Monday, November 1, 2010


Science Business by Gary P Pisano.

Harvard Prof Pisano wants to answer an evocative question. “Can Science be a business?” Answer in a word is “No”. In a sentence, “Well, it is possible when …… ”. In a paragraph, “Of course yes, when the anatomy of the industry, support eco systems are in place etc”. There is a caveat though. The second and the third answers are figments of my imagination. Since I want to embark on this terrain, I would not want to hear a blunt NO as an answer.

The book can be read like a novel for it is very engaging. Per Gary, there are three key attributes which make the scientific landscape indeed unique.

1: Profound and persistent uncertainty 2: Complexity and heterogeneity. 3: Rapid cumulative change.

He could convincingly explain the three factors that make Biotech industry unique and present daunting challenges to incumbent as well as new entrants. When translated into business terms, it means risk management, Integration of diverse scientific development and cumulative learning are the critical success factors. He warns that, any unexamined import of “best practices” of any sun rise industries would create more harm than good in biotech –Case of "cure is worse than disease".

In his fact loaded first part, he makes a sober point that Biotech as an industry has lost money – except for handful of individual companies who have made it big time – Once in way, surpassing the big pharma companies. But they seem to more an exception than a rule.

His treatment of anatomy of the industry is very good. “Anatomy” means how the industry is structured – various players like new entrants, incumbents, institutional arrangements, university links, capital access and their linkages, etc. His theoretical treatment on how industry should be structured from the scratch if we had an option is worth a deep study.

As I read more, the term “Science Business” seemed to be an oxymoron. Gary neatly juxtaposes that "Science holds methodology as sacred. Business holds results as sacred. Science values openness and sharing with attribution. Business demands secrecy and proprietary. Science demands validity – does it stand up to the scrutiny? Business demands utility. Science keeps the score by intellectual impact and contribution to the wider body of knowledge, Business by financial performance. While both seem to be ruthlessly competitive, they compete on different currencies".

I also get an impression that the true “R” of R&D is in Biotech and pharma industry. Even in high tech industries such as semiconductors, aircraft the basic technical feasibility is not in doubt. On the other hand, in Science you don’t know apriori what you would end up with when you start the work. Add the fact that there is no clear clue as to how long a research task is supposed to take and it becomes a frightening combination. He calls it as profound and persistent uncertainty.

One neat aspect of Biotech industry is its ability to absorb the technology and concepts developments across various disciplines into its fold. Rarely one advance obviates the need for previous one, instead it starts complimenting.

Predicting in this industry may not be possible with current body of knowledge and principles. It is more like meteorology. Weather is never the same or exactly repeats itself. Yet we can comprehend the key parameters like ocean currents, jet stream, etc. at a regional level to develop some actionable insights – yes, we have a science with comprehension and explanation with mild predicting capability. Well, sometimes, it may be like seeing the answer first and then moving on to explain the answer.

Biotech being heterogeneous in nature requires a pluralistic approach to solve problems. What might work in one sub-domain here may not work for another. The way challenges are grouped would determine the approach. The age old saying, “One can be knowledgeable with another person’s knowledge, but one cannot be wise with another person’s wisdom” is indeed true in this industry. Each time it demands a “bit” of originality to solve the challenges.

His section on monetization of Intellectual property (IP) delivers an added twist. He explains well why it makes sense for anyone to start their own company instead of joining the established firms. Even in the stable industries like semiconductors, selling IP and scaling up business driven by IP proved to be snake oil for many firms. IP in biotech domain is still unclear as to what is patentable and what is not. Very often, it is not a specific molecule that represents the value like an algorithm – it is the data about how molecule behaves, where it works well, where it fails, how to go about producing it effectively which are very difficult to patent. When the value is diffused patenting can be a nightmare. This explains why sharing is not an industry practice because data is just as important as the main algorithm. Somehow, green sprouts are emerging in specific area where standardization is becoming prevalent. But unless “value” can be concentrated in a few points of the chain and can be encapsulated, patenting and IP related efforts are going to be overwhelming.

If you trace any industry evolution, first it starts as an “art” where one if not a handful of people would hold the key. As it gains traction, more people start jumping into it with their own improvisations. It then would slowly become a “craft” – that is, lots of sub groups with each one having some unique flavor in the same industry. This is the time where heterogeneity is the highest and perhaps product’s compatibility is the lowest. If the industry is perceived to be big, then business steps in and it systematically becomes a “science” – standardized components, interfaces, services leaving lesser and lesser players in the market over the long run. This is a curious case where science and business are coming together.

Thanks for reading this far.



1 comment:

Mukund Srinivasan said...

Thanks for the thought provoking post, Madhu-san. Like with any business and monetization (for without it, there's no "driver") ideas are only as good as the execution and results. The slowest cog in the transformational chain drives the biggest transformation - in this case, I would like to believe that it is not the advancements in science that is holding business back, rather it is the tie-in with the faster growing aspect like technology that is slowing it down.