The GSK is a company which is ranked amongst the top 20 FT Global 500 companies and is considered be the 5
largest pharmaceutical company in the world. It is involved in the manufacturing and creations of new medicines, vaccines which can help cure the different diseases of people. It is currently operational in 116 countries with the marketing of its product in 125 countries. Its headquarters are in Brentford and the company provides employment opportunities to 100,000 people. Its aim and goal is to create new and innovative products and for this it spends enormous amounts on research and development every year. Its main objective as described by the 2010 Annual report is “to improve the quality of human life by enabling people to do more, feel better and live longer.”
Case Study Analysis
Based on GSK’s past performance, what do you believe are the critical implementation issues for GSK with regards to internal innovation? Justify your answer.
GSK with regards to its process of internal innovation is likely to face certain difficulties in carrying out the activities in regard with research and development of new technology. The foremost problem of implementing its strategies is the reliability and validity of the networks as well as the trust issues in the people engaging in R&D involved in the society in which it operates. It would have to select the most responsible people to work for them such that they would not leak out the information or project that they are carrying out to any other third party not involved in the process otherwise there would be high risks as well as cost of recruiting and training new people again and again. Problems can also occur due to misunderstandings in the process of change as in the process of team work there are some people who try to dominate the innovation process and see the other group members as their competitors rather than cooperation partners. This notion is developed by them if they mistrust the colleagues or if they are yearning for recognition and to be highly considered above others. Resource allocation is another hindrance. If the company does not have enough funds and financial resources to meet the demands of the requirements of the project being undertaken such as tools and machinery then the process of innovation might have to be stopped for a time period to collect funds which would increase the time period of the development of the project. This might also result in many years for the completion of the project during which the environment conditions such as demand for the product being designed but decline, might not be needed or might be produced by another competitor.
When GSK merges with other companies to carry out R&D then this might result in some problems. First organizational culture can change as a result of which communication process might be hindered. New managers might become in charge of the members involved in the R&D which might not be acceptable to the workforce. Secondly the new management might want to bring its own workforce for carrying out R&D thus retrenchment of large workers might take place and in this process some creative and efficient workforce can be dismissed which could pose adverse conditions for the company.
Taking part in R&D and acquiring patents for them can play a key role in stimulating firms to engage in research and development and be the first ones to generate greater revenue through that particular technology by gaining monopoly over it. However once a patent expires all other firms in the industry can have access to technology thereby reducing revenue of the initial firm. Secondly other firms enjoying rights to access technology may not experience such high costs as GSK primarily did as they would not have to participate in the research of making a technology thus creating opportunities for them to outweigh GSK in terms of revenues and costs thereby inducing greater competition through price war and price cuts.
Also GSK needs to identify which products in R&D should require the most support and resources because if allocation is not done properly then resources might be used for inefficient products and even for useless products which might not have any demand in the market thus before undertaking a project all risks and demand of the product should be assessed otherwise higher costs can be incurred in the form of misallocation of resources and higher wastage
With the 70 DPUs working on eight therapy areas for future growth of the company, how might this affect the implementation effort and would the firm need special programs to ensure that implementation was successful?
GlaxoSmithKline (GSK), in order to fulfil its aim of outshining all other firms in the industry in internal innovation by its research on eight therapy areas (Immuno-Inflammation, Neuroscience, Metabolic Pathways, Oncology, Respiratory, Infectious Disease, Ophthalmology and Biopharmaceuticals.) formed 70 DPU’s to increase the growth prospects of the company. The role of the DPU is to focus on one particular disease and to come up with innovations in the form of medicines to cure them. These DPU’s form a plan for meeting their goals which also incorporates mergers and collaboration with other organizations which is critically analysed by the board who then revises plans, identifies which areas in the plan needs improvement and constantly monitors the deliveries of these units against their targets. Secondly the major inspiration of developing a R&D organization is their interest on the focus of science which led them to create an environment for bringing about discoveries which caused them to create a formal organization which came to be known as the Centre of Excellence for Drug discovery. These 70 DPU’s can have a major impact on the implementation effort through the following ways:
- It could help in diminishing the costs of screening and evaluating ideas to focus only on those innovations whose support can be instigated or promoted.
