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Case Study
Entrepreneurial leadership in an established biotechnology company

With its stock up 1,190% in the decade ending June 2006, Genentech, once a legendary startup whose leadership under its founder the late Robert Swanson has been well chronicled, today leads the biomedical industry as an established company. Here are just a few examples of how a strong entrepreneurial culture at Genentech over the last ten years has kept innovation and effective commercialization humming at even a large company1:
    Entrepreneurial Leadership
  • Hiring top scientists. Even as a public company, Genentech has maintained a university-like environment that has attracted top scientists including a former Stanford neurologist and a former University of Washington immunologist;
  • Driving scientific initiative through self-selected projects. Genentech encourages its researchers to spend 25% of their time on projects of their choosing (vs. an industry average of 10%). In 1988, Genentech's Napoleone Ferrara, focused on anti-angiogenesis, which cuts the blood supply to cancer tumors, resulting in Avastin, a $3 billion (peak sales) colorectal cancer treatment;

    Open Technology
  • Genentech has in-licensed over 100 technologies such as Rituxan, a $1.6 billion (2004 sales) cancer treatment.

    Boundary-less Product Development
  • Cross functional product development teams include both technical personnel, relevant business functions, and key outside stakeholders like physicians.
  • Using genomics to reengineer drug discovery. Genentech internally created and then applied in company-wide collaborations the Secreted Protein Discovery Initiative, which generated five product leads. This project accelerated drug lead identification within the human genome by focusing on the 10% of proteins that travel outside cells, blocking or spreading disease.

    Disciplined Resource Allocation
  • Focusing on areas of therapeutic expertise. Levinson's analysis of the drug industry concluded that greater therapeutic focus yields higher shareholder returns. So when Levinson became CEO in 1995, he focused Genentech on cancer treatment;
  • Killing development projects lacking sufficient scientific justification. Levinson kills projects he thinks lack potential. Genentech only moves compounds into clinical trials - which cost between $30 million and $100 million - if the scientific arguments for pursuing the drug can withstand Levinson's intense scrutiny.
The lessons of Genentech are also appropriate to today's biotechnology startups. Indeed a track record of entrepreneurial culture, disciplined resource allocation, and careful technology market-matching2 is an attraction for venture capitalists funding the expansion of small bio-medical companies. For example, Dan Summa, Venture Partner at Genesys Partners in New York City, emphasizes that he looks for companies that have successfully endured periods of scarce resources. These are entrepreneurial management teams that learned key skills during the post-Internet bubble 'nuclear winter' of biotech funding in the early 2000s; skills such as bootstrapping and surviving with leaner infrastructure rather than large organizations, motivating talented people with means other than high salaries and stock options, using in-licensing and partnering to obtain technology from others and to stretch resources, and focusing on well defined revenue-generating projects and business arrangements that demonstrated and advanced their innovative technologies.

Contributed by Dr. Barry Unger (unger@bu.edu) of Boston University and Peter S. Cohan (peter@petercohan.com, http://petercohan.com) of Babson College and Peter S. Cohan & Associates.

1. Cohan, P., and Unger, B., Four Sources of Advantage: Technology and Bio-medical Companies Create Success Cycles. Business Strategy Review, Spring 2006.
2. Unger, B., and McDonald, I., An Exploratory Study of Mechanisms and Processes in the Development of US Technology-based High Growth Ventures. Presented at the 4th High Technology Small Firms Conference, 5-6 September 1996. Enschede, The Netherlands.

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