Corporate Entrepreneurship At Glaxosmithkline Gsk

Corporate Entrepreneurship also expressed as “Intrapreneurship” a term coined by Gifford Pinchot in 1985 encompasses the entrepreneurial endeavor that takes places within an organization. Corporate Entrepreneurship in many ways is a process as well as a strategy which encourages entrepreneurial behavior within organizations that purposefully and continuously rejuvenates the organization and shapes the scope of its operation through the recognition and exploitation of entrepreneurial opportunity. (Ireland, et al. , n.d.)

This paper aims to analyze the corporate entrepreneurial structure that GlaxoSmithKline (GSK) has adopted to encourage innovation, enhance its drug pipeline, augment employee motivation, boost talent sharing and eventually drive growth and profits for the organization.

Research & Evidence

COMPANY BACKGROUND

Glaxo Welcome, which had expertise in chemistry and SmithKline Beecham, which specialized in biology and genomcis merged in the year 2000 to become the world’s second largest pharmaceutical company in the world.

Glaxo and Beecham both had history dating back to the 1800’s. Glaxo’s roots can be traced back to New Zealand, however it rose to prominence with its product, the dried infant milk powder, which became a brand leader in the UK, while Beecham’s claim to fame lied in being the world’s first factory built solely for making medicines at St Helens in England.

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“One of the key elements of Glaxo’s success has been a readiness to get things done while readily embracing change. The mergers with Welcome in 1995 and SmithKline Beecham in 2000 reflected the groups determination to remain at the forefront of scientific innovation and at the very top of a rapidly changing international pharmaceutical industry” (Sykes, 2000)

One of the leading research-based pharmaceutical and healthcare companies in the world, GSK employs over 100,000 people in 117 countries. The company’s global quest is to improve the quality of human life by enabling people to do more, feel better and live longer.

CORPORATE ENTREPRENEURSHIP @ GSK

The subject of corporate entrepreneurship is becoming popular and various articles are reporting the fusion of entrepreneurial thinking into large bureaucratic structures. And, when Micheal Porter (1990) said: “Invention and Entrepreneurship are at the heart of national advantage”, he implied two crucial things, a relationship between invention and entrepreneurship and a direct link to invention and national advantage. At GSK the importance of invention and entrepreneurship can be accessed when Jean-Pierre Garnier translated the concept of “being big and think small” by dividing GSK’s research outfit into seven Centers of Excellency Drug Discovery (CEDD) in 2001. By breaking away from the traditional model GSK revolutionized its R&D organization, resulting in one of the most impressive pipelines in the industry. These small entrepreneurial drug discovery centers had the freedom and budget to pursue opportunities that they believe will deliver the best molecules into the development portfolio. In 2003, GSK took its corporate entrepreneurial strategy further and formed the – Centre of Excellency in External Drug Discovery (CEEDD).

“Our Centre of Excellence for External Drug Discovery plays an important role in seeking out highly innovative and transformative science, and capturing a diversity of ideas and talents outside our organization. This is a key element of our strategy to externalize R&D.” Moncef Slaoui, Chairman of R&D, GSK (GSK website)

In a nutshell these sub-units applied entrepreneurial concept to external drug discovery by delivering molecules with clinical proof into the GSK late-stage development through a network of external alliances with world class biotech companies. The CEEDD is focused on gaining access to innovation in science and technology and they specialize in establishing creative and mutually beneficial deal structures to underpin strong and productive alliances.

Like Porter, Bolton and Thomson (2000) stressed the importance of creativity. To them creativity and innovation need the entrepreneurial context, including the perception of opportunity, to become a business reality. At GSK this link is best portrayed by the figure below:

ENTREPRENEURIAL ENVIRONMENT

Ability to spot

OPPORTUNITYIES

INVENTION

Ability to be

CREATIVE

INNOVATION

Source: Burns.P (2005)

SUCCESS

INNOATION PATHWAY @ GSK

CEDD research areas

Infectious disease

Metabolic pathways

Neurosciences

Respiratory

Immuno-inflammation

Biopharmaceuticals

Oncology

The drug discovery units, CEDD and CEEDD have the ability to spot opportunities. From developing molecules to medicines and forging external collaborations, the units have a focused approach.

The seven CEDD’s focus on seven research areas while the CEEDD’s look for biotechnology companies, which has the technology and capability to develop compounds matching the four focused areas of research at GSK.

Once the opportunities are spotted, identified and assessed then comes the second stage that is research and invention. The 15,000 strong dedicated scientists and the external innovators bring in their creativity and skill, which ultimately leads to invention.