- GSK through these DPU’s would be able to modify its R&D structure to develop technology for internal use.
- As these DPU’s are composed of small groups or teams working on different defined projects thus these teams through their experience can share the lessons learnt during the process of development with others hence causing enhancement of individual skill and consequently leading towards the creation of new structures of old products by means of technological innovation.
- Leaders of different groups in DPU’s can be helpful by eliminating wasteful projects and allocating resources only towards critical activities such that goals can be achieved efficiently, productively and cost effectively.
- The development of 70 DPU’s allows more inputs in the form of creative ideas, decisions and innovations to be formed and created.
- Having groups to work on different projects help enhance efficiency and dexterity in creation of new products. In research especially if tasks are allotted to just one person then several years would be required for completion of the project but if different tasks are allocated between different groups then pulling together a proposal, implementing it etc. becomes uncomplicated and goals become easier to meet.
In order to ensure successful implementation of projects the company should have clearly defined goals and how they would be measured. For this they should set their key performance indicators so that comparison can easily be made against the objectives of the project.
The management enforced with the task of monitoring should be up to date with any progress in the projects so that any discrepancies found can be handled immediately. Furthermore it should engage in a risk assessment analysis so that projects carrying greater probability of failure can be eliminated at the initial stage. Thus for such an activity a special task force dealing with risk should be formed.
The company should also launch an incentive program to induce motivation amongst their employees. Such programs endow their employees with extra perks above their regular pay so that employees are motivated to give their best performances for the success of the company. These perks could be in the form of cash bonuses or giving a share of the profits to the employees. Such programs should not be seen by the company as a pressure on their cash resources or as unnecessary expenditures as they stimulate workers and make them feel that they are part of the organization. Such activities reduces the rate of employee turnover and hence the cost of constant recruitment by the company and instead stimulate healthy competition amongst the work force. The capabilities of the workers can also be approved off by giving awards of best employee or of best achievement or best performance award.
Success in a particular project by GSK can be guaranteed if it provides training to its employees to provide them an opportunity to enhance their skills and in the process increase people’s performances and consequently productivity of the company.
Provision of career opportunities is another ingredient for success. When employees are made aware that on the basis of their performances and achievements they can be promoted to the top ladder then it will motivate them to work hard and to give off their best.
Other ways to ensure success is to provide workers with fringe benefits like free vacations, medical facilities, a good work environment, provision of job titles, conducting social gatherings and seminars. All these factors and programs combined aids in increasing productivity and profit margins of a company and steers it towards success.
What are the special evaluation needs for a company such as GSK, with regards to its internal innovation? What characteristics of GSK do you believe have the most influence on how well GSK evaluates progress toward stated innovation goals?
GSK needs certain evaluation criteria’s with regard to innovation management. For this it needs to consider certain key areas of evaluation which are as follows:
- Organizational focus: GSK should keep in mind that it is the total organizational performance which matters not the individual performance. If one area or department is working inefficiently then it should take into account the factors which are resulting in their poor performance rather than ignoring the matter just because all other areas worked productively as the whole organizations performance is dependent upon productivity and profitability of the company not just one area.
- Creation of value: In this area the focus of GSK should be on accumulated effort of team members and employees towards creation of new ideas such that it results in production of value added products for its customers and stakeholders. In order to ensure this it should constantly monitor and evaluate the progress of its members involved in new innovations.
- Best practices: GSK should adopt strategies which induce workers to adopt new technological means to steer the company towards development. Moreover it should provide for competitive opportunities also.
