Review the history in recent years of Lilly that is presented in the case: what mistakes did Lilly make in its product development efforts?
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Eli Lilly pharmaceutical company had been well known for the manufacture of insulin related products needed in the treatment of diabetes. The company had managed to establish very firm foundation in North America, Canada as well as other well developed economies (Christensen, 2004).
As a matter of fact, Eli Lilly was one of the global market leaders in the production of insulin. Its major competitor was Novo Nordisk, a German based pharmaceutical firm. However, the two market rivals merged and formed one big firm. For a considerable period of time, Eli Lilly had enjoyed impressive revenue amounting to over $5 billion. In any case, the second largest generator of revenue at Eli Lilly was insulin.
The company started experiencing expedited growth in its manufacturing portfolio when it was awarded an exclusive license to manufacture and market insulin products in the wider North America. Although this was an early development, it greatly gave the company an impetus for growth bearing in mind that it came at a time when demand for insulin in the entire American continent was high due to increased obesity (Christensen, 2004).
There were myriad of mistakes that the management at Eli Lilly & Co. made in their path towards product development. It is imperative to note that all the subsequent improvements that were done on insulin especially after 1923 brought about tremendous results. However, the company failed to prioritize its development agenda. It is indisputable that the pharmaceutical company was faced with a major management challenge throughout its operations.
For instance, one of the vivid mistakes that Eli Lilly committed was to invest enormous amount of money when innovating in one product only (Insulin). This was executed without a proper audit of the cost benefit analysis. In other words, the company proceeded with an extremely fast pace of innovation which jeopardized its operations in later years due to loss of billions of dollars. For example, the pens and Match insulin that were launched almost on all major markets across the world was done within a very short time.
In addition, the test data technology as well as operating CDS centers proved to be an extra and unnecessarily financial burden to the company. It is imperative to mention that the CDS centers were not used to retail insulin products for Eli Lilly Company. These centers were meant for providing education to the population. As a result, there were no direct returns on this multi-million investment. The company also failed or completely ignored to work on its supply chain management as well as product line rationalization.
Why were those mistakes made in your opinion? Explain what you mean.
In my opinion, Eli Lilly failed to draft its own developmental plan and the various phases through which innovation would take place. While we may appreciate the fact that the company made some considerable gains in its development record in manufacturing and marketing insulin products, it is worth noting that it reached at a point when cash outflows in terms of innovative investment went far above the revenue generated.
In addition, the company should have introduced insulin products into the market bit by bit only after assessing the competitiveness and demand of the products. In most of its innovative moves, Eli Lilly did not proceed with caution. The company disregarded the potential of other market players. In addition, it did not carry out any investment appraisal or prior surveys before expanding to overseas markets.
As you analyze what lessons Lilly needs to have learned from its past experiences, apply those lessons to the innovation projects on Mr. Larry Ellingson’s current agenda at the time of the case. Is the Company pursuing the right diabetes related opportunities in light of what you perceive matters to most customers? Specify which of the possible projects he should emphasize and why. (Note that as always, there are various different segments of customers, some more important to growth than others).
There are several lessons that Eli Lilly ought to have learnt from its past management loopholes. To begin with, it is worth noting that the main management problem at the company was largely a function of how innovation was approached over the years. In the case of Eli Lilly, it was necessary for the company to develop a statistical study source that would capture the internal innovative strategy of the firm as well as analyze the economic features of both the products being sold and innovative response of the market.
For instance, the Portable Blood Glucose Meters did not respond well to some markets due to the prime price of the product. Additionally, the market dynamics led to low or reduced sales due to high competition from other market rivals. There were some companies like Boehringer Mannheim that were selling their insulin with free samples attached to the gadget. Mr. Larry Ellingson’s current agenda on innovation may not be addressing the needs of all segments of customers.
The management of the company should emphasize on developing more user-friendly insulin gadgets and which are also cost effective. The CDS centers should be operated minimally or eliminated altogether. Mr. Larry Ellingson ought to embark on thorough Research and Development (R&D) especially in foreign markets in order to establish the various needs of consumer segments available in the market before eventually rolling out new products.
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What about Humulin – what should the Company do with this product on which it has spent so much money with such poor results, why did it do this, what should it do now – should it market it more widely to doctors (advertising was largely still forbidden at this time), market it differently, or discontinue it?
The fact Humulin has been assimilated into the market as well as cost the company enormous sum of money implies one important consideration. It should be promoted in the market using the most viable avenues of advertisements.
Market promotion should be accompanied by price reduction of the product so that all segments of consumers are reached out. It is most likely that the prime price of Humulin was a major marketing setback for the product. In addition, marketing of Humulin should also target professionals in healthcare such as doctors.
Is Eli Lilly & Co. talking to the right persons or groups to determine what product features or advancements would be most appreciated by the “diabetes related market?” Explain your answer, do not just answer yes or no.
It is highly likely that Eli Lilly & Co has failed to contract the right persons or professional to carry out market survey before embarking on selling newly innovated products. This has been evident from the fact that a product such as Humulin did not yield positive outcome in the market. Research and Development (R&D) is indeed necessary as part and parcel of successful innovative end.
What other steps should Ellingson and/or his bosses do to ensure the success of Eli Lilly’s efforts to grow and expand its diabetes related market?
The following are some of the steps that should be taken to ensure growth of diabetes related market: exercise strategic human resource management, conduct cost-benefit analysis, create a distinction between process of innovation viability of individual product in the market as well as understand the various modes of innovation that can be successfully employed in international and domestic companies (Jolly, 2003).
What should we learn from this sad case?
The main lesson that can be learnt from this case analysis is that the process of innovative development in an organization should be executed with caution and proper planning (Jolly, 2003).
Christensen, M.C. (2004). Eli Lilly and Company: Innovation in Diabetes Care. Harvard Business School. 697(77): 71-86.
Jolly, A. (2003). Innovation: harnessing creativity for business growth. London, UK: Kogan Page.