Responding to a Potentially Disruptive Technology: How Big Pharma Embraced Biotechnology

What is it about?

How do incumbent firms respond over time to a potentially disruptive technology? This article documents the strategies of 12 large pharmaceutical firms over 25 years as they addressed the opportunity/threat of biotechnology. All showed awareness of biotechnology’s potential, but their response profiles varied dramatically in terms of timing (early/late) and focus (external/internal). Late movers mostly made large acquisitions to “catch up,” but early movers maintained their lead in terms of biotechnology-based drug sales and profitability, and those with a more “open” response profile performed better. This response involves a three-step process: building awareness (sensing), building capability (responding), and building commitment (scaling).

Featured Image

Why is it important?

------------------------------------------------------- Contribution to Academic Scholarship ------------------------------------------------------- We contribute to understanding of how firms respond to potentially-disruptive innovations. Rather than a two-stage "sense-response" process, we document a three-stage "sense-response-scale" process, and we identify the mechanisms through which early investment in a new technology translates into later success. ------------------------------------------------------- Contribution to Management Practice ------------------------------------------------------- All the large US and European pharmaceutical firms have sought to get into biotechnology during the last 20 years, but some have been dramatically more successful than others. We examine the patterns of activities of twelve large players, and we show how the early movers with an open approach to innovation were able to capitalize on their initial investments. We draw out some general lessons to firms in other industries on how to respond to potentially-disruptive technologies. ---------------------------- Author Perspective ---------------------------- We were fascinated by the different levels of attention put into biotechnology by the big pharma companies, and by their very different success rates in creating biotech drugs. So we undertook this detailed case-based analysis of the biggest twelve companies to try to distinguish between the winners and losers. The stakes in this industry are huge, so the findings from our study are potentially very important.