Category Archives: Business Development

What You Can Learn from an Orchard about Growing your Business

Apples

Approach building your company like planting an orchard. Be sure that you know what your customers want today but also a few years down the road as well.

By:  Andrew Johnson, Ph.D.

What does growing apples have to do with building a life science company?  It turns out that there are a lot of similarities if you look closely.  A successful orchard requires a huge investment in planning (what variety of trees, how much of each, etc.), effort (a lot of work before the first harvest), finances (cost of land, labor, farm equipment etc.) and time (trees need a number of years to mature before your first harvest) to become successful.  The successful orchard keeper needs to have a good assessment of what types of fruit his customers will want in a few years and also how he can differentiate his own business from other orchards in the area to compete successfully.  The leadership of a strong life science business needs to think in the same terms.  What need will your offering(s) fulfill in the future and why will customers come to you rather than to your competitors?  With an orchard, once you plant the trees, you are now committed to your view of the future market for your products and now everything is about nurturing your trees until you have your first harvest.  With a startup, once you have selected a product and/or service, all of your efforts will be to get it successfully to market.  The orchard keeper cannot rip up trees next year if he thinks that the market for his fruit has changed.  Likewise, most startups do not have the funds (or time) to scrap a product offering once they are working to get it to market.  The lesson here is, make sure to spend enough time to understand your market, your customers and how you will successfully sell and then commit to a laser-like focus for getting that offering to market as soon as possible.

Tips for Building a Strong Startup:

  • Plant Trees:  Build your company for strong and steady future business.  Whether you are offering a platform, service or a one-time sale of a large instrument, referrals are the key to efficiently growing profitably.  Winning new customers is costly so getting referrals from happy customers is like harvesting apples in the fall.  The time, effort and investment you put into winning strong early customers will pay off as they share their experience with your future customers.  Building a scalable infrastructure that consistently and efficiently delivers the goods that delight your customers will insure success in the long run.
  • Build a Barrier to Entry:  It takes a while to plant and nurture an orchard.  However, once your trees have matured, you will have happy customers coming on a regular basis.  Building strong relationships with key opinion leaders, establishing preferred vendor status with organizations and establishing your company as a market leader in the technology is a lot like planting new trees.  There is a lot of prep work up front and the rewards are not immediate but once you have done this, this makes it very difficult for competitors to come into the market later.
  • Plant some Pumpkins Too:  As a startup, you need to start generating revenues as soon as possible to prove out your business.  Your team will need to put a lot of focus on getting your first sales and creating happy customers.  Many startups make the mistake of neglecting to build in some time for creating a scalable and profitable business.  You will be planting and harvesting an annual crop like pumpkins to do this. Developing a product road map that contains both near term (pumpkins) and long term (apples) offerings will allow you to get to market faster and get the insights you need to insure a better outcome with your later prospects. However, the key here is using what you have learned about your customers, their wants and needs and enthusiasm for your offering to build an infrastructure that will allow you to maintain the high level of customer satisfaction that will lead to referrals from your customers (See first point – Plant Trees).

Take Home Points:

  • Start building relationships with key opinion leaders and strategic partners early (even before the launch of your first product or service).
  • Use the insights you gain of your customers’ wants and needs from early sales to guide your efforts as you scale the business.  (e.g. if you will start selling using distributors, make sure that you build in an infrastructure (tech support, technical inside sales, social media outreach, etc.) to maintain the level of support and service that your customers valued in the early days).
  • Everything you do and every interaction you have with the public will shape your brand.  A strong positive brand can be a powerful barrier to block your competitors.  Clearly identify the brand identity you would like to have and make sure that you and everyone in the company reinforce this in everything they do and with every interaction with the public.

Picture Credit:  © Sofiaworld | Dreamstime Stock Photos & Stock Free Images

Don’t Miss the ‘Good to Great’ Way to Startup Success

By Andrew Johnson, Ph.D.

Rocket blast off

Achieving breakout success for your startup is all dependent on what you do before anyone has even heard of you. Do this right and there is no stopping the heights you will attain and the success you will enjoy.

There are no shortages of stories of great ideas and entrepreneurs that, for one reason or another, failed to achieve commercial success.  Is there some secret to getting this right that is being tightly held by the winners in this Darwinian race to startup glory?