CEEDD research areas (GSK consumer Health Care)

Pain Management

Healthy Living

Oral healthcare

Respiratory & Congestion

Success = Outcomes

CEDD and Vaccine market data below

Table Global Vaccines Market 2008

Source: GSK delivering a unique vaccines pipeline, GSK website

Table GSK Vaccines: Continuing Sales Growth

Source: GSK delivering a unique vaccines pipeline, GSK website

CEEDD and GSK Consumer Healthcare Market Successes

70% Launch rate

Structured and Sustainable Pipeline Process

Validated product and claim

Global Launch

Consumer Insight

3 YEARS

Superior Science

Source: GSK consumer Healthcare briefing 2008, GSK website

Scientifically superior products and claims

BRAND

CLAIM

BRAND

CLAIM

5 times faster dispersion

50% more weight loss

3 times faster delivery

25% stronger enamel

Source: GSK Consumer Healthcare Briefing – May 2009, GSK website

Theoretical Framework

After studying GSK’s entrepreneurial innovation process adopted at its R&D organisation, it becomes clear that environmental factors plays a crucial role for its success and growth. The competitive nature of the industry where both technology-push and market-pull drives change, innovation is the precipitating factor that and it is a constant. Thus the interactive model of Corporate Entrepreneuring as identified by researchers Jeffrey S. Hornsby, Douglas W. Naffziger, Donald F. Kurtako and Ray V. Montago, who believe the decision to act intrepreneurially occurs as a result of interactions among organizational characteristics, individual characteristics and some kind of precipitating event, holds true for GSK. (Kurtoko & Hodgets. 2007)

Source: Kurtako and Hodgets (2007)

GSK is a huge conglomerate and thus it is important for the company to strike a balance between its entrepreneurial initiative and some of its internal administrative and decision making processes. At GSK, the equilibrium between control and entrepreneurship has been achieved in its R&D organization and in its marketing initiatives, which can be presented by the Stephenson’s spectrum of Trustee Behavior and Promoter Behavior.

Stephenson’s spectrum

Trustee Behavior

Administrative decision making

Promoter Behavior

Entrepreneurial

Source: Entrepreneurship & Innovation Lecture module, Anglia

Analysis – application of theory to evidence

Analysis of the Interactive Model of Corporate Entrepreneuring

Organizational Characteristics: In January 2000, when Glaxo Welcome amalgamated with SmithKline Beecham at the height of the merger boom, the move was explained in visionary terms. Jean-Pierre Garnier, CEO of GSK was a big believer in innovation and promised to deliver the most cost efficient research organization in the pharmaceutical industry.

“In a big organization like this, you have to focus on the core process of a company. What is the raison d’etre? If you’re trying to discover new drugs, even though it’s complex, you have to make it as simple as possible. The way we’ve done that is unique: we decided that size was the enemy in some parts of the process. We had to define which parts of the process require size and which parts can be done pretty much in a small environment”. (Management today, 2006)

The new company thus revealed its plans to re-engineer its R&D and marketing operations. Organizing 1500 scientists across several time zones required a radical new structure, which led to the creation of small drug discovery of centers (CEDD) as per identified diseases areas, such as one for asthama, one for cancer. The Healthcare Division who works with the CEEDD units formed in 2003 also works independently with a small team, which enable quick decision making when they receive a collaboration proposal from biotech companies.

“This uniquely structured deal enables us to accelerate the progression of our pipeline, capitalize on our discovery and development expertise and leverage the resources of a premier global pharmaceutical company while retaining considerable value. The alliance also aligns with our business strategy to progress our pipeline through human proof of concept and partner selectively for late-stage development and commercialization in primary care fields.” (J. Donald deBethizy, Ph.D. Chief Executive Officer, Targacept, Inc. )

On the marketing front, GSK achieved corporate control and uniformity as well as capitalized on global reach though its alliance partners across the world as marketing partnerships were the only way to enter some markets.

At GSK, the company is committed to rewarding developing and retaining talent. The company’s global Performance and Development process (PDP) helps employees at every stage of their career. And, a CEEDD partnership gives collaboration to compounds an increased chance to reach their full potential and provides public validation for the collaborating company and its technology platform.

“Creativity is fostered in the best work environments. Our aim is that GSK workplaces empower our people to be creative and innovative in their work, for the benefit of the company, shareholders, customers and patients”. (GSK, website)

Individual Characteristics: A company’s culture can be viewed through its people and the work they do for the community over and above its strategy for growth and business development. GSK’s culture and values encompass its mission to improve the quality of human life. But the company places great emphasis on integrity and transparency. Apart from the values which are pivotal to the way GSK operates, the corporate entrepreneurial spirit can be seen in the specialized R&D business unit that is driving growth for the company. The CEEDD builds and personally manage the unique risk/reward-sharing drug discovery alliances with world class biotech companies. As a small, multidisciplinary team, CEEDD share the alliance companies’ entrepreneurial spirit and agility, and complement their capabilities with broad expertise and access to big pharma resources to bring innovative new medicines to more patients more quickly. (GSK, website, CEEDD).

