Ventria Biotech's market entry challenges and stakeholder conflicts

Ventria

'Part II: Company Analysis

Ventria is a small company that does not yet have a commercially-viable product. Its main strengths lie with its technology, which holds significant promise. The company does not appear to have too many other strengths. There is the talent that got it to this point, but otherwise they are a couple of people and a good idea. At this stage, they have received some preliminary approvals and their product looks like it could be close to entering the marketplace, which is cause for optimism.

Ventria has a number of weaknesses, however, and several were exposed in this case. First, the company does not have much cash flow, because of its lack of products. Thus, it has a significant imperative to begin commercial-scale production. The delays that it is facing right now pose almost an existential threat to the company. If it had stronger cash flow, it would be in a better position to withstand these delays, but it appears to be surviving based on investment from a few key investors. Another weakness that Ventria has is that the company is rather tone deaf and myopic.. It has not done much to acknowledge the concerns of the industry, which just happens to be a lot more economically important than they are. As much as Ventria's people believe in their product, they are clueless about their position in the market. Thus, instead of finding a home in an area without a strong entrenched industry, they have walked into direct conflict with a billion-dollar export business.

The leadership structure within the company is both a strength and a weakness. There are some excellent people, researchers in particular, and this is a strength in that respect. However, the company appears to lack experience in other areas. So the leadership team is not particularly well-rounded at this point, and that is a weakness that it must overcome, and quickly, in order to avoid these sorts of problems in the future.

The big opportunity that Ventria is focused on is getting their product to market, by planting enough rice to make commercial production possible. The company has been myopically focused on this, without taking consideration of what it might take to get to that point. Hence the current trouble. But for Ventria, it needs to find a way to get rice in the ground, even if this is not in California. There are other places a company can grow rice.

There are several threats, as the case highlights. The rice industry is California has some legitimate concerns about cross-contamination and the threat that this crop would pose to the rice export markets. Ventria has not dealt with that threat, and as such it now is faced with a powerful industry lobby that is all but shutting them down. But there are other threats as well. If a competitor with a similar concept can get to market first, because of these delays, that would be a crisis for Ventria. They appear to have competitive advantage in their technology, so this risk is low, but the outcomes if it was to come to pass would be catastrophic. There are also risks associated with the regulatory environment. Not only is the regulatory environment complex and uncertain, but Ventria has walked a fine line in trying to get its product over the different regulatory hurdles. An example of this would be trying to have the rice classed as Generally Recognized as Safe, which was probably not the right classification. So the company in trying to shortcut the regulatory process has ended up with greater regulatory risk than maybe it needed to have.

Ventria faces an uncertain political environment. This is perhaps the biggest threat that the company faces. The rice industry in California is not only entrenched, but it is powerful because it exports. The company has chosen to wage this battle in the state's prime rice growing regions. It is noteworthy that the other major rice-growing states are typically ones with a less stringent regulatory environment than California. However, a lot of the regulations also exist at the federal level. Ventria has done better with respect to fulfilling its federal requirements. At issue now is the fight Ventria has chosen with the rice growers of California. Given the balance of the facts, it is likely that Ventria will be blocked -- nobody in their right mind would put an established, multi-billion dollar industry at risk for an upstart company that has never sold anything. Simply put, from the perspective of political decision-makers, Ventria is not worth the risk.

Navigating the political environment in part requires the company to navigate the social environment. The competitors are challenging Ventria's plans because they see risk in those plans, and the opposition is strong because they feel that the stakes are substantial. They may be correct in that assessment. The social environment surrounding GMO crops is generally unfavorable, not just in California but in the major rice markets like Japan. The Japanese consumer is an important stakeholder here, because they are defining the issue for California's rice growers. While Ventria is correct in assuming that the public will generally favor its drugs once they are released, the current social environment offers strength to Ventria's opponents while offering Ventria itself little support.

The economic environment is generally favorable. Ventria has been able to raise sufficient capital thus far, and if it can get its products to market, there is no reason to believe that their projections for sales are wild.

The technological environment is favorable to Ventria. The company is one of just a few that can execute on its core technologies. While it cannot hold this competitive advantage forever, Ventria presently has a technological advantage, and sits at the fore of innovation in this field. Indeed, some of the opposition to its products among the rice growers appears to relate to their not being as familiar with the technology as Ventria is, and certainly this is the case for the key rice buying consumers. The pace of technological change is fairly rapid, but Ventria seems well-positioned at the leading edge of this.

Overall, Ventria faces an interesting situation. . The biggest challenges in the external environment pose a substantial threat to the business. There is a risk that they will not be able to produce in California, and if they are allowed it might not be this year. The fact that management did not anticipate this, and does not appear to have any sort of backup plan, is a failing of management. The Ventria team mostly consists of researchers, and they were tone deaf in assessing the social environment in which they operate, and as such seem unprepared for this opposition. One of the biggest challenges for Ventria will be for the company to evolve internally, shore up its weaknesses and start taking advantage of the opportunity that it has right now. They are showing that they are, despite their technology, a young company without much experience. Not only have they walked unnecessarily into a major problem, but they have no backup plan, as though they live in a world without options. For Ventria to succeed, they will need to either win their battle with the other rice growers or they will need to relocate their rice field to a place where they can grow. They should have done that from the beginning, building redundancy into their supply chain, given how critical it was to the company's survival to grow this year.