Jim Collins investigated this phenomenon in his book, ‘Good to Great:  Why Some Companies Make the Leap and Other’s Don’t’ more than a decade ago.  He selected 11 publicly traded US companies from the ‘Fortune 500’ that consistently out-performed the market by 30% for at least 15 years after an initially lackluster performance of 15 years.  He compared these ‘breakout’ companies to their industry matched (same size, market, revenues in the previous 15 year period) counterparts to see what was behind these company’s’ incredible success.   Mr. Collins and his team used publically traded US companies since there was a wealth of publically available data for him and his team to use to figure this puzzle out.

A look at the stock market valuations of the ‘breakout’ companies compared to their market average counterparts shows that any two comparison companies tracked one another for at least 15 years and then the graph of the returns for the breakout company would just skyrocket up consistently for at least 15 years (some showed even more dramatic growth both in size and duration).  This is the type of financial performance and success that every startup team dreams of achieving as well.  However, this study was originally done with well-established companies whose revenues were high enough to rank them as the top earners in the US.  What, if any, of the findings here could be relevant to a startup?

The Secret Sauce
The answer:  Many of the ‘Good to Great’ findings are a perfect fit for startups as well.  Many of the principles that drove the success of the ‘breakout’ companies in Jim Collins’ study are applicable to startups today.  The following insights are inspired by the findings of the ‘Good to Great’ team but have been adapted for startup stage companies.

  • Selecting your leadership:  The ‘breakout companies’ were all lead by top performing CEO’s that many had not heard of before.  This is because they were not celebrity CEO’s that were interested in driving their own ego’s and compensation, but passionate ‘get-it-done’ leaders.  Startup CEO’s rarely have this issue.  The reason is that entrepreneurial leaders are passionate for transforming their startup into a successful company.  The only ‘watch-out’ here is that sometimes investors will insist on the placement of an experienced executive (well-known outsider) at the helm based on the misconception that this will boost the chances for success.  When this occurs, it is important to make sure that this leader shares the passion for driving the company’s success (rather than their own) first.  In other words, a leader that has an enviable track record of creating long-lasting successful companies rather than just a big name in the industry.
  • Building your team:  The ‘Good to Great’ findings showed that all breakout companies spent some time making sure that they had the right team in place before they worried about their strategy for transformation.  The startup is spared the need of ridding the team of ‘dead wood’ if it focuses on only hiring the very best from day one.  The reason that this effort precedes developing your strategy is that you need the input of a top performing team to come up with the best strategy here.  Another benefit of hiring the very best even before you fully know exactly what all of your needs are is that they will require much less care and handling and help to create a culture of excellence from day one.
  • Facing the music:  All great ‘breakout companies’ had some moments of truth were they discovered that they were in the wrong business or that the market had changed in such a way that they could no longer count on being number 1 or even 2.  Once the truth has been faced, the team can then rally to develop a strategy to redirect the company into a more successful and profitable direction.  Startups with a good leader and a solid team can face the realization that they might have a great technology that has no compelling market early on.  This team , working from these facts, is now in the best position to make the necessary pivots in the early days (before too much cash and time) is wasted to direct the company in a new and more promising direction.
  • Refining and sticking to your focus:  Jim Collins called this the ‘Hedgehog Concept’ (The Fox knows many things but it is the Hedgehog that knows the one most important thing).  This is all about focus and not being distracted by outside interests that do not serve your central strategy to succeed.  The ‘Good to Great’ team found that this central guiding concept (The Hedgehog Concept) was composed of 3 things that are roughly 1) identifying what you are best in the world at, 2) what you are most passionate about and 3)what business model will best transform this passion and world-class talent into financial success.  The startup concern will need to do the same reckoning and this is not always an easy thing to do.  Insight will come from both an honest assessment of the capabilities and talents of the team as well as a reasonably good estimate of how you can successfully commercialize this.  Focus is usually not an issue in the early days for the startup.  This becomes more of an issue after the company has enjoyed some commercial success.  The key here is to stick to this central focus of the company (The strategy for taking you to number 1 in the market) when exploring opportunities for growth from everything from product line expansions to strategic partnerships and acquisitions.  Anything that does not contribute to your core strategy should be ignored.
  • Nurturing a culture of discipline:  Remember that we recommended hiring only the best people for your team.  If you have done this well, you will already have built a culture of discipline.  Many of us have seen the gimmicks and marketing efforts that companies use to ‘motivate’ their employees to do more for the company.  If you have the right people in the company in the first place you won’t waste one minute or one dollar on this since everyone is already aligned with your goals for the company.  Essentially with a culture of discipline, you will not need to find ways to get your employees to get the job done as they will likely already be well on their way to completing this.  Make sure that you continue to follow the high standards you used in the early days as you continue to grow the team.  ‘Quality People’ over finding the cheapest person to do the job will always be more valuable in the end.
  • Turning the ‘Flywheel of Success’:  Success does not come overnight.  The ‘Good to Great’ team found that there was never one event or decision that lead to the company’s success.  It turns out that it was the accumulation of a thousand little things being done right that lead to breakout.  For a startup, this is about meeting challenges every day and working together to achieve that one central goal of first getting the company to market and then building its fortunes after a successful launch.  This last point is kind of a recap of all the others in that with the right leadership, the right team will be hired and with the right team and leadership the right path to success will be found and then the team will work hard together to achieve this goal step by step every day.  Judicious and frequent use of refining and following your central strategy will easily allow the team to determine if a given action or decision will be a push that increases the momentum of the ‘flywheel’ or not.

Putting it all together
It can often look like ‘breakout companies’ just popped up out of nowhere.  Whether they are the next Apple Computer or Genzyme, startup or well-established, this comes about more from the way that the popular press covers these companies than reality.  Jim Collins and his team found this to be true in his study and it is true for the budding startup as well.  The ultimate factors that best predicted for success turn out to be with those companies that are fortunate to have a passionate and capable leader, strong ‘results focused’ team and a single minded discipline and focus to do what is most important for the growth of the company.  The road to success may be long but following these great insights will insure that you stay on track.

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The Next Step: Partnership or Business Alliance?

By:  Michael Kaiser

4 people and puzzle

Business partnership or alliance? Get this right and build your company.

Here is an imaginary (yet realistic) scenario: after much effort, your company has earned the “growing business” label in your industry. In order to keep its growth momentum, the time has come to choose one of the two alternatives listed below.

Partnerships
A partnership is an   arrangement where parties agree to cooperate to advance their mutual   interests. In the most frequently associated instance of the term, a   partnership is formed between one or more businesses in which partners   (owners) co-labor to achieve and share profits and losses.

A business partner is a commercial entity with which   another commercial entity has some form of alliance. This relationship may be   a contractual, exclusive bond in which both entities commit not to ally with   third parties. Alternatively, it may be a very loose arrangement designed   largely to impress customers and competitors with the size of the network the   business partners belong to.

Of course, there are also downsides to partnerships, the   most significant ones being:

“1) The business-related acts of one partner can legally   bind all other partners. So it’s essential that you enter into partnerships   only with people you trust. It is equally essential that, no matter how much   you trust your partners, you execute a written partnership agreement   establishing each partner’s share of profits or losses, day-to-day duties,   and what happens if one partner dies or retires.

2) A disadvantage of doing business as a general   partnership is that all partners are potentially personally liable for all   business debts and lawsuits. Each partner is financially responsible for his   or her share of the business debt. But in many cases, it is the partner with   the greatest assets who loses the most if the business fails. Of course, a   good insurance policy can help reduce lawsuit worries, and many small, savvy   businesses don’t have debt problems.” (Yahoo)

However, to make up for the above, one of the most   important aspects (and advantage) of a partnership is the ability to work   under the umbrella of a Limited Liability Company (LLC), described as a   flexible form of enterprise that blends elements of partnership and corporate   structures.

“An LLC is not a corporation; it is a legal form of company that   provides limited liability to its owners in the vast majority of United   States jurisdictions. LLCs do not need to be organized for profit. Certain   types of businesses that provide professional services requiring a state   professional license, such as legal or medical services, may not form an LLC   but use a very similar form called a Professional Limited Liability Company   (PLLC).” (Wikipedia)

Business alliance
A business alliance is an agreement between businesses, usually motivated by cost reduction and improved service for the customer. Alliances are often bounded by a single agreement with equitable risk and opportunity share for all parties involved and are typically managed by an integrated project team. There are five basic categories or types of alliances:

  • Sales alliance
  • Solution-specific alliance
  • Geographic-specific alliance
  • Investment alliance
  • Joint venture alliance

“In many cases, alliances between companies can involve two or more categories or types of alliances.” (Wikipedia)

A sales alliance occurs when two companies agree to go to market together to sell complementary products and services. A solution-specific alliance occurs when two companies agree to jointly develop and sell a specific marketplace solution.

A geographic-specific alliance is developed when two companies agree to jointly market or co-brand their products and services in a specific geographic region. An investment alliance occurs when two companies agree to join their funds for mutual investment.

