Critical implementation issues for GSK's internal innovation strategy

GLAXOSMITHKLINE (GSK) - SUCCESSFUL INTERNAL INNOVATION Read case study answer 4 questions . Do write a report. 1. Based GSK's past performance, critical implementation issues GSK internal innovation? Justify answer.

GlaxoSmithKline (GSK) -- Successful Internal Innovation

Critical implementation issues for GSK with regards to internal innovation

Implementation processes are complex endeavors which need to be thoroughly assessed and carefully decided upon. This is true in any situation and in the case of virtually all economic agents, but while this necessity is valid, it is to be differently approached and resolved across companies. In other words, the dimensions of a strategy to be implemented are sensitive to a wide array of organizational and situational particularities, including, among other things:

The size of the economic agent

The availability of resources (capitals, labor force, commodities and technologies)

The intellectual capitals possessed and the ability to gain, transfer and capitalize on knowledge

The access to information

The critical elements of the strategy to be implemented, such as the pre-established goals, the resource constraints, the schedules to be met, the deliverables and so on The mechanisms of monitoring, controlling and evaluating the processes and the outcomes (Cardiff School of Computer Science and Informatics).

GlaxoSmithKline is one of the most reputable economic agents at a global scale. In order to reach this leading position, the company has overcome a series of impediments and has managed to develop and implement a series of success strategies. Among them, was the decision to focus on internal innovation, as opposed to the purchase of already developed technology (external innovation).

The internal innovation processes at GSK are subjected to a wide array of dimensions, which constitute critical implementation issues. As it can be deduced, these issues are given by the unique complexities and particularities faced by GSK as a result of the actions it develops and the industry in which it operates. In this order of ideas, some of the most important implementation issues refer to the following:

a) The changing needs of the society

As the society evolves, so do the diseases it carries. While the management of AIDS has significantly improved in recent years, medical challenges are now posed by the exponential incidence of cancers. Given this scenario, it is imperative for GSK to consider the evolution of diseases in its internal processes of innovation.

b) Competition

The pharmaceuticals industry is a highly competitive industry which attracts more players, but in which the size of the consumers' base remains relatively unchanged. The demand for the pharmaceutical products and services is sensitive to the general state of the population's health, but also -- most importantly -- by the state of the economy and by the income of consumers. Pharmaceutical products and services are often expensive and demand is as such limited. Large size companies succeed due to operational efficiencies and new discoveries, whereas smaller size companies can complete on smaller, more specialized markets (Hoovers, 2010). The actions and strategies developed and implemented by the competing firms are also to be taken into consideration in the innovation related decisions at GSK.

c) Legislation

GSK is heavily impacted by the short duration of patents. This specifically means that after a short period of time since they invented a new product, the competing firms would also be able to manufacture the respective item and retail it for their own benefit. For GSK, it could imply a restricted ability to collect the return on the investment in innovation. This situation accentuates the need to speed up the innovation process, as well as make it more flexible and efficient.

2. Discovery Performance Units and the implementation process

In the aftermath of the 2000 merger, the executive team at GlaxoSmithKline has conducted a process of internal restructuring, according to which the internal research and development unit was divided into 70 Discovery Performance Units. These units operate independently, but their representatives and scientists meet in order to exchange ideas, as ideas constitute the foundation of innovation. The decision to create the 70 individual units was based on the need for flexibility as well as increased levels of operational efficiency.

The work of the 70 Discovery Performance Units (DPU) is divided into eight categories. At a more specific level, the DPUs focus on researching and finding solutions to eight different therapy categories, as follows: biopharmaceuticals, immuno-inflammation, infectious diseases, metabolic pathways, neuroscience, oncology, ophthalmology, and respiratory.

Given this structure and focus of the DPUs, the implementation process could be indirectly impacted. At a traditional level, it would be assumed that the Discovery Performance Units come up with a pharmaceutical solution, which is then implemented at an organizational level. In other words, the discovery would be extrapolated into the creation and retail of a new products / service, which would help improve the condition of the human health. This objective would be achieved through a process of strategic implementation at the company's internal level.

At a more salient level however, the developments which occur within the 70 DPUs could generate a series of changes within the implementation process. A relevant example in this sense is constituted by the new discovery of a more efficient solution. In this order of ideas, take the example of a product A having been discovered and prototyped. The decision was that of producing it at large scale and retailing it. While the item is under production, an accidental discovery is made and this discovery could be integrated into product A to further improve it. The improvement could refer to a higher rate of success, a reduced change of secondary effects, the partial elimination of secondary effects, the generation of cost efficiencies which could make the product more accessible to the consumers and so on.

