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TEACHING NOTEThis case has been prepared for classroom discussion and is not to be used as a source of data or illustration of effective or ineffective manage-ment practices. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise — without the permission of the editor and the authors.

Case Study

BluepharmaRe-starting-up an approach to innovative business development

Cátia Miriam CostaSandro Mendonça

2015

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Introduction

This Teaching Note is intended as a teaching resource for the Bluepharma case study. Its purpose is to help the instructor fully develop the story, tease out its meaning and engage with students. So, it is supposed to make life easier to the instructor but also to make the students learning experience richer in a hands-on classroom setting.

The case is very rich and allows itself to be explored from a variety of angles. This makes it ideal as a raw material to study in-depth in a broad array of subject-matters. The core perspective is innovation, but the case is designed in a way that a number of issues radiate from it.

A set of questions is assembled to be explored in class or in a formal written examination. The Teaching Note leaves room for the instructor adopt its teaching and assessment strategy.

This Teaching Note is organised in five sections. After the introduction, it starts by a framing about the likely use of this case in the contemporary

class room. The third section presents a synopsis of the case study and its likely added value in the class room. Section 4 provides questions for students (stand-alone written examination or oral discussion in class), and suggested feedback by the instructor. Section 5 indicates a cluster of essay challenges (home assignments or term paper themes). Section 6 provides a summary of the main lessons to be learned from this case. In the Appendix there is a list of technical terms in the pharma business.

Teaching guidance

This Teaching Note is thought as a tool for higher education professionals who live through an era of accreditation and quality control mechanisms. In particular, these notes are adapted to the practices and standards promoted by a body such as the Association to Advance Collegiate Schools of Business1, a well-known institutional frame for

1 · See http://www.aacsb.edu/

harmonisation of business education worldwide.

According to Spady (2004), who contributed to spread the “outcomes based learning” philosophy, the contemporary environment of learning experiences is characterised by factors such as:

Active learners, Continuous assessment, Critical thinking, reasoning, reflection & action, Integration knowledge, learning relevant/ connected real life situations, Learner centred & educator/ facilitator use group/ teamwork, Learning programmes seen as guides that allow educators to be innovative & creative in designing programmes/ activities, Learners take responsibility for their learning, learners motivated by constant feedback/ affirmation of worth, Emphasis outcomes – what learner becomes & understands.

Learning goals and allthat…In this environment it is common to refer to “Learning goals”, “Learning outcomes” and “Demonstration of achievement”. Say,

Ɩ Learning goals convey the educational targets and end-states toward which they will work. Understanding these contributes to clarify pedagogical objectives for educators (communication priorities and managing emphasis) and expectations for students (inform students and empower a sense of progress in specific directions). A list of learning goals deemed appropriate for a given program is defined by faculty staff in a business school;

Ɩ Learning outcomes describe the lasting substantive knowledge (understanding of concepts, theories and methods) and behavioural improvements(skills, attitudes, and habits of mind) that students are supposed with them;

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Ɩ Demonstration of achievement refers to measurements that assess progress along the learning path. There is a number of ways for assurance of learning, from direct ones (an ability to respond to questions on the subject-matter) to more indirect ones (becoming better prepared for a job interview).

Class levelsThe case study is designed in a critical and interdisciplinary mode. They are apt for use in elective courses at the bachelor degree (economics, management, public policy, etc.) but are specially fit for use at a masters level or in an executive education context (the higher end of business school activity).

Quality standards are a requirement for accredited higher education institutions. The spirit of this should ensure that2:

Ɩ What will our students learn in our program? What are our expectations?

2 · This discussion follows AACSB Withe Paper

No. 3 http://bit.ly/1JhaJdC.

Ɩ How will they learn it? Ɩ How will we know they have

learned it or not? Ɩ What will we do if they have

not learned it?

A case study as a learning tool in a program module allows an alignment of practice with such desiderata:

Ɩ Students will leave with a sense of knowledge of the case, its context, key concepts and framing theories;

Ɩ Self-study and class exercises (debates, Q&Q, simulations, etc.)

Ɩ Assessment of students class participation and/or answer to the case problem-set;

Ɩ Collect students feedback for continuous improvement.

These formulations may guide the design of learning goals for specific programs, but these are not mandatory for the AACSB. The learning goals developed are responsibility of the teaching staff of the institution and should fit the mission of that institution and the objectives of a particular program.