A joint venture is an alliance that occurs when two or more companies agree to undertake economic activity together. It is an agreement whereby the parties agree to develop, for a specific time, a new business entity and new assets by contributing equity, i.e., they share revenues, expenses and assets.

There is a difference between a partnership and an alliance as described below:

“An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project. A strategic alliance is less involved and less permanent than a joint venture, in which two companies typically pool resources to create a separate business entity. In a strategic alliance, each company maintains its autonomy while gaining a new opportunity. A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities.” (Investopedia)

Epilogue
There are specific advantages for a growing company to either seek a partnership or a business alliance, but it must be remembered that those advantages are quite different, one from the other. In general, a business alliance should not be undertaken unless you started with a partnership and are protected either by and LLC or S-Corporation shield.
 
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A Socio-Economic Theory of Emerging Economies and Technology Development

By:  Michael Kaiser

Old Sailing Ship

Understanding the socio-economic forces that drive the economies of international customers will help your company’s growth overseas

The Historical Precedent
In a previous article (New Globalization Trends = New Startup Opportunities) I described
globalization and its continuous fine-tuning of technologies, business and society. But globalization is not a recent geo-political or geo-economic phenomenon. Rather, we can safely say that the concept of trade between nations as we know it started with the Phoenicians, who were among the greatest traders of their time and owed much of their prosperity to their talent for commerce. Centuries later, international trade continued with Marco Polo’s trips to Asia, especially China. They preceded the onset, and set the tone, for present day global business standards by centuries. These two historical examples serve as an advisory to emerging economies that global trade is serious business (pun fully intended).

Two socio-economic theories, and the winner is…?
The late Neil Postman, a professor and media critic at New York University, postulated that “technological change is not additive; it is ecological. A new technology does not merely add something; it changes everything”.

A respected humanist and media critic, one wonders if Postman reluctantly conceded that the old conflict between Dependency (Dependency Theory) and Modernization (Modernization Theory) ended in favor of the latter. Whereas Dependency can be described as a social model that condemned economic colonialism, Modernization is a closer model of evolving economies and technological development. Unlike Dependency, which reached its apogee in the 1960’s and 1970’s, Modernization remains a viable and applicable model to this day.

Basically, Modernization defines the positive impact of technology on societies where poverty is the standard rather than the exception. It is worth mentioning that Modernization preceded the advent of Dependency, but paradoxically, it was its failure of viable social and economic solutions that led to the rebirth of Modernization, with its eye to the future. Dependency had a legitimate socio-political argument, but one that attempted to find solutions to narrow the chasm between developed and under-developed or emerging economies at a time when PC’s, cell phones, internet, and the sundry information technologies assisting international communications in business and social affairs where not even available in developed countries. The first IBM PC was marketed in 1981, and by then Dependency had seen its better days. The next decades, to the present day, witnessed advances in technology and financial clusters that can be best described as moving from days and hours to mere nanoseconds.

The rebirth of Modernization is due to its emphasis on transplanting information and other technologies, higher education and communications to those countries approaching or designated as ‘emerging economies’. It can be argued that one unexpected contribution of Dependency lies in the very targets it was addressing, (the periphery or semi-periphery) because those countries  disavowed the theory itself and were forced by overwhelming new technologies and communication tools to modernize, instead of blaming the wealthy, developed countries for their perceived ‘westernized exploitation’ supremacy.

The example of two BRIC countries
Globalization has been the force that changed the policies of growing economies. Nowhere was the case for Modernization more evident than in two BRIC countries: India and Brazil. The most populated democracy in the world, with a population exceeding 1 billion, India is a country divided by politics, areas of abject poverty or great wealth, religion, social origin and language differences (although English remains the language of business and international relations). Starting in 1991 and continuing to the present day, the two major rival political parties of India committed to improve the economy and development of the country, and thus, India set an example for modernization success. The Indian Institutes of Technology, spread over several locations, not only compare with the most advanced ones in the Western economies, but earned a reputation for their rigorous R&D. The wave of information technology and life sciences specialists from India started in the early 1990’s and created a new wave of entrepreneurship and global companies, e.g., the TATA Group, InfoSys, Wipro, Cognizant, Mahindra Group, and international pharmaceutical companies like Ranbaky, Sun Pharma, Dr. Reddy, Lupin, Torrrent, etc. In addition, India hosts some of the largest American and European corporations.

Brazil is a different case, but equally interesting because it actually used to be at the center of Dependence theory led by local sociologists, as well as André Gunder Frank, Dependency’s most prominent academic author and analyst.