Precipitating event:

“The pharmaceutical industry is experiencing a time of unprecedented challenge. Patent expiries, regulatory issues and increased pressures from healthcare providers have combined to create an environment where our sector is associated with lower growth and higher risk”. (Witty, CEO, GSK)

Precipitating event provides the impetus to behave inrapreneurially says research and some of the precipitating factors identified researcher Shaker A. Zahara are environmental or organizational changes that ignites the interaction of organizational and individual characterisitics to cause intrepreneurial events. At GSK, the precipitating event began with the merger in 2000. Thereafter creation of the CEDD to enhance the drug pipeline and remain competitive in the market, the creation of CEEDD to drive growth and partnering with biotech companies to gain technological edge and marketing alliances to expand its marketing reach can all be classified under participating events from the organizational side. As for the environmental factors, the challenge of patents, delivering consumer focused drugs, economic change and enhancing market share are constant events that GSK has to deal with.

“Creating an entrepreneurial and innovative culture at Glaxo is critical to our business strategy. We are a research-based health care corporation. The company seeks to find innovative medicines that will improve quality of life”(GSK Management)

In 2008, GSK spent £3.7 billion on R&D. Over 80 per cent of this expenditure was in pharmaceutical R&D with the remainder in vaccine and consumer healthcare R&D.

The journey thereafter: The next major element after the decision to act Inrapreneurially is to develop an effective feasibility plan and a business plan. This process is already been established at GSK within its R&D and marketing.

The Open Innovation process at GSK links ideas or technologies of biotech companies with GSK R&D and commercial team members. The process begins with the submission of an innovative technology, which is then assessed by key R&D and commercial team keeping in mind the market need, demand and financial implications. Gartner (1988) suggested that in entrepreneurship research, the research questions should focus on the process of entrepreneurship instead of who is the entrepreneur. This what GSK too believe in when they say “with an ever-changing global consumer marketplace demanding better quality, better value and improved performance, innovating our products is key. We know the importance of bringing in external ideas and recognize that the best ideas often come from innovators like you”. The Want-Find-Get-Manage model at CEEDD encompasses this philosophy perfectly.

Resource availability and the ability to overcome barriers is not a problem with GSK. With 15,000 dedicated researchers, 99,000 employees across the world and innovators who submit their proposal to worth along with GSK, it is a committed environment. As for external barriers, the radical strategy of breaking the R&D organization was not viewed to bring in success but as of 2008-9, some of the key facts as highlighted on the website can talk for themselves:

cd

Every second..

We distribute more than 35 dose of vaccine

Every minute..

More than 1,100 prescriptions are written for GSK products

Every hour..

We spend £300,000 (US$ 562,000) to find new medicines

Every day..

More than 200 million people around the world use GSK brand toothbrush or toothpaste

Every year..

Out factories produce 9 billion Tums tablets, 6 billion Panadol tablets and 600 million tubes of toothpaste

2008 Global Market share..

Highest with 22% market share worth £2,359 mn

Other achievements..

70% launch rate in the Consumer Healthcare division

Generated £299 mm worth of sales on Niquitin in 2008

Discovery of Alli, weight loss drug claiming 50% more weight loss

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Stephenson Spectrum

That sums up the analysis of the interactive corporate entrepreneurial model. As for the Stephenson spectrum, the decision and identification of specific research areas can be attributed to trustee behavior while the CEDD and the CEEDD functioning, which combine product innovation with scientific expertise and world-class marketing within the organization can be attributed to promoter behavior. Outside the CEEDD, GSK’s interest in other types of collaborations with some companies – co-development, single asset in-licensing, early research collaborations, technology licensing, co-marketing/co-promotion arrangements etc. fall under the remit of GSK’s Worldwide Business Development group to whom the CEEDD refers any such opportunities we encounter.

GSK’s organizational structure and way of functioning thus can be weighed with the Stephenson’s spectrum as well.

Conclusion

A “Gazelle” by definition in the business environment are business establishments creating jobs and generating sales growth year-on-year. It was David Birch of Cognetics, Inc., who coined the term for such companies. However, according to Birch, these were smaller firms who were not bogged down by hierarchy or bureaucracy. Gazelles are also famed for the number of innovations they manage to produce and deliver in the market. Going by the small firm definition alone, GSK probably will not find a fit since it is a huge conglomerate and not a small firm. However, the innovation part of definition does fit in well.

GSK’s size does not hamper its innovation desire. If Corporate Entrepreneurship is the process of profitability creating innovation within and organizational setting, GSK is a perfect example. The company’s twin-track strategy deployed in is R&D and marketing works with a fine balance. GSK is utilizing its 42,000 sales and marketing force as well as 15,000 scientists to gain a significant competitive advantage. GSK continues to be a dynamic change agent in an industry at the leading edge of scientific discovery.

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