Implementing innovation in R&D intensive company

Innovation does not have a standard
model, it can have effects on products, technology and can also impact major
structural changes in institutions. At the heart of the innovation process is
research and development (R&D), which is a fundamental asset in the process
of creating and acquiring new technologies aimed at refashioning and
revolutionizing our lifestyle as well as our organizational modes. Facing the
growing competition, some firms have to devote more funds to R&D activities
to pioneer and innovate because they want to survive. Those firms are called
“R&D intensive” for the huge amount of investment spending in research and
because of their success we will take a look at their organizational structure
and also give a typical example or form that these firms can take. So, what are
the main steps of innovation in these “R&D intensive” companies and how
does the implementation of innovation in these companies occur?

The scope of this paper is to examine the innovation implementation in
R&D intensive company and specially in pharma company. We will start with
the literature review of R&D structures as well as an example of company and
the main stages of the innovation process in this type of company. Then we will
present the literature review of the implementation of innovation followed by
the presentation of our methodology. Finally, we will present the case study on
the Novartis pharmaceutical company, followed by a discussion and finally a
conclusion.

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II- Literature review

 

R&D intensive companies are
characterized by the way they invest much more in R&D than other firms,
with very high investment costs for each project (DiMasi, Grabowski, and
Hansen, 2014). They require specialized knowledge (DiMasi, et al, 1991 and
Nanda and Kerr, 2015). And their investments generally have low success
probabilities (DiMasi et al, 1991 and 2013), but high payoffs conditional on
success (Grabowski, Vernon, and DiMasi 2002, 2004), and Nanda and Kerr, 2015)

 

II-1 Structure of R&D company

 

The organization of R&D activities has a
great influence on the ability of the company to execute its business and
technological strategies. Studies have shown that the structure of R&D
companies include strategies to create value or the use of technology, but all
this also depends on the internal dynamics of the company as well as its
external environment (Tirpak, Miller, Schwartz, Kashdan, 2006). The structure includes among other things the
structural organization, the allocation of resources, the culture as well as
the R&D strategy and in fact the choice of a structure tends to reinforce
the objective pursued by a company.

Existing structures are usually
described as centralized, decentralized or hybrid (Tirpak, Miller, Schwartz, Kashdan, 2006). Thus, a company using a
centralized approach will have a centralized structure that encourages risk
taking and is oriented towards the long term, and a company that uses a
decentralized structure will favour a decentralized approach that focuses on
the short-term market and focuses on project and business monitoring and the
hybrid structure is a mix of the other two approaches reflecting their
strengths and weaknesses.

The structure is also influenced by the
innovation game which can reflects a preference for a radical innovation as
well as an open innovation with a challenge in terms of dispersion or
integration particularly the internalisation of R&D (Zedtwitz, M., &
Gassmann, O., 2002) with some criteria like the location of the R&D
headquarters, proximity to the market, access to scientific and engineering
knowledge and the competition monitoring. In relation to the dynamics of
external and internal affairs, the characteristic of R&D structures evolves
according to the innovation game and can be illustrated as follows (Tirpak, Miller, Schwartz, Kashdan, 2006): the globalization
which leads to transnational R&D while adapting to the local market, the
diversification that leads the company to hybrid structures with multiple
business, the cycles of centralization and decentralization (decentralization
to grow market and centralization allows scientists to create networks), outsourcing
for cost efficiency and for efficiency and enables the company to focus on its
skills, and finally the technological information that allows the bridge between
time and space through sharing of information.

At all companies with the same R
& D structures will practically have the same innovation game:
biotechnology with technology races-game will just prefer a centralised approach
and pharmaceutical company whith a science-based safe journey-game will prefer
a centralized approach with R&D alliances.

The common feature of pharmaceutical
companies is the continuous innovation. These companies are globalized, highly
diversified with huge investment in R&D, and essentially defined by
innovation in the creation of new knowledge bases, the invention of new drugs
and the improvement of existing drugs (Petrova, 2014).

 

The innovation process

the main business of pharmaceutical
companies is the process of R&D of new drugs that is divided into four
stages: research, development, manufacturing and marketing (Raja & Sambandan,
2015):

research activities involve the
identification and validation of new goals, he is here to understand the
disease and identify the target molecule that could become a drug

development activities include
pre-clinical experimentation of the new drug to demonstrate its effectiveness
and safety. there are three phases: in phase 1 the first clinical trials are
done on a small number of volunteers (ten to one hundred people). In Phase 2,
more patients (twenty to two hundred) are being tested and in Phase 3 clinical
trials are being conducted on a larger number of patients (up to one thousand)
to examine the efficacy and safety of the drug in the long-term

Regulatory, manufacturing and
marketing activities: the drug that has passed all the clinical tests must be
approved by the regulatory agency to be manufactured and sold on the market. The
patent and the marketing right guarantee twenty years of license to the company
allowing it to gain exclusivity of marketing rights, maximize revenue and
facilitate the amortization of costs related to R&D expenditures.

 

II-2 Innovation implementation

Modern organizations have a constant
need to adapt to the changing environment and according to David Johnson (2001)
the success of the implementation of innovation positively depends on three
factors: the framing that refers to policies and company’s strategy, the innovation
environment that refers to the internal tactics of the environment
(interdependence of the system components) and the innovation attribute that
refers to the characteristics of innovation. On the other hand, Dewett, Whittier, & Williams,
(2007) propose an innovation implementation framework influenced by
three factors: the organizational factor, the innovation factor and the human
factor, which depend mainly on the manager’s willingness to innovate. The
management of innovation is carried out at three levels (strategic, tactical
and operational): the strategic level is focused on the setting of the main
objectives of the company, the tactical level refers to the development of new
products and services as well as the planning of the manufacturing process, at
the operational level it is a question of controlling the efficiency of the
manufacturing process (Bartochowska & Szumigaj, 2015). Igartua & Albors (2011)
proposes a framework for implementing the innovation management process defined
in eight blocks: the strategy, the process-project-portfolio block, the market,
the network, the organization and measurement of innovation and its management.