Program contentsThe core fields that are addressed by the contents of the case study are:

Ɩ Innovation management; Ɩ Knowledge management; Ɩ Economics of technical change; Ɩ Science and technology policy.

Target audiences:

Ɩ Master’s students and doctoral candidates;

Ɩ Business decision-makers (entrepreneurs, product managers, R&D directors, project leaders, marketing managers, etc.);

Ɩ Other actors (university managers, incubators’ managers, policy-makers at large);

The case study may be deployed in economics or management courses. It may be used in courses on entrepreneurship or strategy and industrial economics or economics of innovation both at the bachelors or post-graduate levels. However, the underlying assumption is that it best fits “innovation management” courses. For typical modules see here where the case studies may be deployed:

1. “Managing Innovation and Entrepreneurship”, an MIT Sloan graduate course (http://bit.ly/1ERGfNt) (for a similar course see http://bit.ly/1LtPY1d)

This module focuses on how to organise successful technology-driven innovation in both young/smaller (entrepreneurial, Schumpeter Mach I) and established/larger (mature, Schumpeter Mach II) firms. It takes innovation as a basis of competitive advantage and focus on designing strategies identifying, building and commercializing technological innovations. Major topics include: the innovation process; organizational set-up that stimulate learning and creativity; taking advantage of the external environment and outside sources of innovation; etc.

Role of the case-study contributes to the goals of the module by enabling the students to:

a) Create familiarity with key topics in innovation management, such as R&D routines, innovation

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networks, complementary assets, absorptive capacity, etc.;

b) Given a glimpse into a concrete realm of innovation processes and structures such as R&D project and incentive design, R&D portfolios, idea generation processes, make or by decisions;

c) Provide an in-depth understanding of the positioning, paths and processes most effective for exploiting innovations;

d) Enhance the ability to apply innovation concepts to real world situations;

e) Exercise skills to identify, evaluate, and resolve a variety of issues relating to operational and strategic challenges in large companies as well as entrepreneurial firms.

2. “Science, Technology and Innovations: Markets, Firms and Policies”, a SPRU master’s module (http://bit.ly/1U9SUlG) (for a similar course see http://bit.ly/1Jwc7fT)

This module gives a strong grounding on the ongoing tradition of innovation studies in the way it helps navigating current academic, management and policy debates. It explores the processes underlying knowledge discovery and accumulation and within the global economy and national innovation systems (both developed and developing countries). It considers scientific institutions, technological competition, theories of the dynamic firm, public policy for technical change, environmental analysis, and innovation systems approaches. It provides a range of analytical frameworks, especially neo-Schumpeterian and evolutionary, for understanding and shaping public policy and its influence on the workings of business organisations and other stakeholders.

Thanks to the contribution of the case study, by the end of the module the student will be able to better:

a) Distinguish several concepts and approaches at play when analysing a real world situation;

b) Explain the role of innovation from the perspectives of firm and managerial choice, but also serendipity and path-dependence,

c) Identify gaps and sources of competitive advantage open for exploration and exploitation by the firm in a context of globalisation for the international division of labour;

d) Demonstrate knowledge of innovation system (role of multinationals, universities, public policy) and open innovation (alliances, sharing, intellectual property management) concepts in history of the firm.

3. “Technology-based entrepreneurship”, a masters course at the University of bath (http://bit.ly/1JWwdC7)

The course seeks to introduce students to the opportunities and challenges of technology-based entrepreneurship. It brings together standard management and innovation management providing the student with an opportunity to cultivate and entrepreneurial mind-set to master the challenges of managing dynamic organisations.

The case study can serve its learning but comes by facilitating students’ efforts in:

a) Understanding of how entrepreneurial action can create and exploit technology to generate new business opportunities;

b) Critical assessing of the potential of different technologies for value generation;

c) Gaining an appreciation of different tools and methods for developing new products, process and services;

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d) Developing skills to come up with entrepreneurial strategies to capture value from new technological opportunities.

