Pharmaceutical Executive Europe - September 2008 - (Page 12)

The Value of VRIO Dr Brian D. Smith looks at the value of management science to real-world pharmaceutical executives. S ometimes, we learn more from our errors than from our successes. That was the lesson of workshop on strategy excellence I ran for a large firm recently. The four syndicate groups, each asked to role-play a competitor in their therapy area, came back into the room and presented their strategies. They all looked good so the executives, all bright people, were shocked when I gave my feedback. What was wrong was that the strategies all looked good because they were all pretty much identical. Had this been for real, I told them, all four firms would have banged heads to no one’s advantage. As the currently fashionable ‘blue ocean strategy’ explains at slightly tedious length, the aim is to find (at least relatively) uncontested market space. So much is obvious. The pressing question is where to look for this Shangri-La? One perspective on this important question is given by a body of work in the strategic management literature called the Resource-Based Theory of the Firm (RBT). Understanding this theory, and its implications for pharmaceutical firms, is important for any competent executive. … the aim is to find an (at least relatively) uncontested market space. So much is obvious. The pressing question is where to look for this Shangri-La? Resource-based theory has its origins way back in the 1950s with Selznick and then Penrose. These seminal authors invented the idea that firms could be thought of as a bundle of distinctive competencies. Eventually, this led to RBT as we know it today, the most readable exponent of which is Jay Barney. In essence, Barney argued that firms succeed when they have resources that are valuable, rare, hard to imitate and that the organisation is capable of using — tests he captured in the mnemonic VRIO (value, rarity, imitability and organisation). Moreover, success comes from indentifying which of the firm’s resources (tangible or otherwise) meet those VRIO criteria and picking the market space that uses them. How is that relevant to pharmaceutical executives? Well, ask yourself what resource or competence does your firm or business unit have that meet those criteria? Think of a potential example then apply these tests: ● Is it valuable, in that it can be used to exploit opportunities in the market? ● Is it rare, in that it is distinctive of your firm and not possessed by your rivals? ● Is it inimitable, in that it is hard or expensive or time consuming for rivals to copy? ● Is it organisationally aligned, in that the rest of the organisation is complementary to this competence? Remembering that a real strength must meet all four of these criteria, most of the 14 BioFutures Gerhard Symons’s second report on pharma in Russia. 16 Critical Vision Jacky Law joins Pharm Exec Europe as a columnist. 18 Executive Profile Pharm Exec Europe talks to NNIT’s CEO, Per Kogut. 22 Regulatory Affairs Will the FDA/EMEA joint inspection programme work?

Table of Contents for the Digital Edition of Pharmaceutical Executive Europe - September 2008

Pharmaceutical Executive Europe 9/08
Contents
From the Editor
News and Analysis
Calendar
The Battle for Bio
The Value of VRIO
Russian Pharma 2015
Pharma’s New Winners and Losers
Into the Lake
Joining the Parallel Lines
Last Words

Pharmaceutical Executive Europe - September 2008