Abstract
This report analyzes why Eli Lilly and Pfizer, both well-established companies, were unsuccessful in the introduction of innovative products, the 100 percent insulin “Humulin” and the first inhaled insulin “Exubera” and why “thinking big but acting small” is significant in the need to innovate and in knowing and keeping the customer. Big companies must think outside the box by solving their customer problems, making better products and creating value.
Keywords: insulin, inhaler, customer
Thinking Big and Staying Small
Both Eli Lilly and Pfizer realized unforeseen decrease in market shares in their efforts to “enhance their technology trajectory” (Christensen, 1999) by introducing groundbreaking products in the market. For any market opportunity, validating the market appropriately and defining the products in terms of customer needs are crucial. Undoubtedly, poor planning and short-term investment horizons may have played roles in creating troubles for both companies.
To explain why these companies failed, I will explore their mistakes hopefully establishing clear grounds for conclusions and strategic business recommendations.
Mistakes Were Made
Developing Products with No Market
The Humulin-brand was technically successful. However, because of its premium price, the product had no takers. Its price was 25 percent higher compared to the animal-extracted insulin. Retailers were reluctant to add it to their crowded refrigerators of insulin products because “the market was not dissatisfied with purified pork insulin. Only a fraction of a percent with diabetes developed insulin resistance and the differentiation was not significant (Christensen, 2004).
The defeat of Exubera, on the other hand, was due to its halting sales in the market. After the drug was approved by the United States Food and Drug Administration, it never gained the acceptance of the customer. “The bulky inhaler, tricky dosing and lingering questions about side-effects in the lungs hurt the product” (Simons, 2007). Development of these insulin products was a research and development triumph and not a product that knocks into the marketplace and its customers. Influence of Stakeholders
The important influencers of Humulin were their sales representatives and physicians. The sales representatives contacted the physicians in the office to describe the advantages of the products and encouraged them to prescribe the drugs over competitors’ products.
The case of Pfizer was different. Physicians had no knowledge of the usage of the Pfizer-designed inhaler and were unwilling to train their patients. They were unhappy about the lung-function test they needed to perform on patients. Furthermore, Pfizer was unsuccessful to roll out an aggressive physician education, or a direct-to-consumer advertising effort (Simons, 2007).
Failed to Understand the Customer
Eli Lilly overshot the needs of average customers by introducing multiple similar products simultaneously in a race to be the first to market insulin products, all of which priced at a premium compared to traditional insulin products. Not too many patients were eager to use Exubera in their daily life. There were few clinical trials conducted and no insurance reimbursement was offered due to its price. These companies were opportunistic and do not know their customers well. They adopted the “ready, fire, aim” approach to build the business (Adams, 2002). Experience to uncover customer pain and envisioned solution to it were not taken. A market validation to assess customer pains was not performed. Patients of Exubera did not really care about needles nor need an inhalable insulin product.
Conclusions
These products had serious issues that “root in the Technology Adoption Life Cycle of new products” (Moore, 1999). Both companies were focused on the products alone and blamed the market for their failures. Moreover, they had serious problems with their business models that were not centered on the customer.
Recommendations
Stay Close to Customers and be Happy
In order to thrive and act as a start-up, both companies need to stay close to their customers and understand different types of pains they have. These companies need to “align their team with a common goal to resolve the customer’s pain. They should be on the same page” (Adams, 2002). At the present time, both companies viewed their customers with diabetes as one group with potential revenue. They produced products that can be used by each and every patient. Focusing more on patient groups to develop a product that can be used by each patient may be smarter. For instance, therapy for obese and elderly patients may differ due to different metabolic control of these groups. Some markets may dislike needles due to cultural or religious reasons. The fate of these products is determined by conducting market validation again and again. Close coordination with different departments of the two companies is also critical. Often, employees in research and development do not communicate with employees from other functions such as the marketing departments. They simply come up with clinical ideas, develop that product and see if it sells. Understanding the customer needs and preferences are fundamental to business success.
Ski with Your Knees Bent
From the medical point of view, inhaled insulin was a door opener in the history of science. Its fate most likely also hampered the development of all other alternative routes. We should not forget to support new routes as they need a front-runner to help needy customers. Creating a subsidiary or partnering with agile companies whose reputation stand out in this specialization may be a viable solution. I am aware that Pfizer has already a similar structure with Nektar Technologies but being open to other potential partners in the future may uncover successfully the next generation of innovative products. Clinical development may take time but I believe in the principle of downhill skiing (that is to keep your knees bent and flexible and your center of gravity low). This style enables you to patient and responsive to change – on the slope, in surface conditions or with obstacles or other skiers – and still achieve your goal of gracefully traversing the hill. Conversely, skiing with locked knees, a rigid posture and a fixed gaze is a formula for disaster. It is too easy when working in established companies to develop certain rigidities on how they approach decision-making. Most times they can get away with it by standing upright, knees locked and eyes trained straight ahead. Because established businesses necessarily develop standard operating procedures, the rigidities creep up. Keeping loose and with a low center of gravity will help in absorbing change and keeping the business on its feet. References
Adams, R. (2002). You don’t know your customer as well as you think you do. A good hard kick in the ass: Basic training for entrepreneurs. (pp.43-47). New York, NY: Random House/Crown Business.
Adams, R. (2002). Big companies need to act more like start-ups. You don’t know your customer as well as you think you do. A good hard kick in the ass: Basic training for entrepreneurs. (pp. 237-263). New York, NY: Random House/Crown Business.
Christensen, C. M. (2004, April 15). Eli Lilly and Company: Innovation in diabetes care. Harvard Business School. Boston, MA: Harvard Business School Publishing
Christensen, C.M. (1999). Value networks and the impetus to change. Innovation and the general manager. (pp. 11-24). Boston, MA:McGraw-Hill Irvin.
Simons, J. (2007, October 19). How the Exubera debacle hurts Pfizer. Fortune. http://money.cnn.com/2007/10/19/magazines/fortune/simons_pfizer_erbitux.fortune/?postversion=2007101916