Reinventing the biotech manager
Reinventing the biotech manager
0 Jianming Li is a biologist at the National Cancer Institute , Washington, DC , and William E. Halal is professor of management, The George Washington University , Washington, DC , USA
Biotechnology is a high-risk, fast-moving arena that requires quite a different breed of manager for success, say Jianming Li and William E. Halal. he biotechnology industry is one of Twestern economy, and the pace at the fastest growing sectors of the which change takes place in this arena places unique demands on managers. Consequently, biotech managers must be able to create and sustain an entrepreneurial and collaborative research-based organization within a high-risk environment. These managers cannot simply imitate the management styles of other corporate practices, but must develop their own management philosophy compatible with the special nature of the biotechnology industry. This article looks at the distinctive characteristics of the biotechnology industry, and suggests an organizational structure and management philosophy desirable in biotechnology companies.
A profile of the industry
To develop a current profile of the industry,
we collected data on 414 public
biotechnology companies listed on US stock markets.
Analysis of these data produced the following
snapshot of the industry:
? Biotechnology companies are unevenly
distributed in size, but in general are
small. Although 32 companies employ
more than 500 people, 163 companies
employ fewer than 50.
? Few biotechnology companies are
profitable. The industry lost $3.5 billion during
2000. Although 97 companies were profitable
during the year 2000, 316 showed a loss.
? US biotechnology companies are
concentrated on the coasts. Most biotechnology
companies are drawn to major universities in
California and the northeastern states to
benefit from the proximity of scientific institutes,
qualified personnel, and the intellectually
stimulating environment that results.
? Biotechnology companies form alliances
with pharmaceutical companies.
Biotechnology companies need
pharmaceutical companies to gain access to capital, while
pharmaceutical companies benefit from the
entrepreneurial opportunities associated with
? Long product-development cycles make
biotechnology a capital-intensive business.
Biotechnology companies require large
infusions of capital not only to start a
venture but also to validate their technology
So, what type of management would be
best suited to an industry dependent on
talented scientists who must work for many
years at great risk to make scientific
breakthroughs and then bring the fruits of this
research to market? To answer this question,
we have drawn on key aspects of progressive,
well-performing companies such as Biogen,
Human Genome Sciences, and Immunex, all
of which practice at least some of the
principles described here. In general, a high-tech,
knowledge-based economy requires the
following conditions (see Table 1):
? an entrepreneurial research atmosphere;
? a collaborative corporate environment;
? a dominant focus on scientific values.
A new management model
Biotechnology is a costly and risky business in
which few companies can achieve the major
product breakthroughs needed for success.
Indeed, the top 3% of all biotechnology
companies produce 79% of the entire industry?s
profit?most companies operate at a loss.
Because the odds are against new
biotechnology ventures ever becoming profitable,
companies must build an organization that
tures a large number of diverse, highly
entrepreneurial efforts under one ?roof ?to
improve their chances of success. A similar
strategy is used in the publishing industry to
manage the risk of book publishing: book
publishers sell hundreds of books in several
genres in the hopes of hitting on just a few
profitable bestsellers. In both cases, pooling a
large number of small, risky ventures reduces
the overall risk to the entire corporation.
There may also be some lessons to be
learned by looking at how large
pharmaceutical companies have studied innovation in the
biotechnology sector and reorganized their
management teams to mimic it. The
bureaucracy inherent in hierarchical corporations
discourages creative research. As a
consequence, progressive pharmaceutical
companies have been re-engineering themselves so
that they can operate more like biotech
companies. For instance, Merck (Whitehouse
Station, NJ) has been rated a top Fortune 500
company because its researchers pool their
efforts and resources to carry out a diverse
range of promising projects. Merck?s former
CEO, Roy Vagelos, described the system:
?Everybody here gravitates around a hot
project. The corporation is like a living
organism.? In a similar manner, GlaxoSmithKline
(London) has said it will partition its
organization into a series of autonomous research
centers (?biotech hubs?), each focused on a
specific therapeutic area, in the hopes of
recreating a more stimulating and
In our eyes, the ideal biotechnology
company therefore should be constructed from
several small, independent teams, or research
ventures, that form spontaneously around
promising concepts. This allows the company
to pursue a variety of research avenues so that
the total risk is reduced and the chance of at
least a few ventures succeeding is increased.
Teams should be allowed almost complete
freedom to choose their goals, supporting
technology, personnel, working hours,
resources, and almost all other aspects of their
projects?exactly the same conditions in
which entrepreneurs thrive. However, because
no business can indulge researchers in
unproductive, drawn-out projects, teams must be
held accountable for either completing
specific pieces of research or developing products
that are profitable.
This important link between freedom and
accountability can be established by tying
salaries and bonuses to the success of each
team, or by offering stock options and other
profit-sharing incentives. In addition to
financial accountability, accolades from
professional colleagues and company managers
can encourage scientific personnel.
This ?bottom-up? entrepreneurial system
exhibits many of the characteristics associated
with organic life. Organic systems provide
large numbers of small, redundant units to
ensure the survival of the larger whole.