- Flow of information is also necessary condition for success and needs to be evaluated. The process should be easy and not so long. Trust should exist both between the employer and the employees and between the managers and the employees such that employees are not hesitant in giving their ideas to the management involved. The management should constantly monitor and encourage the workforce and have interactive sessions with them such that the employees feel that they are part of the organization and that whatever they contribute to the organization will be valued.
- GSK should also constantly motivate its workforce and make them feel that their ideas towards the innovation process are being highly valued by providing them with future opportunities such as by giving them promotions if the workforce achieves the targets set for them or by giving the best team work award or even promoting the most efficient amongst the group as its team leader but care would have to be taken that the leader should not be so dominant on its members that members become inefficient.
One of the characteristics of GSK which emphasizes the importance it places on evaluation of its products and the overall organization is its method of screening products and compounds annually in their search for new pharmaceuticals to cure diseases. All those products which are not consistent with meeting the goals of the company are not carried forward so that wastage of resources is reduced.
Identify and explain the kinds of control systems you suggest GSK employ to manage innovation?
There are three types of controls system which can be adopted by GSK which are as follows:
- Financial control system: This control system engages in the administration and supervision of the company’s costs and revenues. In such a system earned-value control system can be used which involves assessing the performance of a particular project through its cost and time. Another way is to measure actual cost and revenues of the firm against the budgeted costs and revenues. The management decides which portion or areas are most important such as sales or profitability and then forecast such financial aspects by means of the process of budgeting and then compare it with the actual performance achieved. By engaging in such an activity constraints are put on spending as a result manager then ensure that only those projects are executed which generate higher revenues compared to forecast. Thus GSK by adopting financial control methods can ensure through this process that costs are kept in accordance with the forecasted values and that those projects requiring higher expenditures are justified by higher revenues otherwise strict actions on the part of team members involved be taken account of.
- Strategic control: It is a more qualitative approach and aids the managers in knowing whether a specific strategy would work or not by detection of any problematic areas which might imply that the strategy is incorrect. It is advantageous for the company to adopt such a method as it sets goals and direction for the members involved and also fits in with the overall work environment of the firm. Furthermore it takes into account the external situation such as political situation of the country whether it is stable or not, the picture of the economy whether it is in recession or in boom where the company is located and then formalizes a plan for the completion of a project. Thus a strategy for implementation and innovation of new products and ideas and its control would ensure GSK that it produces quality products for its customers and meet their demands in time and if a strategy is incorrect then change its structure which in turn would enhance the flexibility of the company.
- Cultural control: This involves the norms, values, beliefs and rituals of a particular company which guides its members and motivates its employees. Some organizational structures are dominant in nature which might lead to inflexibility in change and hinder the process of innovation while some cultures encourage team work and award employees generating new innovations. GSK is one of the companies whose culture is such that it to a greater extent promotes innovative ideas by its members and is based on team and outcome orientation. However despite this it still needs to have a check on its cultural control system and needs to balance the cultural alive and cultural fit between its members and the organization. It should control its culture through human resource practices such as selection, performance appraising, career development and training. Furthermore it can through the process of socialization ensure that new employees adapt themselves to the environment of the company so that if they do not fit might leave. Moreover if employees are well adapted and able to understand the company’s culture and goals then less time could be taken on explanation of tasks, tutoring regarding projects and trying to build harmony between employees before innovations. It will also ensure that less error are made and thus would lead towards greater profitability, productivity and retention of workers within GSK.
To sum up the case study it can be seen that overall the company promotes a culture which inspires its employees to engage in research and development. Moreover it promotes team work, employs strategies and ensures that each and every person in the organization is in consensus with it and follows it. It also follows methods such that time is utilized efficiently and more innovative products are generated in the market by one of its evaluation techniques namely screening of products thereby decreasing its wastage cost and enhancing the profitability of the firm. However the firm to increase its revenues should also consider the motivation of its employees by providing them certain incentives to come up with new ideas such as monetary and non-monetary benefits. Also it should adopt the different control methods such as financial and organization control systems to ensure greater productivity, efficiency and profitability.
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