Other teaching materialsOptimal complementary materials in the form of text-books can be gleaned from the following:

Ɩ Tidd, J. and J. Bessant (2013), Managing Innovation: Integrating Technological, Market and Organizational Change, 5th Edition, London: Wiley;

Ɩ Dodgson, M., D.M. Gann and A. Salter (2008), The Management of Technological Innovation: Strategy and Practice, Cambridge: Cambridge University Press;

Ɩ Hesterly, W. and J.B. Barney (2014), Strategic Management and Competitive Advantage: Concept and Cases, 5th Edition, New York: Pearson Education, Limited;

Ɩ Gassmann, O., G. Reepmeyer and M. von Zedtwitz (eds) (2013), Leading Pharmaceutical Innovation: Trends and Drivers for Growth in the Pharmaceutical Industry, Berlin: Springer

The case study approachCase studies allows “understanding of the dynamics present in single settings” (Eisenhardt 1989, p. 534). According to Yin (2003) a case study is investigation of “a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident”.

Alston (2008) proposes seeing them as “analytical narratives”. This perspective is here taken as the combination of a clear theoretical framework with the use of evidence in the form of a story, bearing in mind that concepts may be employed explicitly or implicitly (in research or teaching) and that evidence may be either qualitative or quantitative (interviews, statistics, etc.). Its intimate connection with reality and first-hand data make them an unreplaceable tool, enlightening in research but also useful in the classroom.

In the context of research Yin (2003, p. 2) has argued that the “method allows investigators to retain the holistic and meaningful

characteristics of real-life events”. He positions it as one of five strategies of inquiry: experiment, survey, archival research, historical work and case study. Case studies have comparative advantages in addressing “how” and “why” research questions. According to this author, the functions of case studies may be exploratory (to be descriptive and add details; pursuing particularising objectives) or explanatory (to infer significant interpretations and add new ideas; pursuing generalising objectives). Case study strategy are not necessarily “qualitative research” in nature, but it should be also kept in mind that in social sciences “numbers alone should not automatically be considered a sign of accuracy.” (Yin 2003, p. 13, p. 89)

Small, unrepresentative samples create scepticism over their generalisation powers (Siggelkow 2007, p. 20; Yin 2003, p. 10). In their paper on “Learning from samples of one or fewer” March et al. (1991) argued that companies have to learn from infrequent events. They propose how learners may convert such first-hand experience into

robust lessons, and here we may paraphrase them for the real of case studies and students second-hand experience. This may be seen as best practice for using a case study in a business school or social sciences class:

Ɩ Experiencing cases richly: use more evidence to study a single case; tease out more aspects of the case; pooling and triangulate the data; put yourself in the feet of different stakeholders;

Ɩ Simulating experiences: imagine different contextual conditions such as the business cycle or target market; consider the consequences of different institutions or decisions;

Ɩ Assessing and improving learning: extract citations from leaders or other episodes to stretch conclusions and perform sensitivity analysis.

Bluepharma case at a glance

Bluepharma’s place in a library of case studies is, it seems safe to state it, somewhat unlikely. It enters the field as a relatively

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small player coming from Portugal, a periphery European country with little reputation in high-tech industries and much battered by the euro-crisis. Moreover, it is not a deus-ex-machina appearance: it grew out of a divestiture from a manufacturing unit by Bayer, the historical giant German multinational. This is a story about the ways in which such a company (a re-“start-up”?!) was able to stave off the initial risks of its peculiar birth, climb up the value chain in a mature industry and a carve a growing space for itself and its expanding network in the globalising market for new medical substances and manufacturing capabilities. How was this possible?

As the company grew, mutated and thrived a number of issues became salient. On is the role of its founding management team. Their motivations and vision are not linear: not just profit-oriented, but also mission-driven. The personal and professional knowledge of the founders is also of interest. The vision combined scientific expertise with business flair; it sought to excel in production while being slick in

distribution; it was geared toward making the firm viable in the short-term while opening the way for the structural transformation of the company in the long-term.

The company strong basis has been manufacturing. In retrospective this makes it a curious case, since around the year 2000 the order of the day was the “New Economy”. However, the company commenced by being a non-innovator: it just responded to volume orders of established products. Moreover, it’s community of leaders insisted on retaining its industrial base much before the notion of “re-industrialisation” was the talk of the town on the “developed west”. The company acknowledge early on that a conventional routine role on the generics market segment was unsustainable: it paved the way to become an innovator from the outset.

The company adopted a partnership-intensive strategy. The company relied on brokers to tap into business opportunities but also market trends. It developed a strong contact with its near-by academic institution, the multi-secular University of

Coimbra. It engaged in a wide number of sectoral associations and mingled with stakeholders of its regional and national environment. The company also critically relied on the Portuguese state in a number of ways, as a beneficiary of capital, as a user of highly-trained staff, etc.

