01 Jun 2008
A Binary Formula
Leadership for Science-Based Companiesby Garry EmmonsTopics:
It’s been said that in this century, carbohydrates will replace hydrocarbons, and biology will supplant physics as the innovation-producing science. As science fiction becomes science fact, and with science-based firms presenting unique challenges for managers, HBS is examining how, in its teaching and research, it can best contribute to what will be a major new force in the American economy.
For several decades, the view from the HBS campus across Western Avenue has been decidedly “old economy.” But now, creative destruction has come to the neighborhood, and change is in the air. While trucks continue to rumble in and out of the container-cargo rail yard opposite the HBS parking lot, the depot’s days are numbered. Adjacent to it, several blocks of low-rise commercial buildings are already history, demolished and carted away, seemingly overnight. Spiking skyward above the flattened landscape left behind, giant construction cranes, clustered over the site’s several acres, accentuate its emptiness. It is here that Harvard University is putting down a big bet on the future — and on a dramatically new, emerging economy. From the rubble will rise the 530,000-square-foot Allston Science Complex — four multistory buildings, due for completion in 2011 — the centerpiece of the initial phase of Harvard’s 300-acre development on the Boston side of the Charles River.
Both in the scale and scope of Harvard’s ambitions and in the proximity of these new buildings, this emphasis on science will affect HBS. The unique challenges of managing and leading science-based businesses — certain to be a driver of this century’s new economy — demand new management paradigms. For a core group of HBS professors, that has meant some soul-searching in terms of how and what the School teaches, and to whom. How can HBS best complement and contribute to the work of the University’s world-renowned laboratories as well as to cutting-edge, science-based firms in Boston and beyond? Can the School itself learn from the labs’ inspirational (but results-oriented) dedication to finding solutions to huge challenges? For example, should blocks of the HBS curriculum focus on big, multidisciplinary problems — such as the world’s water shortage — and how to solve them? How about increasing the number of MBA students who have science backgrounds and the number of Executive Education offerings that teach scientists business and organizational fundamentals? What about joint MBA/Ph.D. programs? How about science/business seminars, more science-based cases, and more science-savvy faculty to teach them?
At a mid-March HBS Centennial colloquium titled “Science-Based Business and the Business of Science,” these and other ideas were batted back and forth by academics and scientists from across Harvard University, along with HBS alumni and other business practitioners. Much of the science discussed will unfold in the Allston complex’s four buildings, which will house Harvard’s initiatives in stem cells, bio-inspired engineering, systems biology, chemical biology, and innovative computing. The colloquium featured a number of case studies about academic labs as well as private-sector firms that are setting operational and best-practice standards for converting scientific knowledge into commercial applications. For HBS participants, an overriding goal was to gain a better understanding of how the School might best contribute to this effort.
“To maintain a leadership position globally, the United States needs high value-added products and services to be the engine of its economy,” says HBS professor Kent Bowen, organizer of the colloquium. “One way to do that is through science and technology, but we need to know how to get those discoveries into the economy.” To achieve that goal, Bowen and others believe that science-based companies require a different kind of leadership. “Since the investment and R&D decisions you make today are often not easily quantifiable and not coming to fruition for fifteen to twenty years, special intuition and judgment are required,” he observes. “Compared with operations, marketing, and strategy, we don’t really know as much about how to manage research or value it, especially when it has long time horizons. For science-based companies, more collaboration and openness, both within and outside the organization, are probably required of them than they’re used to. Different kinds of partnerships and new licensing and intellectual property arrangements are also necessary.”
At the colloquium, Bowen’s colleague, Senior Lecturer Willy Shih, led a discussion titled “Emerging Models of Corporate Research,” which centered on case studies on Corning, IBM, and InnoCentive. A veteran of 27 years in industry, many of them in computers and consumer electronics, Shih says, “We tried to highlight some of the unusual, fresh thinking — such as IBM’s radical collaboration model in semiconductor R&D — that business leaders are using to approach the challenges associated with science-based businesses. We also examined strategic thinking in terms of how you manage these types of projects, how you manage investors’ expectations, and how you manage partners.
“I see a lot of great research going on within HBS,” Shih continues. “I’m struck by the opportunities we have to develop more interaction with the business community through colloquia like this and through Executive Education programs. I think it’s critically important for HBS and for the country to grow leaders who are fluent in the language of technology and knowledgeable about the challenges facing leaders in those businesses.”
Another industry veteran, Professor of Management Practice Vicki Sato, led a discussion on “Emerging Models of University Research,” with cases that looked at the Harvard-affiliated Whitesides Lab, Stem Cell Institute, and Broad Institute. Sato, a Ph.D. in biology and a former biology professor at Harvard, has also had a 25-year career in drug development and biotech companies, leading both R&D and business functions. She teaches the MBA elective Inventing Breakthroughs and Commercializing Science and an Executive Education offering Leading Science-Based Enterprises. Says Sato: “Whether it’s the Whitesides’ one-lab model, with dozens of post-docs from diverse fields collaboratively working on big problems, or the Stem Cell Institute’s embrace of multiple labs and hundreds of scientists, or the Broad’s model of a small group of leaders catalyzing a networked community of scientists that focus on big problems — we know that each of these different institutions is innovative and successful, and we want to better understand their best practices.”
HBS professor Gary Pisano has long researched and written about the biotech industry. “The competitive advantage of the U.S. economy lies in our great science institutions and university infrastructure,” he says. “We need to learn better how to exploit that advantage and how to grow new businesses out of it. Once worlds apart and unto themselves, businesses have become involved in the pursuit of science and universities in the commercialization of science. Unlike traditional high technology, science-based businesses — especially biotech and pharmaceuticals, nanotechnology, and materials science — are not just users of advanced science, they are direct participants in the creation of science. They straddle two worlds with very different expectations, time horizons, risks, and norms. New management skills, new organizational forms, new institutional and financial arrangements, and a new breed of leadership are all essential.” Adds Pisano, whose case “The Science Economy: Creating Leaders for a New Breed of Business” examined these issues: “At HBS, we should be the ones trying to figure these things out and teaching them to the next generation.”
Pisano notes that despite the hundreds of billions of dollars invested in biotech in recent decades, most biotech companies do not turn a profit. He suggests that the industry needs a new “anatomy,” one that can better cope with risk and uncertainty and increase collaborative problem-solving and sharing of knowledge throughout the sector. Pisano proposes more vertical integration, fewer but closer long-term collaborations, and quasi-public corporations. In academia he calls for more cross-disciplinary research and for universities to strive to disseminate new knowledge and liberate it from unnecessarily restrictive patents and licensing.
Indeed, many of the ideas Pisano has advanced over the years are being adopted by the biotech industry. It is precisely this sort of real-world research and analysis, resulting in value-added intellectual capital, that has helped define HBS’s role as a key institution in enabling and influencing business and industry over the decades. It is a role the School aspires to play prominently again in the area of science-based business.
Pisano observes that at its founding, HBS was occupied with understanding — and imparting the skills to manage — the challenges posed by the emergence of large, complex business enterprises, particularly railroads. One hundred years later, Pisano argues, another transformational force, the rise of science-based business, similarly demands new kinds of management leadership, organizational forms, and institutional arrangements. Once again, HBS is in a position to prepare its students for the challenges and rewards of leading companies whose products can truly change the world. But perhaps for the first time, the products of tomorrow’s transformative companies will have their greatest impact not in the material world but on the most basic elements of the human experience of life — health, physical well-being, and mortality. For HBS students who want to make a difference in the world, could anything be more rewarding than leading such an enterprise? And for HBS, what could be more rewarding than giving its students the tools to achieve just that?