How is your company responding to this imperative?
In the 1990s the pharmaceutical industry was in the midst of a biotech boom. Recombinant DNA technologies and biological pharmaceuticals brought novel treatments to previously untreated conditions. For my PhD I researched the top 21 global pharmaceutical companies, who together represented a discrete strategic group. By the end of my four years of research there were 14 companies left. A flurry of merger activity between the dominant players in this industry was driven by the imperative for innovation.
A pharmaceutical patent lasts 20 years. It can take 15 years for the development required from the stage of patent registration to a final product on the market. These companies have about 5 years to make a return on the multi billion dollar capital invested in this process. Therefore, they need a steady pipeline of new patents coming through to maintain their competitive advantage. They need to remain innovative, while at the same time maintaining efficient production and distribution networks on a global scale.
These competing imperatives can be challenging to manage and one way pharmaceutical companies do this is to create strategic alliances with small start-ups and university research labs. This can be through joint-ventures, licensing arrangements or direct acquisition. What I found through my research on the performance of these companies over a ten year period, is that those companies who focused on acquisition as their key strategy grew faster in the beginning, but those who instead focused on nurturing an innovative culture from within, had more sustainable growth over the long term.
In the 1990s pharmaceuticals was an ideal example of an industry with an imperative to innovate.
Today every industry has an imperative to innovate.
How is your company responding to this imperative?
In the coming weeks my articles and blogs will focus on ways that you can build an innovative culture from within and how you can reduce the risks of innovation for your company. To receive these hot of the press, sign up for my regular newsletter here.
Striking a Chord: Why the Strategy You Internalise Is the Only Strategy You Have
Recently I attended a concert of fantastic contemporary music for choir and two pianos. There is nothing quite like watching a live concert pianist at work. For two pianists to play simultaneously and keep the harmony and rhythm in sync is very challenging, but amazing to watch when it's done well.
What you notice about professional pianists and other musicians, is that they play the music from memory. Performing great music is about more than just playing the notes. Not only have they memorised the score, but they've internalised the music, it's nuances and it's meaning, so that they can tell the composer's story with passion and energy.
When we see people perform in the business world, there's often a disconnect between what the composer has written in the score and what the player performs on the stage. Strategies and plans may be written down, but not internalised. Systems and processes may be cumbersome, overly complex and unwieldy to implement. Musicians can memorise music because music has patterns and harmonies that make sense. Music is not a random collection of disjointed notes.
Likewise, in business, your strategies and plans need to make sense. They need to be in harmony with your vision and values and clear enough for everyone to internalise. A random hotchpotch of systems and processes that don't work together or don't work towards the overall vision will never help the business progress and will inevitably be abandoned while people revert to playing the tunes they know.
If you want your business to perform at its best, you need to design your business the way a composer writes music, with an overall vision for the story to be told, with patterns and themes that fit that vision and with harmonies that make sense.
What tune are you playing?
One of the keys to sustainable growth through innovation is to divorce what you own from what you earn. Historically, wealth was linked to land ownership and he who had the most land had the most wealth and power. Kingdoms were built and wars were fought over the ownership of scarce land assets. While land still has value, it's no longer the only way to build wealth.
On a recent trip to the UK, I visited Blenheim Palace. This magnificent estate was granted to the first Duke of Marlborough by Queen Anne in the 18th Century as a reward for a great military victory. At that time such a large parcel of land brought untold wealth to its owner. Today, the Blenheim Estate is World Heritage Listed with a restoration plan over the next ten years costing in excess of 40 million British pounds. Income from tourism, venue hire and filming access helps to cover ongoing maintenance and upkeep, but charitable donations are also required.
In the 21st Century, relying on physical capital as your primary source of investment limits your potential for growth. The further you can separate the ownership of physical assets from the creation of value, the greater your growth potential. It's a bit like choosing from all the books in the library, rather than restricting your reading to the books on your own shelf.
Many of today's largest and fastest growing companies are based on platforms, rather than physical assets. You will hear it said that Uber owns no cars and AirBnB owns no property. Sometimes this is misconstrued to mean that these companies have 'no assets'. However, for these connectors, the platform is their asset. A platform is less tangible than a car or a house and therefore its growth is less constrained.
Is the way you think about your assets limiting your growth? How might you reduce these constraints and give yourself the chance to flourish?
This month I'm celebrating 15 years in my own consulting practice. In January 2004 I resigned from the job I was in at the time and set out on my own adventure. I haven't looked back. It's been exciting, challenging, rewarding and never, ever dull.
I'm often asked why I chose to make the decision at that time and what were the factors that made it right for me. Many people who might consider doing a similar thing are hampered by the potential risks. For me it was perfect timing. I was under 30, single, with no children and no mortgage. So, in many ways taking those risks was easier, as I only had to fend for myself. In the 15 years since I started my practice, I have met my husband, married my husband, bought a house and had a baby (in that order!) The factors that would go into making a similar decision at this stage of life would be very different, I think.
The other question I'm often asked is about the name of my company, Teak Yew. Where does it come from and what does it mean?
Teak and Yew are two trees, both long-living and resilient. The yew tree can live for over two thousand years. The Teak Yew logo consists of the teak leaf and the medieval long bow, which was made of yew wood.
The wood of these two trees is sought after for its valuable properties, being at once strong, yet flexible. Teak and Yew symbolise my philosophy for business strategy and growth. I take a long-term view of Strategy, looking to generate sustainable growth, rather than merely short-term gains. I recognise that building resilience for the future requires continual innovation and a creative approach. Through my work I challenge the status quo, to stimulate innovative thinking and create sustained competitive advantage for my clients.
I thank everyone who has contributed to my success on this journey and I look forward to the next 15 years!