But, it always reinforced its own internal capabilities. A number of mechanisms exist in order to unleash internal creative, spot and reward merit, foster and retain talent. Intrinsic and extrinsic incentives are in place and organisational activities are nurtured to keep its internal sources of innovation alive. At the same time the company is able to keep abreast with external developments, and tracks peers with which it may learn how to design innovative strategy.

Lately, the firm seems to be involving to become a hub for new technology-based initiated. It already works as an incubator of new specialised ventures that emerge from cooperation with its own professionals, PhD students and outside experts.

Highlights of the case study:

ɞ Innovative manufacturing in the generic drugs industry;

ɞ Non-US case and a non-multinational case;

ɞ From non-innovation to emergent innovation;

ɞ Network-centric evolutionary path;

Key concepts involved:

ɞ Entrepreneurship and business turn-around;

ɞ R&D management and non-R&D management;

ɞ Network-based growth strategies;

ɞ National system of innovation; ɞ University-industry

interaction; ɞ Sectoral systems of innovation; ɞ Entrepreneurial state; ɞ Absorptive capacity and

complementary assets; ɞ Vertical integration; ɞ Dynamic routines and

dynamic capabilities; ɞ Business incubators; ɞ Other.

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Learning benefits:

ɞ Context-sensitive discussion of concepts;

ɞ Highly readable story for working independently;

ɞ Problem-solving in class; ɞ Ample material for reflective

thought and practice.

Bluepharma’s discussion

The case follows the trajectory of Bluepharma. The following general questions may be raised to the students as a basis to stimulate debate in class or structure a formal problem set. There are suggested talking points and possible answers to the questions posed. These should not be though as the only answers. The instructor and students are encouraged to have their own take.

Question 1. Bluepharma’s origins Identify the key features of the company’s origin as Bluepharma, in 2001.

This is a kick-off question. It is a general question that appeals to students’ broad understanding of the case.

The students are likely to raise some of the following issues:

ɞ The announcement of Bayer’s divestment decision;

ɞ The anti-climax of this news in the zeitgeist of the time (the New Economy, the Lisbon Agenda);

ɞ The capabilities that existed inside and outside the industrial unit;

ɞ The role of Paulo Barradas in wiring-up together his own experience with the skills of the other founders and sea sing the moment;

ɞ Entrepreneurship context in Portugal.

Theoretical points and conceptual observations:

ɞ Discuss the Schumpeterian notion of “entrepreneur”. There was combination of production capabilities (in the factory) with business vision (the new owner-managers).3

ɞ Entrepreneurship is also a collective phenomena. The team worked well together and had highly complementary skills.4

ɞ There was an ability to exploit this opportunity. Discussing what factors may have facilitated this is relevant: entrepreneurial mind-sets; pre-existing scientific and technological infrastructures; access to foreign markets; etc.5

3 · The chapter on Schumpeter in this book is

useful: Fifty Major Economists (Routledge Key

Guides) 3rd Edition, 2013, by Steven Pressman.

4 · Regarding non-individual agency in inno-

vation consider this paper: Raghu Garud and

Peter Karnøe (2013), “Bricolage versus bre-

akthrough: distributed and embedded agency

in technology entrepreneurship”, Research

Policy, Vol. 32, pp. 277-300.

5 · This OCDE framework is useful here: OECD

(2006), Understanding Entrepreneurship:

Developing Indicators for International

Comparisons and Assessments, Paris: OECD.

Question 2. Bluepharma’s evolutionIdentify the salient aspects of the company’s evolution.

This is follow-up question. It appeals to students’ narrative skills and understanding of the “biography” of the company”.