Their very different cultures not withstanding, India and Brazil made the decision to make radical changes to their economies in the early and middle 1990’s. By 1994, when Fernando Henrique Cardoso became the country’s President, the social theory that fought against the imposing strength of developed centers against the countries of the periphery and semi-periphery no longer played a role in the economic future of Brazil. In Henrique Cardoso’s two terms as President, the Brazilian economy took a significant leap forward and when Luiz Inácio Lula da Silva, a union leader and head of the opposition Worker’s Party became President, he kept his country on an evolving economy track. Like India, Brazil is also known for dramatic, visible differences between the poor, the middle class and the well-to-do, despite being ranked as the most important economy in Latin America and one of the largest one in the world (Economy of Brazil) as well as a top automotive and international aerospace manufacturer, Embraer.

The University of São Paulo and the Oswaldo Cruz Foundation are advanced academic institutions of research. The Butantan Institute is the largest producer in Latin America (and one of the largest in the world) of immunobiologicals and biopharmaceuticals. In 2001 it produced approximately 110 million doses of vaccines and 300 thousand vials of hyper immune sera. The institute produces 90% of the vaccines used in Brazil. The anti-hypertensive ACE inhibitor, lisinopril, is a synthetic structural analog of a peptide derived from the venom of the ‘jararaca’, a Brazilian pit viper (Bothrops jararaca). The Vale Corporation and Petrobras (Petroleo Brasileiro, S.A) are global giants, Vale in mining and Petrobras in oil and gas. This year a new wave of social discontent is emerging, one that could compromise Brazil’s hard-won economic growth. Time will tell.

Brazil’s close to 200 million inhabitants cannot compare with India’s 1.2 billion, but it has a significant advantage over its Asian partner: Brazil was and still is a country of immigrants. From the early Dutch and Portuguese, to Italians, French, German, Syrian, Lebanese and other nationalities, Brazil has benefited from that international influx, comparable to the U.S., Canada and Australia. India, on the other hand, stands out for its unique expertise in the field of information technology, pharmaceuticals and its thousands of entrepreneurs spread overseas.

Epilogue
Although the notion that America is the easiest country for technology startups and innovation financing is being challenged, it still deserves its place as the source of opportunities, innovation and entrepreneurial spirit, qualities that seem to hark back to the need for achievement, described by David McClelland in his 1961 magnum opus “The Achieving Society”.  Worth recalling Neil Postman’s observation that: “… A new technology does not merely add something; it changes everything”. Does that mean that we are experiencing Aldous Huxley’s somber, satirical “Brave New World” and “Brave New World Revisited”? Or will countries with different cultures decide to adopt policies of rapid development for the benefit of their people?

Globalization was the target, the objective of both Dependency and Modernization. The evolution of communications and travel facilitated the improvement in the health care of both poor and emerging societies; this in turn increased the number of able workers in countries that could not absorb all of them, forcing large emigrations to the developed countries. By contrast, the developed countries witnessed the meteoric demand of their citizens for more goods and higher living standards as the prerogatives of better education and high-technology. Based on the importance of comparative advantages and their connection with free trade agreements between countries, it is safe to predict that Modernization will continue to fall under the magnifying glass of social and economic analysis and evaluation.

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Modernization Theory

Dependency Theory

Globalization

Indian Institutes of Technology

Brazil

Picture credit: Wikimedia Commons, Nanban Carrack

New Globalization Trends = New Startup Opportunities

globe over water

Issues of outsourcing and insourcing become especially critical during the growth phase of any startup.

By:  Michael Kaiser

For at least two decades, if not more, globalization has become the ‘karma’ for social, economic and political discussions.  And yet, the “jury is still out”.

What Is Globalization?
The impact of technology on globalization as been extensively reviewed and will continue to be so for the simple reason that technology is developing faster than globalization. I have chosen two slightly different interpretations of globalization:

1. Globalization refers to processes that increase world-wide exchanges of national and cultural resources. Advances in transportation and telecommunications infrastructure, including the rise of the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.

