formula is simple: Others will eventually

follow. Formula is complex: You may have just

gotten lucky. Luck wont save you when the

world changes.

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Why have a strategy course?

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Learn strategy to deal with challenges

presented by Life-science Industries

High degree of uncertainty in product development

Requires integration of various types of knowledge

Knowledge is tacit (i.e. hard to share)

Public policy environment

Regulatory environment

Is healthcare a product or a right?

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Course Goals

Develop the perspective of a general manager and

identify strategic issues commensurate with this

perspective.

Strengthen your ability to present your strategicarguments in a persuasive manner.

Develop diagnostic reasoning skills that will help

you determine appropriate courses of strategic

action.

Foster teamwork & professionalism

G l M

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General Management

Perspective

1. Pay attention to institutional changes in the

markets that matter to you

Rules of the game: formal rules, norms, best or

custom practices, and beliefs

E.g. Managed care & Waxman-Hatch change

how Big Pharma compete

E.g. AHS took advantage of off-shoring trends inUSA healthcare markets & EHR mandate

E.g. Teva took advantage of Waxman-Hatch to

compete in USA

G l M t

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General Management

Perspective

2.Balance between short-term & long-term

perspective

3.Often intertwined with balance between old

and new products or markets

E.g. Due to limited resources, AHS had to

decide how to balance betn

new service offerings in USA

adapting existing service offerings to sell in other

geographic markets

G l M t

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How should Teva balance old & new?

Corporate culture for blockbuster (new) differs from that

of generics (old)

If units are kept separate, why not spin off generic orinnovative?

With limited resources, how can Teva structure

innovative projects to take advantage of strategic

relationships? Israel academic scientists & marketing partner

General Management

Perspective

G l M t

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Should Teva focus mainly on generics or move

up the value chain?

Generics have reliable returns now but subject to

imitation in future

Blockbuster & biosimilars are more risky now but

may have bigger payoffs in future

Risk profits for multiple quarters or years butdont bet the farm

General Management

Perspective

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Diagnostic Reasoning Skills and the Case

Method

Diagnostic reasoning is the ability to quickly seerelationships between apparently unrelated pieces of

data, leaping to appropriate conclusions without a linear

approach.

The general manager needs business judgment, i.e.

wisdom

Too much data, not enough information.

Too little time.

This course is designed to help you past the beginner

stage of experiential learning through cases.

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How to prepare a case

Skim contents quickly

Quick reading (30 minutes)

Reflection (10 minutes)

What issues do you think may be relevant for

discussion? What information would you like to have to confirm

your hunches?

Review preparation questions (10 minutes)

Update your list of issues to investigate andinformation that you like to have.

[Sometimes relevant] Review any co-assigned or past text

excerpts, articles or lectures that you think might be

relevant. (20 minutes)

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How to prepare a case

Analysis (1 hour) Review case to uncover the answers to your questions and to

validate / invalidate your hunches / hypotheses.

Includes qualitative and quantitative analysis.

Prepare your findings for presentation (20 minutes)

Summarize your conclusions.

For each conclusion, document supporting information that could

be shared in a concise manner.

Talk over your findings with a peer or a group before class. (1015

minutes)

Total Time: 2.53 hours

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How to succeed in this course

Pursue right thinking more than right answers.

Come fully prepared for each class.

But dont stop there! Let your thinking evolve

during each class! Make connections across cases and sessions

whenever possible.

Be able to explain strategic frameworks &

concepts in your own words.

Seek help early when you dont understand the

material.

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Other

Review key items from syllabus (esp. code

of conduct)

Examples of unacceptable behavior:

Arriving late for class meetings or leaving early.

Inattention during class meetings.

Disrespectful comments or unprofessional

language.

Sakai

Minapsys

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10-minute break

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Industry Analyses

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IO View

Industrial-Organizational View

Structure-Conduct-Performance Paradigm

Industry Structure dictates firm Conduct whichdetermines firm Performance

Focuses on the industryas the primary driver

of strategy

Assumption: resources to implement strategiesare perfectly replicable

GOAL: Locate in most attractive industry

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Above Average

Returns(in Excess of the Competitive Level)

Avoid

Competition

Attractive Industry

Entry

Barriers

Low

RivalryPower over

customers &

suppliers

But rivalsresponse

could render

industry

unattractivefor entry

(Insights from

Game Theory

lecture &cases)

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Components of Industry Profitability and

Our Toolkit for Analysis

Industry

Profitability= Value Creation x Value Capture

Demand createdCost of Inputs

Ability toappropriate rewards

ConceptDefined

PIE Chart

(Potential Industry Earnings)

Porter Five-ForcesCorrespondingTool

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Value Capture Factors

Factors

Buyer Power

Supplier Power

Threat of entry

Rivalry amongst

incumbents

Industry output

Industry

Price

Level

Supplier

Mark-up

Buyers

Incumbents

Suppliers

Quantity

Price

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$

Porter 5-Forces Analysis

Rivalry amongIncumbents Buyer Power

Supplier Power

Substitutes

Threat ofEntrants

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Pharmaceutical Industry Exercise

Pick 3 out of 7 options for Big Pharma. Compare

and contrast the 3 options, evaluating the potential

pros and cons.

Be prepared to explain/defend your logic in the next class

Form small groups outside the classroom. Discuss your

arguments. Try to reach a consensus agreement on the

answer and the logic behind it.

Y b lik

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Yes, you are super-busy like

Superman but remember to

Be iClickers ready

Prepare Thursday cases

on Tuesday evening or

by Wednesday noon Finish Minapsys

questions by 5pm on

Wednesdays

Form self-study groups

(Encouraged)

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See you on Thursday