The Story of Eli Lilly
NPD Trends and Practices Part 1 of 2 The story of Eli Lilly’s open innovation journey—how one company developed a mature model Kevin Schwartz Bret Huff Kevin Schwartz, Director, PrTM ([email protected] com), and Bret huff, VP of Chemical Products r&D, Eli Lilly and Company, ([email protected] com) Over the last decade, the giant pharmaceutical companies have moved away from their reliance on “blockbuster” drugs as a basis of earnings and toward other models.
Part of the shift has required going outside the “just invented here” Research & Development model that these corporations embraced in the past. In this article, the first of a two-part series, the authors describe how Eli Lilly moved into “open innovation”—using partnerships and alliances to find new products—and how the process has evolved to one of “mature” open innovation.
In the second part of the series, the authors will explain how to apply these techniques to other companies and industries and where leading companies may be going next with the open innovation concept. “ ver the past 15 years, Eli Lilly and Company has embraced a culture of open innovation—moving from the traditional thinking in the pharmaceutical industry (“just invented here”) to a new model that has paid big dividends and today could be considered Level 3 in the maturity model in Exhibit 1 on page 20.
Like other leaders in open innovation practices, the company has evolved an extensive and powerful network of Research & Development partnerships that adds to its internal capabilities and helps it drive new revenues and more rapEli Lilly’s senior management idly bring new products to market (see Exhibit 2 team made a conscious decision on page 21). However, open innoto invest in building a worldvation an mean many class capability for collaborative things to different people and even leading product development. ” companies vary in how they pursue the concept. As the open innovation paradigm has become more and more firmly established, a variety of models have started to evolve for describing the levels of maturity that companies move through as they adopt practices.
In this article, we’ll use the model shown in Exhibit 1, which presents three main levels of open innovation maturity: • Level 1: Externally Aware • Level 2: Fully Integrated • Level 3: Ecosystem Orchestration In Part 2 of this series, we’ll discuss in detail how this model for open innovation maturity can be applied to different companies as a guide for moving forward, what hurdles must be overcome along the way, and even where leading companies are starting to push the envelope beyond Level 3 maturity.
But in this article, we will focus on using the example of Eli Lilly and Company to bring this maturity model to life—exploring why Eli Lilly embraced open innovation, how it built its open innovation model, the stages it moved through, and the successes it has gained from it. PDMa Visions Magazine O The growth of Eli Lilly and company Eli Lilly and Company was founded in 1876. Since then, the company has grown to be the 10th largest pharmaceutical in the world. Today, it has approximately 40,000 employees around the globe and its medicines are marketed in 143 countries.
Lilly has major Research & Development facilities (R&D) in eight countries and conducts clinical trials in more than 50 countries For over 130 years, the company has created medicines that improve the health of people around the world. Lilly was the first company to mass produce penicillin and offer a number of other important medicines, such as Prozac and Zyprexa. Like most other companies in the early and mid-1900s, internal R&D was the primary driver of Lilly’s production of new medicines.
The company turns to collaborative product development However, in the early 1990s, the company’s thinking changed. In order to provide a reliable, ongoing stream of external ideas to supplement its new product pipeline, the senior management team realized it had to do more than approach partnering opportunistically. The company made a conscious decision to develop a strategy that would create a sustainable alliance management capability. This strategy included specific actions the organization needed to take in order to achieve excellence in this new endeavor.
An Office of Alliance Management headed by a new Vice President position was created with the explicit mandate to create and drive execution of this strategy. Mature Open Innovation — Eli Lilly Goes from FIPcO to FIPNET FIPcO: Fully Integrated Pharmaceutical Company FIPNET: Fully Integrated Pharmaceutical Network March 2010 19 “ The company turns toward collaborative PD Fortunately, Lilly already had a history of successful collaboration—the development of mass-produced insulin for diabetics.
This success was a strong piece of the company’s cultural history and demonstrated the power of successful external collaborations. It originated in 1921 when Dr. Frederick Banting and Charles Best, of the University of Toronto, discovered insulin as a treatment for diabetes. Unable to mass produce insulin, the University of Toronto entered into a partnership with Eli Lilly and Company to develop a manufacturing process. This collaboration was ultimately successful and led to one of the greatest products in Eli Lilly’s history, one that not only contributed to the company’s commercial success but learly served the corporate mission of improving people’s lives. More than 70 years later, the Eli Lilly management team again started looking outward. The idea was to create a reliable, ongoing stream of external ideas to supplement its new product development. But the team realized it had to do more than approach partnering opportunistically. It needed an explicit strategy that would enable the company to have a sustainable alliance management capability and define the specific actions needed to be taken to achieve excellence in this new endeavor.
Management appointed a Corporate Vice President whose mandate was to create an Office of Alliance Management to drive execution against this We believe Lilly was the strategy. This office was first organization of its kind to be staffed with experienced program managers that developed a holistic set of and leaders from across alliance management processes the global Lilly organization. We believe Lilly was and metrics. the first organization of its kind that developed a holistic set of alliance management processes and metrics and assigned individual Alliance Managers with responsibility for overseeing key partner relationships and ensuring that the goals of each alliance was met—from both Eli Lilly’s perspective and that of its partner. creation of the Office of alliance Management The investment the company made was substantial, but the commitment to cultural change was even more important than the specific resources committed.