The term globalization has been in increasing use since the mid-1980s and especially since the mid-1990s. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge. Further, environmental challenges such as climate change, cross-boundary water and air pollution, and over-fishing of the ocean are linked with globalization. Globalizing processes affect and are affected by business and work organization, economics, socio-cultural resources, and the natural environment.  Globalization | Wikipedia

2. The tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets. Globalization has had the effect of markedly increasing not only international trade, but also cultural exchange. The advantages and disadvantages of globalization have been heavily scrutinized and debated in recent years. Proponents of globalization say that it helps developing nations “catch up” to industrialized nations much faster through increased employment and technological advances. Critics of globalization say that it weakens national sovereignty and allows rich nations to ship domestic jobs overseas where labor is much cheaper.  Globalization | Investopedia

Outsourcing and Insourcing
One of the key roles that globalization played for the United States, and one that generates to this day intense pro- and con- arguments is the issue of outsourcing.  Its negative impact on the manufacturing industry of the country has been thoroughly discussed and needs no repeating.

Now some good news have emerged for the opponents of outsourcing, and simply put, is the opposite: insourcing. In the December 2012 issue of The Atlantic magazine James Fallows and Charles Fishman explore this trend in separate articles that point with examples to a return of manufacturing in the United   States.

But can it be argued that outsourcing was always a negative one-way process, and thus represented all that was bad about globalization? The fact is that insourcing was already visible in the automotive industry of the country, with Toyota, Hyundai, BMW, Mercedes-Benz and other foreign car manufacturers establishing advanced manufacturing facilities in several states. The same was the case with some foreign pharmaceutical companies like Roche and Novartis who built large R&D and manufacturing facilities.

In both industries, automotive and pharmaceuticals, insourcing represented a two-way street in favor of the local and national economies, to the benefit of contractors, parts manufacturers and clinical research organizations.

There is no doubt that the wave of outsourcing in the last two decades led to irreversible losses to the number of manufacturing employment all over the US, including household needs and clothing; the reason was the cost of local manufacturing vs. foreign ones. Countries like China, India, Mexico, Brazil, Thailand, Viet Nam and other emerging economies eagerly answered to the demand for cheaper (but brand name) products. The US was not the only client, the European Union was not far behind and so were a limited number of Latin American nations. It was clear that globalization led to a major socio-economic shift, and more significantly a political one between the US and China, the latter emerging as the single most important competitor and provider to nascent and developed economies.

China and…
It cannot be ignored that the demand described above had a beneficial effect for the elephantine supplier that China became across the globe (and to a lesser degree two other BRIC countries, India and Brazil).  The local demand for the goods that it was producing for its clients changed Chinese society in a way that could not be predicted in the early 1990’s. A plethora of entrepreneurs and foreign manufacturers from General Motors and Apple to Italian and French clothing emerged
in response to its emerging middle class demand for Western goods. Chinese tourists started slowly showing up, in a manner reminiscent of the Japanese tourists in the late ‘50s and early ‘60s. But there was a significant difference: information technology in the form of internet, mobile phones, tablets, etc. which the Chinese eagerly adopted, a form of cybernetic tourism. But let me dispel the notion that all is roses, and for that no one better than James Fallows, not only in last December’s article, but in his many previous ones during his years in China as a reporter for The Atlantic magazine. His description of the brutal working conditions in many manufacturing facilities, even like the Foxconn one, is sobering to say the least.

As Charles Fishman describes in his article, the return of General Electric’s important home appliances business to their original Ohio base became necessary because the cost of outsourcing to China had reached a higher level than manufacturing in the United   States. (The Insourcing Boom | The Atlantic)

James Fallows explains why insourcing is returning back to the United States:

“Through most of post–World War II history, the forces of globalization have made it harder and harder to keep manufacturing jobs in the United States. But the latest wave of technological innovation, communications systems, and production tools may now make it easier—especially to bring new products to market faster than the competition by designing, refining, and making them in the United States. At just the same time, social and economic changes in China are making the outsourcing business ever costlier and trickier for all but the most experienced firms.

For Americans, the most important factor is the emergence of new tools that address an old problem. The old problem is the cost, delay, and inefficiency of converting an idea into a product. Say you have an idea for—anything. (For me, the list would start with silent leaf blowers, which I’d give to all my neighbors as gifts.) Before you can earn the first dollar from the first customer, you have to decide whether the product can be built, at what cost, and how fast, so you can beat anyone else with the same idea.”  Mr. China Comes to America | The Atlantic

This is not a case of a business analogy of “The China Syndrome”, the eponymous 1979 movie with a cast led by Jack Lemmon, Jane Fonda and Michael Douglas. Rather one should see insourcing as a corrective issue at a time of global financial dislocation, and the notion that China is folding its arms should be immediately discounted from this analysis. As a matter of fact, and paradoxically so, the American insourcing trend frees China to further develop and provide its global customers with its own line of automotive, appliances and other products, very much like Japan and South Korea have done in the past and up to the present time.  For China, the legendary Middle Kingdom, this will be a very different challenge to its present role as the global outsourcing destination.