It is recommended that Ventria seeks out other sites for its rice. The present strategy appears to be something on which management has become fixated. Yet, they need to get rice in the ground. They should have planned to grow double the rice they think they need, in part because of issues like this and in part because all agricultural products are subject to weather and pests. Having other places to grow rice would also take Ventria away from this controversy, especially if they choose their site wisely. They were always taking an unnecessary risk with this plan to grow medical rice in an area that grows food rice, never mind the GMO/export issue. The current strategy is ill-conceived and myopic, so it is recommended that the company pursue other options, ones that are probably better than the current course of action.

Further, it is recommended that Ventria brings in at least one new senior manager. The current team seems to lack when it comes to things like stakeholder management, or just understanding some of the business issues. The company is only going to face more such issues going forward. The researchers and product development people need to focus on that, because that is their strength. But somebody else, a professional manager, needs to be added to the team to provide that balanced perspective that can help the others to handle situations such as this, and perform a key role in stakeholder management, public relations, lobbying and other roles in which the members of the current management team do not excel.

Global Citizenship

There are seven dimensions to the global citizenship model: citizenship content, strategic intent, leadership, structure, issues management, stakeholder relationships and transparency. Overall, Ventria struggles with some key aspects of this, something that comes from having a small, inexperienced management team that has been operating in their own bubble for several years.

With respect to citizenship content, Ventria is operating at the elementary stage. This is, in some respects, understandable because they are so focused on getting the necessary approvals to bring their product to market. They are only really worried about getting the revenue stream online, and doing the bare minimum.

Similarly, the strategic intent of Ventria at this point is something less than the elementary stage. That stage is legal compliance, and Ventria has on a number of occasions tried to take shortcuts on this, for example the GRAS application. It is understandable why the company wants these shortcuts, but to this point the commitment of Ventria executives to legal compliance is up for question. On this dimension, however, the company is also committed to market creation, in that they are trying to get an innovative product to market that will transform the pharmaceutical business. Basically, they want to run, but forget to tie their shoes (legal compliance, license to operate).

The company's leadership is fairly visionary where their product is concerned, but are at the elementary stage of corporate citizenship, because they are out of touch. They do not seem to have a firm handle on the risks their rice farm creates for others, to the point where they do not seem to have even anticipated their current problems, nor have any alternatives set out. Being out of touch on citizenship issues is not unexpected for a small company trying to bring a complex product to market, but the reality is that is the stage at which Ventria is right now. The structure of Ventria is that of functional ownership, so the owners are very much engaged in the future of the company. This is perhaps the most encouraging sign for Ventria, because the management team is fully invested in fixing whatever problems are preventing it from gaining the approvals it needs; there is a strong motivation to improve global citizenship and the owners have the ability to make this happen.

The company's response to issues management is poor, and defensive. They are trying to do the bare minimum with respect to this issue, and this approach has not won them too many friends in the California rice industry. They appear to view this issue as not really a big deal, when in fact it is a billion-dollar industry they are threatening.. It is not surprising, then, that Ventria also performs poorly with respect to stakeholder relationships. They are aware of the major stakeholder groups, but do not fully understand the issues that those groups have. They do not seem aware of some of the other stakeholders, and certainly have only limited, defensive engagement with them.

Ventria handles transparency at this point as flank protection, the elementary level of global citizenship. The company is at this point not even engaged in public relations -- they are simply trying to focus on regulatory approvals. The problem is that since they are not particularly transparent and they do not engage with stakeholders, they were entirely unable to prevent from walking into this problem. Overall, Ventria has not performed well in terms of global citizenship, typically scoring at the lowest level (or worse). The company is not showing much evidence of learning about the links between global citizenship and financial success yet.

Ethical

a) Ventria is not ethical, weighed against a utilitarian perspective. As much as they believe in their product, they are risking a lot of people's livelihoods to bring it to market. Given that there is more than one place to grow rice, this is needlessly putting those people and the rice industry of California at risk. A high risk of negative consequences to a lot people, for no reason, is the behavior of an unethical company.

b) The rights approach is actually difficult to apply to Ventria here. The company is not looking at this issue as one of rights -- at issue is the economic benefit of other rice farmers, but nobody's right to freedom is being infringed here. In that sense, Ventria maybe can be said to be ethical, as their activities are not violating anybody's rights.

c) The justice approach is similar to the rights approach, but focusses on distributive justice, or outcomes, rather than rights, which are an input. In this instance, Ventria is not behaving ethically. They are putting many people at risk for their business. Even though that business may generate substantial benefit for many, the company has not explored other options to reduce the harm that its actions might potentially cause. It should focus on reducing that harm in order to be more ethical from a justice perspective.

d) I feel that Ventria is violating the golden rule, and is perhaps feeling a similar reply from the rice industry. The company has put others at risk, and the industry is responding by putting Ventria at risk. They are having others do unto them, what they did unto others.. Had Ventria taken the consideration of others into account, it might not find itself in its present situation. As for the disclosure rule, the company has not been as transparent as might have helped it. Ventria has not technically violated any laws, however, and has made the disclosures that it needed to. In that sense, Ventria is behaving ethically at this point. This shows that business executives would see the ethics of Ventria as walking a fine line. They are not in violation of laws, but they are definitely creating some strife for some other people in the industry, when they probably do not need to be.

3a). Ventria still has options that can help it to improve with its global corporate citizenship. The company can start by taking into account the interests of other stakeholders. These stakeholders have considerably political power than can negative affect Ventria, so Ventria should have been listening to the other stakeholders all along. There is no time like right now to start, however, and Ventria might be able to come to some sort of agreement with these stakeholders. For example, if Ventria reaches ot to the industry, some of those other farmers might work for larger agricultural companies, and those companies might have rice growing land in other areas that is more secure and further from the food supply chain. Ventria has not listened to the concerns of other stakeholders, but if it had then it is certainly possible that other solutions might emerge.