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Realizing your Business Model

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CrESIT Assobiotec Workshop 2009 (Varese, Nov 23rd, 2009)
www.cresit.it

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Realizing your Business Model

  1. 1. Realizing Your Business Model Alberto Onetti, Director, CrESIT Antonella Zucchella, President, CIBIE Workshop CrESIT-ASSOBIOTEC 2009 Business Models for Biotech Varese, November 23rd www.cresit.it CONFIDENTIAL
  2. 2. Why you need a Business Model To get to your Destination, you need Directions The Business Model is the road map to your Destination Managerial tool — Defines how the company organizes its activities Decides your business: “Focus” — the relevance of the different activities “Locus” — the localization of the different activities “Modus” — the way different activities are executed Analytical planning tool — What you need to do “activity by activity”
  3. 3. Our Business Model Concept FOCUS LOCUS MODUS Who? In-house or Third Parties? How much Where to place How? Capital or labour-intensive? Activity A to allocate? the activities? How much tech-intensive? Which Skills are required (brain-intensive)? Activity B Activity C … Source: Onetti and Zucchella, 2008
  4. 4. First Issue: How to represent complexity The Business Model: Multiple decisions for Focus, Locus, and Modus A company has many options Business Model decisions characterize the company in a unique way Too many options — risk of “losing your direction” High Tech and Life Science firms are typically global firms: multi-location is the natural way of being A company’s network is “broad” and “multidimensional”: they have to manage many relationships, not only upstream (scientific community, industry…) and downstream (lead users), but also laterally (e.g. finance) They partner in different ways (licensing-in and –out, outsourcing, joint venture, strategic alliances…) More than an analytical planning tool, the Business Model is a blueprint of how a company works A representation of the company’s Business Model Enables one to identify the Business Model’s constituents — the “value architecture”
  5. 5. