01 Mar 2003
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Inside the Revolution

The Life Sciences Project at HBS
by Garry Emmons; Eileen McCluskey

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The kids in Ms. Gubler’s fifth-grade science class are watching Juan Enriquez’s every move — they can’t quite believe that this visitor from Harvard Business School has just denuded a floppy disk. (One girl, Diana, is not so surprised — that’s her dad up there, doing his thing.) Having plucked off the disk’s metal clip and yanked open the tough plastic outer casing, Enriquez now removes from its inner sanctum a flimsy black vinyl circle. “This is the part that matters,” he declares, waving it triumphantly before the youngsters, who seem mesmerized by the heresy of floppy disk dissection. “This is where the action is, in the zeroes and the ones.”

While the kids lean forward to catch his next act, Enriquez projects on a screen an image filled with 1s and 0s. “This is digital code, the most powerful language in the world,” he tells the class. “It allows us to store and communicate any idea we can think of, on a floppy disk or CD. And by tapping on your computer keyboard and rearranging the order and number of these ones and zeroes, you can send an e-mail, write an English paper, or transmit a photograph.” Enriquez then holds aloft a Christmas cactus whose red, trumpet-shaped flowers are vivid against a December snowstorm swirling outside the classroom windows. (He often uses a sliced-open orange as an example — but it’s the holiday season, so the cactus seems appropriate.) Brandishing the plant, he says, “Now we’re fooling around with another language — this one’s called DNA.”

Enriquez projects another image, filled with the letters ATCG in various combinations. The letters stand for adenine, thymine, cytosine, and guanine — the chemicals that make up DNA. Just as the floppy disk stores the zeroes and ones, which emerge as words and images, Enriquez explains, each of this plant’s seeds contains its entire genetic code. The plant develops according to that code, with leaves of a certain shape and flowers of specific colors. To his rapt audience, Enriquez declares, “You’re lucky to be in Cambridge. You’ve got a front-row seat for a technological revolution.”

That revolution — with its enormous implications for all of business — is well under way. Only days before Enriquez’s grade-school visit, for example, scientists announced plans to create synthetic bacteria that would generate hydrogen (a nonpolluting fuel) from water and sunlight. Another bacteria would consume carbon dioxide (i.e., greenhouse gas) and turn it into raw materials that could replace petrochemicals. The energy business, it seems, is destined to become driven by biology-based innovation.

Developments such as these are all part of what’s “probably the biggest technological revolution since humanity discovered how to use fire,” says Enriquez’s colleague, HBS associate professor Jonathan West. West, who had been researching the semiconductor industry for some ten years, came to the life sciences field rather recently. Increasingly intrigued by how innovative, science-based industries develop across cultures, West was seeking a different science-driven commercial realm in which to test some of his semiconductor observations. In 1998, he began looking at the life sciences.

“People in the industry were crying out for a forum in which they could discuss their ideas regarding business, organizational, financial, and institutional problems,” West recalls. Since Harvard University, with its medical school, teaching hospitals, and Nobel Prize winners, is perhaps the world’s leading institution when it comes to biology, it was clear to West that HBS could become the preeminent academic institution for shaping ideas about management and enterprise in the field of life sciences. “What was needed,” he says, “was an initiative to pull things together and examine the business and industrial dynamics of it.” When West prepared a proposal for a Life Sciences Project (LSP), HBS Dean Kim B. Clark was quick to see the merits of the idea and throw his support behind it. Juan Enriquez was hired as the LSP’s chief administrator, and other faculty became involved as well.

HBS professor Gary P. Pisano, an expert on the biotech industry, is, along with Enriquez and West, a member of the LSP core team. Explains Pisano, “The purpose of this initiative is to create some mechanisms for collaboration and integration across disciplines and among faculty, as well as to connect with outside constituencies.” In this way, the LSP, which is funded by the Division of Research, is not unlike the School’s Global Research Centers in helping faculty work on cases and find research opportunities. The LSP builds contacts, compiles databases, organizes seminars, and encourages and supports case writing across units to raise awareness about life sciences issues.