These landmarks may be singled-out:

ɞ The support of the state as a provider of entrepreneurial finance;

ɞ Its explicit embracement of the rising niche of generics in 2002;

ɞ Creation of its in-house industrial laboratory in 2003;

ɞ It’s professionalization of internal processes;

ɞ Its sequence of prises and awards;

ɞ Its growing insertion in sectoral associations;

ɞ Its first spin-offs already under “austerity” and the “troika”

Discuss this descriptive data with the help of this exhibit:

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2001Bluepharma Foundation

Acquisition of the plant to Bayer

2003Creation of the R&D Center

Certification to ISO 9001 and14001, OHSAS 18001 eEMAS

2005Integration into COTEC Network

2007Lean 6 Sigma Training

SAP ERP Upgrade

2009Bluepharma gets FDA certification

2011Equity stake in Biocant Ventures

PME Excelência 2011 Prize

2013Outstanding Venture of the Year Prize

PME Excelência 2013 Prize

2002Formation of Bluepharma Genéricos

2004X-Prot ProjectEuropean Innovation Prize

2006Acquisition of equity stake in Technophage

2008InovCapital Venture Capital Entry1st drug launch

2010Inauguration of new facilitiesStarting year of Luzitin spin-offEquity stake in Treat U

2012Equity stake in Blueclinical and BSIM2PME Inovação COTEC Prize and INSEAD PrizeInauguration of new logistic platform in TaveiroPME Excelência 212 Prize

2014European Business Awards: BestNational Exporter

Source: Translated from http://bit.ly/1MRWEtd

Question 3. Bluepharma’s productioncapabilitiesDiscuss Bluepharma’s goal at manufacturing efficiency and rapid flexibility. To what extent it proved crucial for the company’s intent to aim higher?

The idea is to downplay the notion of innovation. Sometimes, companies start out as non-innovators. Only by first succeeding in this role they can then aspire to become innovative organisations.

Talking points:

ɞ Optimisation is sometimes the only tactical objective for the firm. Keeping costs down of standardised products need skilful operations management.6

ɞ Nelson and Winter (1982) introduced the notion of “routine” to refer to productive memory. Inertia may thus

6 · This is a handy reference: Essentials of ope-

rations management, by N. Slack, R. Johnston

and A. Brandon-Jones (2014), Financial Times

Prentice Hall.

proceeds innovation at the organisation level. 7

ɞ Overtime efficiencies can only be achieved by changing the method of production. Distinguish between “process innovation” and “product innovation”. 8

Question 4. Bluepharma’s innovationintentDiscuss Bluepharma’s organisation of its technical chance strategy. It instituted a R&D centre. Why?

It is now time to dig deeper into innovation theory. The R&D concept is a crucial concept. But is it a justified investment for a small, generic drugs firm?

Talking points:

ɞ What exactly is R&D? What does the Oslo Manual refer to it? “R&D” is an intangible input into the innovation

7 · A classic reference: Richard R. Nelson

and Sidney G. Winter (1982), An Evolutionary

Theory of Economic Change, Cambridge,

Massachusetts: The Belknap Press.

8 · Standard textbook distinctions.

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process. It refers to spending into efforts to generate technical change. Note that not all the efforts are measured by formal R&D spending in an in-house laboratory.9

ɞ There is an opportunity here to define innovation, i.e. the outcome of the innovation process. According to the OECD (still the Oslo Manual): “An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.”

ɞ May be the “strategic intent” behind the establishment of the industrial laboratory was not innovation but imitation! It perhaps served the short-run purpose of detecting, assimilating and applying outside technical knowledge.10

9 · The Oslo Manual (3rd edition, 2005):

http://bit.ly/1EUkdJU.

10 · This is the whole point of this paper:

Wesley M. Cohen and Daniel A. Levinthal

(1990), “Absorptive capacity: A new perspec-

tive on learning and innovation”, Administrative

Science Quarterly, Vol. 35, No. 1, pp. 128-52.

Question 5. What Bluepharma owes to its environmentDid Bluepharma cared about its surrounding context? In what ways did it benefit from it?

The discussion can be carried out to push through the systemic perspective of innovation. This gives theoretical density to the discussion.

Talking points:

ɞ No firm is an island. And successful innovative firms even less so. Innovation is about many actors and many interactions. Outside general institutions and firm-specific linkages come to the fore.11

ɞ The meso-institutional environment also matters. In particular Bluepharma had positive feedback from the regulator, the example for the largest Portuguese pharma

11 · The notion of “national system of innova-

tion” is the concept at hand, available in any

good textbook near you. For a good recent

book on the framework from the perspective

of countries behind the technological frontier

see: Gabriela Dutrénit and Judith Sutz (eds)

(2014), National Innovation Systems, Social

Inclusion and Development: The Latin American

Experience, Cheltenham: Edward Elgar.