Organic business models allow employees
freedom to innovate, while competitive forces
select the most successful ideas for the
propagation of the business.
Organic research organizations are also
favorable environments for professional and
highly educated employees, who generally
prefer to work in small, self-managed teams.
Such structures also suit biotechnology
managers and scientists, many of whom are
entrepreneurs or company founders.
Biotechnology managers need to pass on this
entrepreneurial spirit to their employees,
allowing them freedom to work as they think
best while holding them accountable for the
results. (Further pointers on how to create
entrepreneurial systems can be found in the
reading list at the end of the article.)
A culture of collaboration
This decentralized, dispersed system,
however, must be carefully integrated into a
collaborative whole if it is to be effective. Without a
strong network of productive working
relations, there would be little justification for
keeping these individual ventures together in
a single organization. The total value of the
entire organization must exceed the sum of its
individual business units to offset the added
cost of managing a larger system and to drive
A strong ethos of collaboration is also
needed to integrate the company with the
various groups on which it depends for
economic, intellectual, and political resources.
Good working relations
are needed with
pharmaceutical companies, which
provide funding and
research support, and,
later in the company?s
development, with the US
Food and Drug
(Rockville, MD) and other
regulatory agencies, which
facilitate product approval. Close ties with
academic institutions must also be cultivated
to ensure, for example, access to competent
staff and cutting-edge research. Investors
should also be involved in strategic decision
making so that they feel confident their
investment is being well managed.
Hiring and retaining skilled and
committed professionals is crucial for all
biotechnology companies, and managers need to assure
staff that working conditions and
remuneration are equitable. An entrepreneurial
organization cannot pay everyone the same, but
?equitable? treatment ensures that people will
find the rules linking performance and
reward to be acceptable.
This type of enterprise is seen as a
constellation of collaborative partnerships with
stakeholder groups?a ?corporate
community.? Partners should share responsibility for
the success of the enterprise and, in return,
enjoy the right to influence decisions, realize
benefits, and have their interests recognized as
legitimate goals. Through this diverse blend
of working relationships, the interests of all
stakeholders are enhanced.
The focus is science
Biotechnology is very different from other
types of business because of its focus on
scientific discovery and product development.
In management terms, its ?core competence?
is science, rather than, for example, building
information systems (IBM), drilling for oil
(Exxon), or making pizza (Domino?s).
In business, the culture of an
organization drives its actions. We believe that to
maintain an innovative culture, biotech
management should avoid the temptation
to devote undue attention to the pursuit of
financial results, personal wealth, efficient
operations, and other goals common to
most corporations today. All those aims are
necessary, but successful biotechnology
companies should always emphasize the
value of their science and technology, the
importance of their research personnel, and
their ultimate goal of contributing to
medicine and human well-being.
The focus on scientific innovation must be
most clearly observed in the treatment of a
company?s research staff. In general,
biotechnology company employees are well-educated
professionals who are knowledgeable about
developments in their field, the scientific areas
ripe for discovery, and the gaps in the market
that need filling.
Public declaration about the value of
employees is a well-worn clich?, but in the
case of biotechnology it is true: the ability to
attract and engage sophisticated research
personnel is pivotal to the success of any
biotechnology enterprise. Brilliant leadership,
generous amounts of capital, and all of the other
accoutrements of business ultimately count
for little unless a company can harness the
creative talents of its staff. Biotechnology
managers must therefore constantly strive to create
an intellectually exciting environment that
attracts innovative researchers, offering them
wide-ranging freedom and rewards to
encourage the development of products that will
meet the challenges of a competitive market.
The new biotech manager
This profile of the ideal biotechnology
business model helps to define the newly
emerging roles of managers. Modern managers may
not make all the major decisions nor hold all
control within their organization, as
managers did in the past, but their role is no less
vital. Indeed, the modern manager must play
several roles in the new model of a
biotechnology corporation?leader, facilitator, and
As a leader, a biotechnology manager must
provide the vision needed to energize the
business and drive it to success. As a
facilitator, the manager coordinates the activities of
various teams, cultivating an environment
that encourages excellence. Finally, as a
statesperson, a manager must skillfully organize the
give and take of alliances that engage
stakeholders for the benefit of the entire corporate
community. Biotechnology straddles the
worlds of science and commerce, and so
biotechnology executives must reconcile the
demands of these two masters by assuring the
primacy of research within the context of
Many companies suffer from a serious lack
of understanding on these points. Many
biotechnology companies fail not because of
bad science, but because their management
personnel did not have the knowledge or skill
to design and guide a complex research
organization effectively. Scientists and medical
doctors skilled in their scientific fields often
know little about business and its
management, let alone the more progressive
management concepts outlined above. Although
many of these leaders are sufficiently intuitive
to become outstanding managers, formal
knowledge and training can make this path
less daunting for the heroic few, and more
successful for the average.
The leaders of biotechnology who
understand the new logic emerging from the
trenches of dynamic business will find ample
opportunities to demonstrate their talents.
Armed with a newly emerging philosophy
that recognizes the creativity of
self-organizing systems united into a collaborative
scientific community, this new breed of
biotechnology manager will lead the industry into an
era of unprecedented growth.
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