 

An implementation  framework of technological innovation
addressing six different factors has been proposed by Klein & Knight
(2005): the implementation policy to teach the use of employee innovation, the
team climate or climate organization so that employees see innovation as a
priority and not a distraction to the realization of their work, the
availability of financial resources because implementation is an expensive
process, managerial support, learning orientation and long-term managerial
patience.

Dwayne Simpson (2009) proposes a
conceptual framework based on three main points:

-The Training that refers to the
level of importance of the need, its accessibility including the location of
the costs and the planning, and the benefits in terms of accreditation.

-The Adoption: at this stage
innovation should be seen as having the quality and utility needed to respond
to real circumstances, it must be adaptable, compatible with the strategies
used and fit the value system or the culture of the program treatment.

-The Implementation: in this phase,
leadership must be able to see innovation as effective, feasible in the context
of the program and sustainable in terms of staff skills and economic
requirements.

 

III- Methodology

The goal of our research paper is to
show the implementation of innovation in R&D intensive company. Our initial
approach consisted on basis of the literature review to show that these
companies generally adopt the same type of structure depending on the innovation
game and the strategy aimed. A typical example of these companies is that of
the pharmaceutical companies which, as we have explained above, are
intrinsically linked to science with a high level of internalization of R&D
favoured by cross-border mergers and acquisitions (Held, 2009), thus leading to creation of strategic
alliances taking into account the centralized structure adopted. In the
following we will present a case study on the pharmaceutical company Novartis
which counts among the best in the world. We will show how through her
foundation she is involved in the implementation of digital health innovation
in Ghana. Our data is collected from publications and annual reports as well as
information obtained from the official website of Novartis and the Novartis
Foundation. Our results will be only descriptive and qualitative given the
difficulty of finding the necessary information about our research subject. To
study the implementation process we will use the framework proposed by Dwayne
Simpson (2009) based mainly on training, adoption and implementation as we have
presented it. Then we will discuss the results of our case study, followed by a
conclusion of our subject.

 

IV- Case study and Findings

History

Novartis is a pharmaceutical and
biotechnology group founded in Switzerland on December 20, 1996 following the
merger of a chemical company (Sandez) and a pharmaceutical companies (Ciba-Geigy),
it was the biggest merger in the history of the industry. The company has
continued to grow by acquiring companies such as: Hexal (2005), Protez
Pharmaceutical (2008), Corthera (2009), Alcon (2010), Genoptix (2011), Encore
Vision Inc. (2016) and Advanced Accelerator Applications (2017). The company’s
activities are segmented into Innovative Medicines (Oncology and
Pharmaceuticals), Alcon (for eyes care devices), Sandoz (for generics and
biosimilars) and the innovative engine Novartis Institute for Research (NIFR).

The company aims to discover new
products for healthcare and offer medical solutions to meet the changing needs
of patients around the world by using a science based innovation approach. Novartis
is represented in more than 150 countries with more than 200 projects in its
clinical pipeline.

 

Case study

The Novartis Foundation is a
philanthropic organization committed to promoting models of health care to
people in low- and middle-income countries around the world. She works with
more than 35 partners around the world and has initiated in August 2010 the
Telemedicine Program in Ghana.

Implementation process

The Trainings activities: the
telemedicine project was inspired by a protocol developed by the Medgate Swiss
Center for Telemedicine, an integrated ambulatory care provider. During this
phase nurses, midwives and community health workers were trained in the use of
mobile technologies. In 2010 Medgate organizes workshops in Basel, Switzerland
for stakeholders (including doctors and departmental representatives) to
introduce the concept of telemedicine and protocol systems for project
implementation. In 2011 Medgade is organizing a four-day workshop in Ghana for
nurses, midwives and community health workers and doctors; this workshop
included training in formalized telecommunication by means of mobile phones and
computer based support systems to provide a direct connection between community
health workers and practitioners with physicians working in the district hospital
in the region. The aim is to be able to have structured conversations between
the counterparts and the doctors to obtain precise answers to important
questions in order to establish precise diagnoses to avoid, if possible, the
patient being transferred to the hospital while he or she could have been
treated on the spot.

The Adoption: Villages and remote
communities have limited access to health care, so patients have to travel long
distances (more than 40 km) (with roads that are not always practical) to
receive medical care. This results in a high death rate and pregnant women are
particularly at increased risk. Medgate’s Telemedicine Program has been adapted
to local needs and requirements and is using Information and Communication
Technologies (ICT) resources to connect community health workers and medical
experts through teleconsultation centers that operate 24 hours a day. Doctors,
nurses and midwives coach and counsel community workers on how to treat their
patients, helping them to better manage emergency cases that can be treated and
resolved locally, avoiding thus unnecessary referrals

The Implementation: Antennas have
been installed throughout the community with the participation of local
telecommunications companies (Airtel and Ericsson) as well as the Ghana
Ministry of Telecommunications. These facilities have increased mobile network
coverage and the necessary equipment including mobile phones have been made
available to facilitate communication exchanges. A hotline for emergencies was
created, small closed groups of users for group communication were also
created, and all calls were free and supported by telecommunication companies
(Airtel). The installation of all these devices has been allowed by the grants
for sustainable development allocated by the Novartis Foundation.

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