company, students from the Faculty of Pharmacy of the University of Coimbra, etc. Sectoral systems of innovation matter.12

ɞ The state took large risks. This means that it has a share of the merit. Public policy matters. Keeping a technology-company afloat paid-off. This whole issue can be related to Mariana Mazzucato’s “Entrepreneurial State”. 13

ɞ May be the “strategic intent” behind the establishment of the industrial laboratory was not innovation but imitation! It perhaps served the short-run purpose of detecting, assimilating and applying outside technical knowledge.14

ɞ The close connection to university has been important in a number of ways, such as keeping abreast with scientific

12 · When these fail results can be meager:

“Taiwan’s pharmaceuticals: A failure of the sec-

toral system of innovation?” Mei-Chih Hu and

Shih-Chang Hung, Technological Forecasting

and Social Change, Vol. 88, pp. 162-176.

13 · Mariana Mazzucato (2013), The

Entrepreneurial State: Debunking Public vs.

Private Sector Myths, London: Anthem Press.

14 · This is the whole point of this paper: Wesley

M. Cohen and Daniel A. Levinthal (1990),

“Absorptive capacity: A new perspective on le-

arning and innovation”, Administrative Science

Quarterly, Vol. 35, No. 1, pp. 128-52.

agendas, recruiting promising researchers, capitalizing on student dissertations, etc. 15

Question 6. Bluepharma’s internalcapabilitiesHow does Bluepharma manage its innovation process? What are its salient features?

Now the discussion turns inward, to the internal environment. There is ample theoretical basis to be considered here: the micro-literature on innovation is rich. We adopt a dynamic capabilities angle to tackle this question.

Talking points:

ɞ Innovation management is a structured process, not the real of wacky inventors pulling radical breakthroughs from their hat on a daily basis. Sustained innovation depends on combining resources and on technological opportunities. Mechanisms that drive it are

15 · For the discussion of this dynamics is a

context near to Portugal see: A. Segarra-Blasco

and J.M. Arauzo (2008), “Sources of innovation

and industry–university interaction: Evidence

from Spanish firms”, Research Policy, Volume

37, Issue 8, pp. 1283-95.

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shaped by top management but innovation is also emergent from the resources and routines below. 16

ɞ Bluepharma’s specific schemes to unleash employee imagination can be discussed. They point to the existence of routines designed to subvert established routines and break from stagnation. These “innovation routines” are important.17

ɞ All together we may refer to the presence of “dynamic capabilities” in Bluepharma, that is, the ability of companies “to create, extend, and modify the ways in which they operate”. 18

16 · The book by M. Dodgson, D. Gann and

N. Phillips (2014, The Oxford Handbook of

Innovation Management, Oxford: Oxford

University Press) defines the scope of innova-

tion management.

17 · See: Pavitt, K. (2002) “Innovating routines

in the business firm: what corporate tasks

should they be accomplishing”, Industrial and

Corporate Change, Vol.11, No.1, pp.117-33.

18 · See: Constance E. Helfat, Sydney

Finkelstein, Will Mitchell, Margaret Peteraf,

Harbir Singh, David Teece, Sidney G. Winter

(2009), Dynamic Capabilities: Understanding

Strategic Change in Organizations, London:

John Wiley & Sons,

Question 7. Bluepharma’s strategicunfoldingRefer to the company’s strategies. To what degree are they conventional and unconventional?

Open-ended question that looks toward the future.

Talking points:

Ɩ Bluepharma is keen on its “vertical integration” strategy. This is up-stream (note Sérgio Simões interest in producing at least some core inputs, “active substances”) and down-stream (a capability to perform Phase II trials). This internal growth seems not to follow the classic trend towards outsourcing and specialisation19;

Ɩ Bluepharma is looking toward the East. The medical market is booming in China, but it’s economy is slowing down and other emergent market companies are developing

19 · What are the limits and virtues of this

strategy? Will it be sustainable?

generic medicines20; Ɩ How is Bluepharma integrating

its horizontal and vertical differentiation strategies. Embracing quality standards reassures costumers of the actual quality of its products but it is also a promotional tool. Embracing R&D enables the firm to dig deeper into the attributes of the pharmaceuticals it produces, but also to signal that it is a company to be desired by young talents seeking promising careers.21

Essay issues

Some general topics for discussion:

i. Hayek and the Austrian school of economics refer to “purposeful action”. Discuss this concept in the context of Bluepharma’s birth.

