Glaxo's Biotechy World

| About: GlaxoSmithKline (GSK)

The Wall Street Journal was out yesterday with a big story on GlaxoSmithKline's (NYSE:GSK) current research structure. The diagnosis seems pretty accurate:

Glaxo's experiment is a response to one of the industry's most pressing problems: the failure of gigantic research staffs, formed through a series of mega mergers, to discover new drugs. The mergers helped companies amass potent sales-and-marketing arms, but saddled their R&D with innovation-stifling bureaucracy. . .

The company's current strategy is to break things down into even smaller teams (often with their own names and logos) and to try to apply small-company incentives to them. That goes for both the positive and negative incentives:

The scientists in Glaxo's new biotech-esque groups know the clock is ticking. Called discovery performance units, or DPUs, the groups are about halfway through the three-year budgets they were given in 2008. Glaxo has made it clear that if the team members don't produce, they could get laid off. . .(the company also) says it's trying to get closer to the financial rewards of biotech. In some cases, it is setting aside "a pool of money" for scientists involved in a certain project. . .each time their experimental drug clears a certain hurdle, they get part of the money. . .

Of course, as the article also makes clear, the company has been through supposed newer-and-better re-orgs before. And that included schemes to break the company's research into more independent units. Those "Centers of Excellence in Drug Discovery" were supposed to be the last word eight or ten years ago, but apparently that didn't quite work out. The current philosophy seems to be that the idea didn't go far enough.

True or not? History doesn't give a person much reason for optimism when a large company says that it's going to get more nimble and less bureaucratic. You can make a very good living printing up the posters and running the training seminars about that stuff, but actually getting it to work has been. . .well, has anyone gotten it to work? Andrew Witty, the company's CEO says in the article that he doesn't see any contradiction in having "hugely successful entrepreneurial innovation" inside a big company, but real examples of that are thin on the ground - especially compared to the number of examples of such innovation being fought to the ground when it attempts to spring up.

That's not to say that this approach can't improve things at GSK. I think it's bound to be a good thing to turn people loose to make more of their own decisions, without feeling as if there's someone hovering over their shoulder all the time. But I don't know if it's going to be the revolution that they're hoping for (or the one that they might need).