“We’re a detonator and a service center,” says Enriquez of the LSP’s central functions. “For example, we work with the Finance faculty, studying how to value assets and structure the finances of businesses as they change in the face of the life sciences revolution. We’re also creating a framework for the Business School to network with the University’s chemistry department and the Medical School.”

Pisano notes that research at HBS on life sciences–related topics has been going on for more than ten years. He estimates that in the last two years alone, some 110 cases and 25 articles and papers have been published on health care and life sciences issues, with the lion’s share focusing on the biotech and pharmaceutical industries. More than twenty HBS professors from different disciplines have contributed to this effort, which Pisano says is analogous to the School’s decision in the 1980s to amass and disseminate material involving entrepreneurship throughout the curriculum.

As his visit to his daughter’s fifth-grade class suggests, Life Sciences Project Director and Senior Research Fellow Juan Enriquez (MBA ’86) has a boundless enthusiasm for the life sciences revolution. His 2001 book, As the Future Catches You: How Genomics & Other Forces Are Changing Your Life, Work, Health & Wealth, has an unusually accessible style and layout that points to the heart of Enriquez’s mission. “I don’t want people to be afraid of science,” he explains. “I want them to feel they can understand this stuff so they can make the right choices for themselves and for society.”

That can be a tall order. The magnitude and scope of the life sciences revolution (and its potential risks) challenge the imagination. But there is little doubt that before too long, life sciences will permeate and change every part of the economy, causing disparate industries to merge, compete, and change in ways that are still unclear. Business models and business practice will also be affected. As with the example of energy-producing bacteria, the entire basis of the industrial economy will shift, with biology joining or even surpassing physics as the innovation-producing science. Or, to use Jonathan West’s shorthand description,“carbohydrates will replace hydrocarbons.”

But in the biotech industry, where all these wonders must first take root, Gary Pisano, for one, has seen the promised revolution have trouble getting established. “For years, biomedical technology firms have been notably unprofitable,” he observes. “It sounds counterintuitive, but the industry may well suffer from its very ability to attract venture capital and entrepreneurs — every new idea seems to get its own VC backing and its own firm, and that’s not necessarily the best way to organize an industry. This is a fixed-cost business, and it has some fourteen hundred players. Talent and technology get fragmented, and that hinders cumulative learning. And with discoveries happening in separate firms, a whole series of complicated alliances may be required. That may not be the right way to do things.”

What’s needed is a different business model and different mentality about value creation. “Value is created by great science, not by dealmaking,” asserts Pisano, who is writing a book about many of these issues. “Firms need to build integrated capabilities across a set of technologies.” Pisano is heading up a June Executive Education program (Leadership and Strategy in Pharmaceuticals and Biotech) that will focus on these matters. He notes that such programs are synergistic learning exercises in the life sciences for both HBS faculty and program participants.

For his part, Jonathan West emphasizes that “real companies are putting billions of dollars into real projects whose impact is going to be staggering.” In envisioning how these investments will contribute to the global economy’s coming transformation and how it will unfold, he says it will occur differently in countries around the world. In his research, West investigates how a nation’s institutional systems may either facilitate or retard the development of biotech as an industry. Labor and capital market structures and different forms of corporate organization are among such factors. “For example,” West explains, “Japan has been a powerhouse in semiconductors because its form of corporate organization is conducive to that kind of technology. By contrast, Japan is weak in biotech. Patterns of innovation and industrial development are quite different between industries.”

The Life Sciences Project, then, is playing a role in the education, understanding, and preparation of people at HBS and beyond for the sweeping, life sciences–based changes that are coming to the economy. It is providing a forum where ideas about creating business models, operations, and practices to facilitate this revolutionary industry can be discussed and formulated. And, importantly, it offers a venue for social and ethical aspects of this revolution to be pondered.

Observes West, “The life sciences revolution has so many positive applications in so many areas that almost everyone can agree it should move forward. Some things, like human cloning, should not happen but many other things should. The industry does have to think about the gray areas, and the moral, political, and social issues; we hope to provide a forum where people can do that.”

Pisano says, “It’s important in all this to separate reality from hype. The School can do serious research to help business leaders understand what the issues really are, what the commercial impacts are going to be, what kind of actions executives need to take for the longer term, and how to make the business model work. These are the next five- to ten-year questions that need to be answered. That’s where we can help.”

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