20 · Will Bluepharma be challenged itself

by Bluepharma look-alikes. Teva, the Israeli

generic drugs company who moved towards an

innovation strategy, seems already to be facing

its own imitators.

21 · It was news in the Expresso newspaper (15

June 2015) that this company, like others such

as Pfizer and Bial, provide “dream jobs”.

ii. Elaborate on Confucius dictum from Bluepharma’s perspective: “If a man gives no thought about what is distant he will find sorrow near at hand.”

iii. An article by the Financial Times (11 June 2015, p. 15) discusses the desire by South Korean firms to aim at a “higher place in the drug shelf”. Provide a comparative analysis considering the paralels with the Portuguese/Bluepharma case:

– The FT states: “Seoul seeks to use copycat products as step to becoming an innovator in life science”

– South Korean companies like Celltrion and Samsung are on their way to build a stronger presence in a category of non-branded drugs called “biosimilars”;

– A study by Citigroup forecasts a robust global sales growth of this category by 2025, a type of product that has “swallowed a growing share of global pharmaceuticals spending for the past two decades.”

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iv. Discuss the “rise of the rest” in the pharmaceutical sector on this basis of this piece from the Financial Times.

v. In his 1995 book on Science and Innovation: The US Pharmaceutical Industry during the 1980s (Cambridge University Press) Alfonso Gambardella (p. 13) argued:

“molecular biology and genetic engineering, together with important developments in computerized drug design and instrumentation, are offering the opportunity to extend the applicability of a ‘scientific’ method of drug research. Industry scientists

can increasingly make use of fundamental knowledge about human metabolism and the action of drugs, and they can employ advanced experimentation technologies.”

Gambardella discussed the impact of the R&D nature of pharma in market structure. The science and commercialisation were key, but not production he noticed then. But as Big Pharma began to rely on outside players and as blockbusters face a “patent cliff” it seems that the scene is changing dramatically once again. Does upgrade from production of generics to the creation of new drugs mean

the collapse of the division of innovative labour in the drugs industry?

Main lessons learned

Bluepharma shows that interesting innovation stories may appear from the margins. It enacts a number of innovation concepts.

In what regards strategy, and as take-home ideas, here are some of the lessons this case yields:

Ɩ Innovation is a contrarian affair: Technology business can make sense, even in moderately innovative countries. Success may happen in crowded, mature, globalised industries. A contrarian attitude may pay off;

Ɩ Investing, innovation, internationalising: The challenge of how to build a high-tech company in a country with no reputation can be met. Bluepharma makes this possibility stand out. This company solved the challenged by a two sequenced process.

“Investment to innovate. Innovate to internationalise.” This is the motto and mantra uttered inside the firm.

Ɩ The innovation system is the way: When facing the challenge of innovation new companies need to develop and capitalise on both internal and external resources.

Ɩ Keep ready to keep changing: An open mind has to be kept as the business model may evolve beyond initial expectation in the sector.

For those more research-inclined students some of the insights that can be derived from the case can be highlighted:

Ɩ Process precedes product: To start the learning curve the company made a bet in doing the thing it did well even better it terms of cost, reliability and timing. This harnessed the customers to which the company could now start to offer other, newer, more complex and customised solutions.

Ɩ From D to R: Incremental innovation in well-known public domain drugs was the natural way. The focus on process then shifted to incremental product

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development. Only after this the company moved to target new, proprietary technologies that can give rise to new, radically innovative products. This “reversed R&D” cycle plots the way in which an imitating insurgent became an entrenched, innovative global player;

Ɩ Innovation is a community-wide affair: Innovation is a team-based activity. For Bluepharma, a company that was founded on friendship and professional respect among a few individuals, this implied partnering with the State. It also implied an active social life with traders, universities and other partners. It implies involving workers on a day to day basis, as well as students and outside researchers.

Overall, student benefits from the case study include:

Ɩ Applying innovation concepts to real-life technology-based company;

Ɩ Learn how to develop recommendations for innovative strategy;

Ɩ Learn innovation the insurgent’s way.

REFERENCES Ɩ Alston, L.J. (2008), “The ‘case’ for case studies in New Institutional Economics”, in E.A. Brousseau and J. Glachant

(Eds), New Institutional Economics: A Guidebook, Cambridge: Cambridge University Press, pp. 103-21.

