I took a break last week from digesting the daily menu of industry calamities to speak at a conference of drug and biotech science execs on how newspapers got into their current fix.
Big Pharma is not doing as well as it used to, you may have heard, increasingly
turning to mergers to mask slowing growth. The organizers of the Miami conference, coyly titled rEvolution, were hoping for lessons from industries in far worse shape. That's how I came to share the stage with, among others, Alan Taub, director of research and development at General Motors.
Let me play back parts of the conversation in reverse -- how the issues of some other industries bear on ours.
Pharma seems to be where newspapers were a decade ago, even five years ago -- loaded with cash, still highly profitable, but experiencing marked reduction in revenue growth. Cracks have appeared in the pipeline of developing new medicines and selling them for years as high-priced, proprietary brands.
The Rx has been a bunch of mergers, which has made bigger (and perhaps more efficient) companies but has added big debt loads in the process.
"Don't do that," I suppose I should have shouted, "or you may end up like Tribune and McClatchy, still operating profitable units but choking on interest payments."
Give credit to the pharma folks, though; the company executives smell trouble, rather than blowing off criticism by outside analysts -- as the newspaper industry did when Monster, Craigslist and Google were in the early stages of eating their print classifieds lunch.
Pharma, unlike newspapers and autos, is not especially sensitive to recession. But generics and managed care have put pressure on the old reliable of high-priced, breakthrough medicine. The companies are casting a wider net for research collaborators rather than trying to do it all in-house. And the industry is focusing on cutting-edge treatments that go beyond the standard pills and devices into such novel concepts as personalized, targeted medicine that's heavy on gene research. Do some of these threats sound familiar?
Turning to GM, Taub spoke about the
Chevy Volt, a hybrid electric/fuel-burning car to be released in 2010. The car, which is on a much faster development track than is typical for the company, represents a calculated gamble on what green-minded consumers are looking for. (The Obama administration
trashed projections of how the Volt will sell as overly optimistic in its semi-takeover of GM over the weekend.)
Under questioning, Taub was candid about how much the American auto companies have been hurt by their insular, in-house approach to R & D. You're talking about three companies, all based in the same place, whose execs know each other and live in the same suburbs. Only belatedly have the Big Three woken up to the value of spreading research around and bringing in fresh insight from a diverse group of vendors.
Richard DiMarchi of Indiana University posed a tough question for all of us. Commitment to change and experimentation is great, but do we have a clear sense of how companies or industries that have successfully transformed did it? Taub and I suggested that some of the classic examples -- Western Union becoming a specialist in financial transfers, IBM fleeing mainframes for a computer solutions approach -- were instances of companies reimagining and reinventing themselves as a fundamentally different businesses.
That's a topic worth more reflection on another day. For now I'm pretty sure that GM, Big Pharma and newspapers all know they need a reformulated business model, but aren't there yet.