The Other One
Another case of outsourcing and insourcing is India. Together with its neighbor China, they are the two most populated countries in the world, with an increasing middle class that looks to the US and Europe as their standards of social and economic improvement. The advantage that India had over China was its use of English in all its scientific and business endeavors, but China is rapidly meeting the challenge in that area as well. America may have outsourced clothing and other cotton and synthetic materials, but it insourced a gold price from India: software expertise in the thousands and thousands. India’s domestic industry did not fold its arms either and was able to provide its own manufacturing of heavy equipment and automotives. The Tata conglomerate acquired that British treasure, the Rolls Royce car and generic pharmaceuticals where manufactured by dozens of Indian companies, who in turn moved some of their manufacturing facilities to, yes, you guessed, the US.

Epilogue
As far as globalization in general is concerned, its future development will be measured by how well advanced and emerging economies and societies interact with each other and how they manage contrasting socio-political theories.

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Note: A personal “Thank You” to Andrew Johnson, Ph.D., for referring me to The Atlantic articles listed above.

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Developing Opportunities in the Life Sciences: A Birds-Eye Review

Bald Eagle Soaring

Keeping a Birds-Eye view of the opportunities shaping the life sciences will allow you to develop effective strategies while keeping your head out of the clouds.

By:  Michael Kaiser

A brief preface: although the developing opportunities listed below refer to the life sciences, they can be adapted to the specific needs of other industrial sectors as well.

1. New Frontier: Stem Cells, Bioinformatics, Genomics, and Proteomics

a)  Stem Cells
bBioinformatics
c)  Genomics
d)  Proteomics

(See descriptions of a), b), c) and d) under “General References and Additional Reading”)

The high R&D cost of these “New Frontier” opportunities demands exposure and experience in dealing with academia, scientific personnel and the highest levels of corporate savvy and investment sources; their ultimate value more than merits the effort.

2. Biomaterials
Biomaterials include implant prosthesis, biochips, nanotechnology, fiber optics for minimally invasive implant or corrective surgery and biochemical suturing. They represent a valuable business opportunity for improving human health and a significant contribution in reducing healthcare costs.

3. Intellectual Property
This is a critical solution in protecting nascent opportunities in high-technology sectors. When the topic of intellectual property is discussed, one cannot but bring to mind the title that Kevin Rivette and David Kline came up for their book on the subject: “The Rembrandts in the Attic. Unlocking the Hidden Value of Patents”.

The potential legal implications of violating a patent requires the assistance of expert counsel in areas such as innovation, field of use, royalties, head-of-agreement terms, etc. Although being an expensive process that can negatively impact the financial resources of a biotechnology start-up, legal IP expertise also serves the purpose of prosecuting copy-cats.

4. Competitive Advantage
Competitive advantage: the key challenge and opportunity in commercial transactions and outcomes; its success lies in the axiom “Understand your competition as well, if not better than thyself”.

No company, be that a startup or established corporation, can afford the absence of competitive strategies. Skills in knowledge management and data mining are useful in the planning of corporate strategies in addition to the regular update of marketing e-commerce and social media tools used in the competitive analysis that precedes a successful commercialization. A clear understanding of information transfer technologies, e-commerce and sales and marketing tools is now an essential requirement in competitive analysis.

5. Entrepreneurship and Structure
Ideally, the entrepreneur enjoys and thrives while working in an innovative, fast-paced environment. However, the reality of the economic marketplace suggests that equal attention should be given to the role of ‘intrapreneurs‘, those executives who implement a formal corporate-like structure to reflect the vision of the entrepreneur’s initiative in a manner that conveys a more established and organized company image to investment sources.

6. Globalization
This one is the quintessential opportunity for any business sector and not just for a selected few because it implies an in-depth knowledge and understanding of the socioeconomic and political factors affecting the conduct of business in different regions. Just like we refer to startup companies, we can also refer to growing national economies, e.g., the BRIC countries.

The liberalization of world trade and the integration of regional markets such as the EU, NAFTA and ASEAN dovetail with organizations such as the WTO and GATT. Paradoxically, in the process of lowering trade barriers the pendulum has swung too far and we see an increase in protectionism by both industrial countries and newly industrialized ones. Furthermore, the fact that the Internet became an effective communications facilitator in no way replaces the unique value of face-to-face personal contact in all endeavors of business, sciences and humanities.

