HBS CASE - Organization and Strategy at Millennium (A)
As Deborah Dunsire, M.D. returned home from her January 2005 interviews at Millennium Pharmaceuticals (Millennium), she ran through her assessment of the challenges she would face at the Cambridge, Massachusetts-based biopharmaceutical firm. As a potential successor to founding CEO Mark Levin, Dunsire’s first priority was to bring Millennium to profitability. To succeed, she knew that she would need to rapidly establish a productive relationship with Millennium’s management team. Among other things, the team would need to reevaluate the number of disease classes Millennium could feasibly tackle and to determine how the firm should allocate its limited resources across the value chain activities of early-stage discovery research, later-stage drug development and final product commercialization. Dunsire would present her initial plans for Millennium to the board on Monday morning. Sitting in her living room, she pulled out a legal pad and began to jot down her thoughts.................
Core issues related to the case:
v To
establish a formal set up in the organisation and a productive relationship with
Millennium’s management team while maintaining its entrepreneurial vision and
culture.
v To
bring Millennium back to profitability by moving it from its R&D roots to a
more commercially-focused platform.
v To
regain credibility with the investment community.
v To
reallocate the resources of Millennium between its commercial and R&D
platforms.
v To
optimize current commercial opportunities without jeopardizing future product
development.
v Informal
review process and compensation system.
v Lack
of employees in commercial wing of Millennium.
v Ignorance
of competition faced by the company with regard to its products.
v Failure
due to marketing philosophy of Millennium.
v Losses
due to failure of some alliances.
v Lack
of competent employees at executive level mainly in R&D.
Analysis of data for the root cause/s of the problem
Millennium’s
organizational structure and processes had always been more informal than those
of larger companies. It was organized around its people.
Employees relied on informal committees and ad-hoc systems
throughout the firm to help guide the business and coordinate operations. A lot
of people resisted or resented the change in culture when Levin began to
professionalize executive meetings when Millennium prepared to launch Velcade
commercially and to restructure its business. There was Frustration among employees
due to informal review process and biasness in terms of deciding over
compensation policy.
Over time some
disadvantages of the alliances began to manifest themselves. Failure occurred
in acquisition of CORE by Millennium. Huge cost incurred in restructuring
process in 2003. Millennium fails to consider the competition Integrilin faced
in the market. Marketing philosophy of Millennium that markets were won through
good science and clinical data so products based on good data would sell them
itself posed a problem. Less number of employees in commercial team of
Millennium and also they were not experts in what they were selling in the
market.
Partnership revenues
were falling, due to the shift in business model from an R&D services
organization to a fully-integrated company focused on its own pipeline, and
raising significant amounts of additional outside capital was unlikely
following the 2001 burst of the technology bubble and subsequently weak capital
markets. Millennium booked $191 million in restructuring charges and the
company booked a net loss of $590 million in 2002 $484 million
in 2003. Millennium’s
management believed that markets were won through good science and clinical
data so products based on good data would sell themselves. This philosophy left
little room for a marketer to express his or her opinions on competing in the
marketplace through education and promotion.
Millennium’s commercial
team was relatively small.
The
Velcade sales team detailed to oncologists with a vast majority working from
their own private practices or in out-patient units of hospitals. The
Integrilin team detailed to cardiologists and purchasing groups in hospitals
with critical care facilities for percutaneous infusions. Both therapeutic areas required keen
understanding of the clinical trial results of their respective products and
those of their competitors. It was unrealistic to require a sales
Representative to master the material of both products. Complicating these
differences was that both products faced intense competition and required
significant investment to remain competitive. It was difficult to imagine
diluting the focus of a commercial rep by leveraging him or her to work on both
products.
Probable
solutions based on the root cause to solve the problems:
The company should
increase the number of experienced sales representatives in its commercial
departments to cope up with the competition prevailing in the market. Instead
of filling vacant positions at senior levels in R&D and commercial
departments, Dunsire should go for internal recruitment as existing employees
better understand the organisation and they can optimize the resources at the
maximum possible to maintain a sound equilibrium between R & D and
commercial segment. The company should also facilitate intense training to the
existing and new employees in commercial segment. Employees should be given
autonomy in performing their task, organizing adhoc meetings in order to
maintain the culture of entrepreneurship but a continuous performance
management system should be implemented in the organisation to decide over the
compensation, promotion and other benefits to be provided to the employees. The
company should prepare an intense marketing strategy with an objective is to
become market leader in the products they deal in at the minimum time possible.
Investors will show confidence in the company only it starts generating huge
revenue from both of its segments commercial as well as R &D. The company
should decide over its R&D products and reduce its cost of research spend
at the minimum possible in order to increase the profitability of the company.
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