San Francisco, CA — Daniel Seewald is the Director of Worldwide Innovation at Pfizer. He took the stage early at Digital Pharma West today to talk about the cultural conditions needed to enable breakthrough innovation and share some examples of how Pfizer is doing just that.
He started with a little reality check. Say you’re the CEO of an established pharmaceutical company and are overseeing the operating plan presentations for 2015 budget requests. You are faced with the decision of allocating $1 million of capital between a long-term speculative project and a DTC campaign for a mature brand. That long-term plan has no proven ROI; the campaign nearly guarantees you a 3:1 return.
What do you do?
That’s where innovation really collides with business decision making.
Back to Pfizer.
Companies inside and outside of pharma have different points of view about what breakthrough innovation is and certainly how to get to it.
Following Clay Christensen, Pfizer invests in three kinds of innovation:
- Sustaining innovation: It can be done right now and is close in to the business. Viagra’s online store falls in this category – it answers a new expectation without entirely reinventing the model. (Or, as our collaborator Bruce has been known to say: Sustaining innovation keeps the cannibals inside the family!)
- Adjacent innovation: It’s outside of the core, but it’s still near in to an existing business model. A great example is Novartis and Google partnership to create a glucose- monitoring contact lens.
- Breakthrough innovation: This is truly out and away from not only the core business model, but even the category. Think Google’s self-driving cars.
90% of innovation in our industry today is in that first category – sustaining innovation.
Why? Dan says, “well-managed companies rarely produce breakthroughs because they are well-managed.” They’re performance machines. They focus on efficiencies and using sustaining innovation to pay the bills now.
What does “well managed” look like on the battleground of history? Like Kodak. They had the disruptive technology of digital imagery in their pipeline in the 70s and 80s but they didn’t act on it. It would have disrupted their core product line. Instead, they waited and were quickly left behind.
The truth is it’s never a fair fight between breakthrough innovation and ongoing operations. Innovation can’t win in that game. So, we have to change the game:
- New funding mechanisms for visionary concepts: create a separate consideration line for these big new opportunities.
- New metrics: that start with a test and learn model. Just think – if the Wright brothers had to show a finished airplane for their first project, they would have never got off the ground.
- Balanced portfolio of innovation: Use the golden ratio to build a risk-balanced innovation pipeline. 70% in sustaining innovation, 20% in adjacent innovation, 10% in breakthrough.
- Change the teams: Building a team from within the same industry leads to an entrenched mindset. When everyone comes from the inside, no one is looking to the outside. Inside experts let you connect back into the organization; outsiders lets you look beyond it.
- Pick new benchmarks: When we follow each other, we end up following ourselves … in a circle.
Posted by: Leigh Householder