The Story of Eli Lilly

Flashcard maker : Lily Taylor

NPD Trends and Practices Part 1 of 2 The story of Eli Lilly‚Äôs open innovation journey‚ÄĒhow 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 ‚Äúblockbuster‚ÄĚ drugs as a basis of earnings and toward other models.

Part of the shift has required going outside the ‚Äújust invented here‚ÄĚ 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 ‚Äúopen innovation‚ÄĚ‚ÄĒusing partnerships and alliances to find new products‚ÄĒand how the process has evolved to one of ‚Äúmature‚ÄĚ 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. ‚Äú ver¬†the¬†past¬†15¬†years,¬†Eli¬†Lilly¬†and¬†Company¬†has¬†embraced¬† a¬†culture¬†of¬†open¬†innovation‚ÄĒmoving¬†from¬†the¬†traditional¬† thinking¬† in¬† the¬† pharmaceutical¬† industry¬† (‚Äújust¬† invented¬† here‚ÄĚ)¬†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‚Äôs 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. ‚ÄĚ 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‚Äôll¬† use¬† the¬† model¬† shown¬†in¬†Exhibit¬†1,¬†which¬†presents¬†three¬†main¬†levels¬†of¬†open¬† innovation¬†maturity:¬† ‚Äʬ† Level¬†1:¬†Externally¬†Aware ‚Äʬ† Level¬†2:¬†Fully¬†Integrated ‚Äʬ† Level¬†3:¬†Ecosystem¬†Orchestration In¬†Part¬†2¬†of¬†this¬†series,¬†we‚Äôll¬†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‚ÄĒexploring¬†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 ‚ÄĒ Eli Lilly Goes from FIPcO to FIPNET FIPcO: Fully Integrated Pharmaceutical Company FIPNET: Fully Integrated Pharmaceutical Network March 2010 19 ‚Äú The company turns toward collaborative PD Fortunately,¬†Lilly¬†already¬†had¬†a¬†history¬†of¬†successful¬†collaboration‚ÄĒthe¬†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‚ÄĒfrom¬†both¬†Eli¬†Lilly‚Äôs¬†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¬†‚ÄúPartner¬†of¬†Choice‚ÄĚ‚ÄĒa¬†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‚ÄĒThree 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‚Äôs¬†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‚Äôs Next In Open Innovation‚ÄĒ4 November 2009 | ¬© 2009 PRTM Proprietary its¬†consistent¬†use¬†of¬†‚Äúalliance¬†health¬†scorecards‚Ä̬†(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‚ÄĒand¬†to¬†establish¬† its¬†Partner¬†of¬†Choice¬†reputation. ‚Äú

Moving beyond alliance management ‚ÄĒ Taking advantage of ‚ÄúTechnology Scouting Networks‚ÄĚ In¬†parallel¬†with¬†its¬†Alliance¬†Management¬†initiative,¬†Eli¬†Lilly¬† was¬† also¬† an¬† early¬† leader¬† in¬† another¬† major¬† element¬† of¬† open¬† innovation¬†‚Ästthe¬†Technology¬†Scouting¬†Network. In¬†the¬†late¬†1990s,¬† a¬†group¬†within¬†Eli¬†Lilly¬† It‚Äôs not just for pharmaceutical companies‚Ķ 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. ‚ÄĚ tool,¬†he¬†or¬†she¬†could¬†post¬† tech¬† arena.

All¬† of¬† these¬† companies¬† have¬† broad¬† open¬† innovation¬† a¬† ‚Äúchallenge‚Ä̬† 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

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