7. Mergers and Acquisition; Strategy and Technology Evaluation
The impact of IT has accelerated the process of consolidation and integration in the life sciences, particularly in those cases where a large pharmaceutical concern and a biotechnology company with a valuable technology platform are concerned. Shareholders, institutional investors and venture capital companies have much higher expectations, with a short time horizon, for a return of their investments.

Therefore, the cost of M & A’s requires a thorough analysis of corporate synergies, innovative financial instruments and fundamentals, experienced investment bankers and financial institutions, assessment of net present valuation and internal rate of revenue, evaluation of technology and future corporate strategy, top management succession, and ability to transfer technologies across corporate and international boundaries.

GENERAL REFERENCES AND ADDITIONAL READING (Links)

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The Successful Life Science Company: Three Tips to Insure You Survive Your Success

By: Andrew Johnson, Ph.D.

Keeping your expanded team well informed, supported and rewarded will insure the continued growth of your company.

Keeping your expanded team well informed, supported and rewarded will insure the continued growth of your company.

What do you do when things start to go well?  Sounds like an odd question but it is something that every Life Science entrepreneur should consider even in the early days.  It is very easy to lose sight of the intangible contributions of your early team as you start to have some compelling profits and the company is growing.

The early days
When you are just getting started, you will have a small but very passionate, focused and solid team.  (If you don’t have this, you soon will not have a business at all).  You can easily sit around the same table at lunch and share what is going on, your ideas for what should happen next and anything else that concerns the company.  Furthermore, everybody is more than willing to put in the insane hours and total commitment it takes to build your company’s success.

What happens when you start to see success?
You and the team have launched your first product or service and you are beginning to see revenues and maybe even some profits.  At this point you and the early founding team may have added a few more people but it is still possible to squeeze together in the same room.  Whether you realize it or not, the culture of your company is by necessity changing.  With the growth of your company, the way that you communicate and get things done needs to scale as well.  This is where some processes and procedures come into play.  Ad Hoc worked well when it was just three of you.  This cannot work as the team grows.  There needs to be communication between the R&D and Sales & Marketing teams but it would be a waste of time and resources to call all of you sales people in for every R&D meeting and vice versa.

Nurturing the goose that laid the golden egg
At the start, everything was about getting your first product or service to market.  Now that you have successfully launched, you need to grow and expand profitability by boosting sales with your commercial team, reducing costs with your operations team and begin and expand your market reach with ‘follow-on’ products (or services) by launching your next product development effort and/or business development efforts.  You need many more hands to get this all done and so the team will now grow significantly (sometimes doubling and tripling in size).  Many will bemoan the loss of the ‘small company feel’ but if you hope to be successful transforming the company from its startup roots, this  is essential.

The easier part here is to start to adopt some of the tried and true processes and procedures that are often associated with large established companies (you just need to scale these down to fit your company so that you don’t import a bunch of bureaucracy).  The hard part is maintaining a positive culture.

Keeping it ‘real’ with the new team
Your company works best when everyone’s individual goals and aspirations are well aligned with the company.  In the early days, only those people that shared your passion and vision would have joined as founders.  By definition you are all aligned and that is partly because you will each individually be successful if the company is successful (financially, better reputation, etc.).  Later employees will often not be well aligned as they do not have the same interests and passions as the founders (the link between their personal success and that of the company will usually be weaker).  However, the company will do best when it can utilize all of the talents, intelligence and ideas of everyone on the payroll.  Get this right and you will see a continued positive impact on the bottom line.

Tips for Boosting Innovation as Your Company Grows:

  • Adopt empowering HR policies.  Consider why someone at the bottom of the compensation scale would want to share their good ideas with the company.  Perhaps there is a monetary reward, opportunity for promotion or other benefit that would encourage this and other employees to ‘go the extra mile’.
  • Nurture a culture of respect and fairness.  A company where employees can share their concerns without being afraid of repercussions is critical.  So is taking care to recognize excellence in the company and to reward it frequently.
  • Maintain excellent communication with the troops.  There is confidential stuff for sure (but share as much as is appropriate).  As the company grows, you may wish to have quarterly ‘State of the Company’ meetings (both in-person and remotely with those in the field), a company newsletter and other tactics for sharing how the company is doing on a regular basis.  This will allow everyone to better connect what they are doing as individuals with the ultimate fate of the company (kind of like in the ‘old days’ when the three of you founders plotting over a pizza at lunch).

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