Chance, Nécessité, et Naïveté

We spent four years building the narrative for a new industrial R&D and called it World Class R&D. It was comprehensive, grounded in behavior fundamentals+, actionable, and elegant in its overall consistency. It has high explanatory value for the lack of productivity seen in today’s industrial R&D organizations.

Powell & Sandholtz obviously spent much time and effort building a narrative for the early days of Biotech for their January 2010 article Chance, Nécessité, et Naïveté: Ingredients to create a new organizational form. The consistency between the two independently developed narratives is striking. It’s not that World Class R&D took Biotech and used it as a model for its solution. Far from it.1 Instead, the characteristics of early Biotech industry deemed worthy of mention by Powell & Sandholtz have close analogs to those called out in World Class R&D. Much of our similarity in narratives comes from our common acknowledgement of the importance of melding the science and the finance for any R&D-centric enterprise: you can’t do good science without good finance, and vice versa.

Exhibit 1: Side-by-Side Comparison of Findings: Powell & Sandholtz vs. World Class R&D Institute
Powell & Sandholtz World Class R&D Institute
Innovations in Finance (Junior Common Stock, Clinical R&D Partnership, Milestone Payments) Innovations in Finance (30-70 Rule, Other People’s Money+)
Innovations in Research (Science-centric models) Innovations in Research (Mini-Clini’s, Scientific Competitive Advantage)
Innovations in Regulatory Approaches (New Regulatory Masters – CBER at the FDA) Innovations in Regulatory Approaches (Firewalls)
Innovations in Market Approaches (Eclectic Commercial Outlets) Innovations in Market Approaches (Eclectic Commercial Outlets)
Innovations in Team Membership+ (Amphibious researchers) Innovations in Team Membership (Fab Five)

See here for definitions of the above Powell & Sandholtz terms:

Powell & Sandholtz give name to the work of World Class R&D: the organizational form. This is a term not found to-date in the Institute writings. This concept is quite different from our frequently mentioned Operating Model. Organizational form is closer in intent to our sick building parable. Differences in organizational form can drive great differences in the productivity of the same men with the same money.

Organizational form is more akin to culture, but it’s culture objectified. This is how we do finance. This is how we do research. This is how we approach the market. The ‘how’ is not found in an operating manual.2 It’s an attitude. It’s a passion. Exhibit 1 illustrates ingredients typically defined by the organizational form.

A new organizational form gives shape to ‘new men’ and ‘new money’. Existing organizations often lack the organizational form needed to successfully exploit new science platforms. They often fail when attempting to import science, men or money from the outside. In World Class R&D we look for ‘new men’, ‘new money’ and a new organizational form for each of our Investible Units+.

Chance, Nécessité, et Naïveté attributes the Biotech organizational form largely to the experience and prejudices of the early players in that industry. It was often a case of not wanting to be like existing organizational forms rather than a deliberate decision to be like some particular form. As the title of their article suggests, new organizational forms were a combination of luck, need and ignorance (i.e., ignorance of how daunting were the tasks that lie ahead).

In World Class R&D, the creation of new organizational forms is planned, deliberate and informed. Our Funding Agent+ (Big Corporation) has a collection of ingredients for new organizational forms. We reach outside of industry to consider organizational forms never before seen in industrial R&D. For example; we reach into the legal sector for Trial by Jury+. This is not a Chinese Menu, but it does served as the basis for discussion to ‘unstick the thinking’ of managers in our Investible Units as they build their own organizational forms. We launch many new Investible Units and this capability, the selection of new organizational forms, is essential to the World Class R&D capability.

Amgen, Biogen, Genentech and other early Biotech players developed distinct variants of the common Biotech organizational form. We similarly demand each new Investible Unit to come up with its own unique organizational form. This is negotiated up-front with management in each new Investible Unit as part of pre-game+.

A careful reading of Chance, Nécessité, et Naïveté suggests several changes in tone for World Class R&D.

  • Staggering amounts of cash were needed to launch the nascent Biotech firms. Each Investible Unit will require comparable sums. These amounts cannot be squeezed out of today’s budgets.
  • The early Biotech industry leveraged ‘new money’ freed up in the late 1970’s from liberalization of rules governing investment of retirement funds and endowments. Portions of these funds could be invested into riskier technology ventures. World Class R&D must also seek new sources of funding: today’s funding is seized-up in today’s R&D pipelines.
  • Venture Capitalists for the industry caught the Biotech bug:
    …it occurred to me that for something of this importance, that there was enough money out there for us to do whatever we needed to do. I always viewed my role - my ultimate responsibility - was to make sure that the company didn’t run out of money. That was my job. Tom Perkins (2002). Venture Capitalist for the early biotech firm Genentech, as cited in Chance, Nécessité, et Naïveté: Ingredients to create a new organizational form

    It’s not just a matter of assuaging the anxieties of investors: it’s a matter of capturing their imagination.

Most importantly, the Powell & Sandholtz article reminds us that luck and timing are still important in industrial transformations. World Class R&D thinking must be waiting for when the market is ready.

Powell & Sandholtz note that only three of the original eleven Biotech firms analyzed as part of their study are still operating today as independent firms. There were many failures. Some argue the ‘success’ of Biotech and its organizational form are not worthy of emulation. However, launching a firm similar in success to Genentech as one of our Investible Units (among several) would have been a cause for great celebration. The intent of World Class R&D is to launch the first (few) firms within each new science platform, each with the potential to launch several blockbuster+ products. And, of course, organizational forms intended for use in World Class R&D will be much better than those used in the early days of Biotech.

There are three principle ingredients to any successful R&D-centric firm: science platform, money, and organizational form. The first two ingredients are groundless without the third. Organizational Form is seen in both narratives as integral to the success (or not) of firms operating in an industry. Without good organizational form you won’t be good at exploiting either the science platform or the money.

Editor's Picks for January, 2011

  • 1. Biotech was barely mentioned prior to 2011. See Articles by Keyword
  • 2. The operating manual has yet to be written for many of our Phase 1 firms.
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