Every Industry Has an Imperative to Innovate

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?

Learn more about the smarts you need to succeed in your asset management career with my free video series.