Ɩ Bassey, M. (1989), Case Study Research In Educational Settings, London: Open University Press.

Ɩ Eisenhardt, K.M. (1989), “Building. Theories from case study research”, Academy of Management Review, Vol. 14,

No. 4, pp. 532-50.

Ɩ Eisenhardt, K.M. and M.E. Grebner (2007), “Theory building from cases: opportunities and challenges”, Academy

of Management Journal, Vol. 50, No. 1, pp. 25-32.

Ɩ March, J.G., L.S. Sproull and M. Tamuz (1991), “Learning from samples of one or fewer”, Organization Science, Vol.

2, pp. 1-13.

Ɩ Mills, A.J. and G. Durepos (2010), “Introduction”, in Mills, A.J., G. Durepos and E. Wiebe (eds), Encyclopedia of

Case Study Research, London: Sage, pp. xxxi- xxxiv.

Ɩ Siggelkow, N. (2007), “Persuasion with case studies”. Academy of Management Journal, Vol. 50, pp. 20-24.

Ɩ Spady, W. (1994), Outcomes Based Education: Critical Issues and Answers, American Association of School

Administration: Arlington, Virginia.

Ɩ Siggelkow, N. (2007), “Persuasion with case studies”, Academy of Management Journal, Vol. 50, pp. 20-24.

Ɩ Yin, R.K. (2003), Case Study Research, 3rd ed., Thousand Oaks, CA: Sage.

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Bluepharma

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APPENDIX

GlossaryThis list of terms helps to decode part of the case study terminology. Some of it is specialised trade vocabulary of the pharmaceutical sector, some other part of it relates to the specificities of the Portuguese national context.

Ɩ A2B,SGPDS – Business Angel/Portugal.

Ɩ ANF – National Pharmacy Association/Portugal.

Ɩ Bial – Pharmaceutical Company/Portugal.

Ɩ Biosimilar – drugs designed to compete with branded biological drugs.

Ɩ Biotechnology – development of products using biological systems, living

organisms or derivatives.

Ɩ CDMO – Contract Development Manufacturing Organization.

Ɩ CPC – Cooperative Patent Classification.

Ɩ Chorus – spin-off of Lilly (Pharmaceutical company/Multinational).

Ɩ Clinical Trials – research studies that test how will new medical approaches

work in people. This is the most expensive of the steps in the drug value

chain. Have different phases.

Ɩ CMO – Contract Manufacturing Organization.

Ɩ COTEC Portugal – Portuguese Industry Association for Innovation.

Ɩ CRP – Clinic Research Partnership.

Ɩ CRP – Clinical Research Organization.

Ɩ FDA – Food and Drug Administration/US.

Ɩ Generic Drug – certificate copy of an original drug, with a different

composition based in the same active principles of the original one, and

producing the same effect on the patient.

Ɩ Horizon 2020 – European Union Research and Innovation programme

(2014-2020).

Ɩ IEFP – Institute for Employment and Vocational Training/Portugal (public

institution).

Ɩ INFARMED – National Authority of Medicines and Health Products/

Portugal (public institution).

Ɩ Inov Capital – Public Agency for investment/Portugal (nowadays

incorporated in Portugal Ventures).

Ɩ IPC – International Patent Classification.

Ɩ Lilly – Pharmaceutical Company/Multinational (origin US).

Ɩ QREN – National Strategic Reference Framework.

Ɩ R&D – Research and Development.

Ɩ SMO – Site Management Organization.

Ɩ Teva – Pharmaceutical Company/Israel (Generic drugs).

Quality standards Ɩ ISO – International Standards Organization – 9001:2008 (quality);

14001:2004 (environmental management).

Ɩ OSHAS – Occupational Health and Safety Advisory Services

– 18001:2007 (security, hygiene and occupational health).

Ɩ EC – Eco-environmental – 761/2001 (eco-management and auditing).

Ɩ NP 4457:2007 – Management of Research, Development and Innovation

(RDI) RDI management system requirements.

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Case Study

Bluepharma

THIS TEACHING NOTE COMPLEMENTS CASE STUDY “BLUEPHARMA:

RE-STARTING-UP AN APPROACH TO INNOVATIVE BUSINESS DEVELOPMENT” (ISBN 978-989-95583-7-3).

2015