The new Office of Alliance Management was empowered directly by the CEO and given abundant exposure throughout the company, and externally as well. As the organization started to operate, Eli Lilly publicized what they were doing, presenting at conferences and publishing various articles on their alliance management tools and methodologies. The goal of Eli Lilly was to become the “Partner of Choice”—a company that others would choose to approach first and foremost with any new drug candidates because they had a reputation for being the best firm in the industry to work with.
By widely advertising both the details of their alliance management practices and its successes, Eli Lilly helped to create its image as a Partner of Choice. Though the company did not think of it in exactly these terms, they had effectively chosen to move from an Externally Aware organization (Level 1 in the open innovation maturity model) in the mid-1990s to a Fully Integrated open innovation organization (Level 2 maturity) by the early 2000s. Three External Orientation lliance management successes The Office of Alliance Management and related corporate initiative resulted in a stream of successful product launches starting in the mid-1990’s that continues today. Lilly has demonstrated the value and strength of these partnerships through the launch of new medicines such as Byetta (with Amylin), Cialis (with ICOS), and Effient (with Daiichi Sankyo). In each of these cases, Lilly and the partner aligned their strengths, whether it was the discovery of the molecule, therapeutic area knowledge, development capabilities, or regulatory expertise to develop and launch these new medicines.
Since 1995, Lilly has launched a total of 16 new medicines, 6 of which were developed or marketed in collaboration through partnerships. Almost 10 new medicines are currently in development with partners. In addition to partnerships that directly led to the launch of new medicines, Lilly Levels The Evolution of Open Innovation—Three Levels of Maturity Exhibit 1: of Maturity Evolution also formed other types of partnerships, involving both in-licensing and out-licensing of technolLevel 3 ogies (see Exhibit 2 on Ecosystem page 21).
These partnerLevel 2 Orchestration ships helped to expand the value that Eli Lilly Fully Level 1 Business Model Is Able to could derive from its Integrated Change and Is Changed By the various technologies and Externally Marketplace Value Innovation Process were structured based on Network Aware and Business Model Are whether Lilly or the partBusiness Model and Innovation Also Tightly Linked ner was best positioned Approach Are Externally Oriented to take the end product to market. Look outside regularly for new
Internal and external R&D Business model is interconnected ideas and technologies Explicit role for suppliers and customers in innovation process Business model can be extended to adjacent markets for new growth activities are integrated with the business model Innovation roadmaps are widely shared and access is reciprocated Business model is focused on new markets and new businesses with business models of others External partners share technical and financial risks / rewards in innovation process Innovating the company’s business model is a part of the innovation task Role of Suppliers and Customers Business Model
Measuring partnership health One of the key elements of the success of Eli Lilly’s Office of Alliance Management was |2 PDMa Visions Magazine SOURCE: PRTM Management Consultants and Dr. Henry Chesbrough, UC Berkeley 20 March 2010 PDMA International 2009_What’s Next In Open Innovation—4 November 2009 | © 2009 PRTM Proprietary its consistent use of “alliance health scorecards” (see Exhibit 3 on page 22) These scorecards allow the organization to see how well a given alliance was performing across such dimensions as strategy, communications, project execution, and so forth and to monitor the changes in that performance over time.
The scorecards are developed via annual surveys involving the various internal and external stakeholders in each alliance and then communicated back to everyone involved. These scorecards and the transparency they drive has helped Eli Lilly to minimize the risks of partnerships that fail or dissolve before achieving their goals—and to establish its Partner of Choice reputation. “
Moving beyond alliance management — Taking advantage of “Technology Scouting Networks” In parallel with its Alliance Management initiative, Eli Lilly was also an early leader in another major element of open innovation – the Technology Scouting Network. In the late 1990s, a group within Eli Lilly It’s not just for pharmaceutical companies… developed an online tool Whenever business practices are discussed in the context of one to allow its researchexample company, people often ask if the practices are specific to Last year Lilly posted more ers to look outside the that industry or if they apply more broadly.
As of today, the robust company for assistance open innovation practices we’ve been discussing have been widely than 100 internal problems on specific technical (and successfully) adopted at leading companies across a wide range through the @Lilly program; more problems they were ad- of industries, geographies, and situations. In consumer products, than 80 percent of those problems dressing.
So if a Lilly re- Procter & Gamble, Unilever, GlaxoSmithKline Consumer Products, searcher was looking for and The Clorox Company have well-established open innovation were solved or significantly a molecule with specific initiatives, to name a few of the most well-publicized examples. properties, by using this Cisco Systems, IBM, and Nokia are leading examples in the highadvanced by internal experts. ” tool, he or she could post tech arena.
All of these companies have broad open innovation a “challenge” on this initiatives (though using a variety of names and terminology), online system for review by a network of individual scientists and involving various elements of Level 2 open innovation maturity, academics around the world. If anyone in the online network had generally including both active R&D partnership management and an idea for how to solve the challenge, he or she could respond technology scouting networks. and receive a cash award if the solution were accepted. Eventually, this tool