As an academic and consultant working in the area of pharmaceutical strategy, I have been aware of Professor Pisano's work for some years. He first came to my attention with his work on organisational learning and dynamic capabilities, which was based in this sector. He is one of the few researchers who can honestly claim to be both academically rigorous and have a real understanding of the medical business, having spent most of his career focusing on the biotech and pharmaceutical sector. This work is therefore well founded on empirical research. Furthermore, he is a strategist rather than an authority on marketing communications. This is important because much work claiming to offer new insights into our business does no more than talk about selling and promotional models, which are important operational matters but not more than that. Professor Pisano, by contrast, provides in this book a rigorous strategic analysis of the biotech/pharmaceutical industry that fills a very important gap in our knowledge. Although I was first made aware of this book through a summary article in Harvard Business Review, this book contains much valuable detail and original thought that is not in the article.
The book is usefully structured in three parts. The first introduces the reader to the science. The second explains and critiques the business models employed. The third makes recommendations for the future. At about 200 pages, with good indexing, useful notes and references and well written, it manages to combine accessibility for managers with opportunities for further reading by academics.
The first remarkable thing about 'Science Business' concerns its positioning against its target audience. Most authors would have chosen to write it either for those within the industry and knowledgeable about it or dumbed it down to make it understandable to a general business audience. The author does neither. By beginning with a substantive section on the history of the business, how drugs are discovered and brought to market and what technological and other developments have influenced this, even the generalist reader is put into a position where they can follow the rest of the book without the need for oversimplification. This is done very well indeed, such that even an industry specialist will gain a new perspective on the workings of the sector. I have, and will continue to, recommend the first section of this book to newcomers to the business and outsiders who want to understand it. Armed with this basic but sound knowledge, the reader can then safely read the second section, which is where the author's research begins to be shown.
In part two, Professor Pisano takes the angle that the central problem of the industry is the monetisation of intellectual property. In doing so, I found he made the lessons in the book valuable to other IPR-based industries, which, of course, is very useful. The approach therefore reveals and clarifies the tensions between scientific and business cultures, exemplified by short-term venture capitalists and long-term scientific research. While this applies to many businesses, it is of greater importance in a sector with such high technological risk and such long time horizons. In particular, the tensions between these two cultures reveal the need to integrate their two distinct sets of capabilities. Within this section, the analysis of the Biotech Industry's performance is particularly useful and insightful both in its own right and as an illustration of the challenges facing an industry that has to monetise scientific discovery.
In the third section, the book moves onto recommended solutions to the challenges facing the sector. His recommendations begin with structural ideas about the use of corporate partnerships and strategic alliances, a compensatory mechanism for the difficulties of raising long-term capital in a high-risk market. As part of this, he addresses the issue of information asymmetry between investors and managers, something which both sides of the capital market would benefit from reading. It is refreshing, however, that Professor Pisano does not preach a panacea to the problem. He argues for a contingency approach to industry structuring, with some types of pharmaceutical innovation needing vertically integrated structures, and others needing webs of alliances and outsourcing. In all of this, the author paints a picture that includes not only firms but also universities, investors and regulators.
Overall, this is a hugely impressive book and any criticisms risk seeming churlish. Professor Pisano's perspective is largely US and he could pay more attention to the less quantifiable but very important issues of cultural change. Importing some concepts from other areas of strategy might have made the book a little more substantive to the more academic reader. But I stress these are relatively minor points. This is an excellent book and I commend it, not only to those involved in biotech but to anyone who wants to see how academic analysis can make a real contribution to strategic management.
© Brian D. Smith