In such a circumstance, the company's executives would have to decide on how to integrate this new discovery into the implementation process. On the one hand, it could be possible for the firm to continue with the implementation as initially launched. On the other hand however, it could be possible for the implementation process of product A to be stopped and for the newer and better version to be selected for mass production.

Another example as to how the actions of the Discovery Performance Units could impact the implementation process refers to the costs incurred in the research and development efforts. In the case of high expenditures in R&D, the other stages of implementation would need to be financially effective, in order to ensure an affordable price, but also an adequate return on investment.

The list of such examples could go on for pages, but the underlying idea is that the operations developed at the level of the 70 DPUs can influence the overall implementation processes. A risk occurs in light of the importance and the necessity for the change. In this order of ideas, it is necessary for the managerial team at GSK to develop and implement a special system by which the importance of a generated change is assessed. If the importance is increased, than the implementation process would be changed. Additionally, a cost-benefit analysis should be conducted in order to identify the advantages and disadvantages of modifying the implementation process.

4. Suggested control systems

The control system is a crucial necessity within any firm, but even more so within GlaxoSmithKline, where the organizational complexities have to be continually monitored and controlled. The first issue which should be addressed in terms of control systems is that of the construction of the control team from a single group, or from various groups which compete against each other. The first category of control is identified in monistic organizations, whereas the second category of controls system is encountered in pluralistic organizations.

The construction of the control system in one single group or in more competitive groups generates specific impacts upon innovation. The academicians have not however decided which type of control is more suitable for supporting innovation, but they have issued two important hypotheses, as follows:

Hypothesis 1:

When relatively well matched occupational subgroups work in both monistic and pluralistic organizations, the subgroup working in the monistic organization will have the higher rate of innovation, provided that the subgroup is the managing or organizational elite (Schulman, 1969).

Hypothesis 2:

When in a pluralistic organization, leadership groups agree that changes must be initiated in a sector that is under the direction of one particular group, the rate of innovation for that group will approximate or surpass the rate of innovation for an equivalent elite group operating in a monistic organization (Schulman, 1969).

In light of these hypotheses, as well as in correlation to the unique complexities at GlaxoSmithKline, the recommendation is that of developing and implementing a pluralistic control system, in which the final decision is made by competing groups. At the level of the pharmaceutical company, the final decisions would be made by the representatives of the research and development department, the marketing department, the administrative department and the financial department. The ability of these four departments to decide upon a solution ensures the validity of the solution, as well as its long-term sustainability as it is all innovative, affordable, manageable and financially adequate for the firm.

Aside form pluralism, another recommendation is that of integrating the control systems across the totality of organizational departments. Such an endeavor would require the full cooperation and integration of the staff members as well, not only the representatives of the company's departments. The mechanisms of the integrated control are revealed in the diagram below:

Source: Sitkin, Cardinal, Bijlsma-Frankema, 2010

The primary benefit of the integrated control system is that of an increased ability to assess the operational and employee responses to a series of control systems, such as hierarchical control, the organizational culture, the norms of ethical conduct and so on. Aside form offering a complex view of control, this system reveals another important benefit -- it stimulates employee participation to organizational operations, including the selection of the most adequate control system -- and it as such enhances employee morale and performances.

Ultimately then, it is advisable for the managerial team at GlaxoSmithKline to develop and implement a control system which is understood and applied organization wide, and which is also able to serve a multitude of formal and informal needs. In this order of ideas, the control system should be a pluralistic one, integrating performance management controls, controls of procedures and policies, as well as work design. At the level of formal control systems, hierarchical control should only be used as a last resort. Additionally, it is also advisable for the firm to implement informal control systems, the most important of them being represented by the organizational culture and values, followed by social norms and codes of ethical conduct.

References:

McDavid, J.C., hawthorn, L.R.L., 2006, Program evaluation and performance measurement: an introduction to practice, SAGE

Schulman, J., 1969, Remaking an organization: innovation in a specialized psychiatric hospital, SUNY Press

Sitkin, S.B., Cardinal, L.B., Bijlsma-Frankema, K.M., 2010, Organizational control, Cambridge University Press

2010, GlaxoSmithKline Plc., Hoovers, http://www.hoovers.com/company/GlaxoSmithKline_plc/crkxri-1.html last accessed on December 22, 2010

Implementation issues, Cardiff School of Computer Science and Informatics, http://www.cs.cf.ac.uk/Dave/AI2/node107.html last accessed on December 22, 2010