Wednesday, October 12, 2011

The Innovator's Dilemma

When I heard that Steve Jobs had passed away last week, I was reminded of how tricky the cult of personality as a management style can be. Mr. Jobs was a visionary and truly changed the way we view the world.  Design and evolution of how we communicate and what we demand of our gadgets was his hallmark. When he took a medical leave in 2010, the stock suffered.  When he stepped down a few months ago, the stock suffered. While there is no doubt that Apple, a well-established global brand, will go on under the auspices of CEO Tim Cook (appointed in August 2011), Mr. Jobs’ absence also underscores the dilemma of what to do when it is time for a charismatic leader to go off the stage.

We have seen this again and again in life science companies. Founders of these companies--most often scientists—take a compelling (in theory) idea and lead a company through the start-up phase. These leaders often occupy the central role in fundraising—the reason the investors are willing to take a chance on promising technology and science.  This is ever more true during the current dire state of affairs the industry finds itself in these days. As a company evolves, the founder often becomes synonymous with the “brand.”  And therein lies the rub. Companies advance and change. In these times, they try to do more with less and seek creative financing avenues. When one person is the brand, rather than a team, risk increases. This is true across technology and biotechnology, and has never been truer than now in life sciences. Companies founded in the last five years, are staying private longer due to a barely existent IPO market for life science companies.

This means that founders—in many cases, a company’s visionary—are staying much longer. Due to financial constraints, teams are smaller. While the current market conditions may be better suited to the entrepreneurial mindset, at some point, running a business becomes more than the selling of an idea, concept or vision to investors. It becomes deal-making and horse-trading with other companies, vendors and potential partners.  As companies mature, the entrepreneurial mindset must give way to operating the business. This does not mean giving up nimbleness and flexibility.  What it does mean is that a company built around a “big” personality” may suffer in the long term. (The investors in the Martha Stewart empire and in Oprah’s fiefdoms are nervous for this very reason.) Balance is essential for a company as it develops. A founder has to be willing to shift roles, allow for growth of key members of his or her team and clearly communicate a succession plan. Apple did this the right way. Life sciences and healthcare are littered with examples of companies and founders that did not.  (See:  board-pressured removals of any number of founders or turn-around CEOs who overstayed their welcome.)

Even in this era of tight financing, most life science ventures cannot survive into the medium term without a plan to shift from entrepreneurial mode to day to day business mode.  This can be a difficult shift for most “visionaries.” In Apple’s case, the company will go on. Mr. Jobs’ and his vision will be missed—and long remembered. He was a shining example of how a founder can shift roles.  It is helpful to remember, though, that he left Apple for several years in the late 90s before returning as CEO of a more established version. He was the example that surpasses the rule.

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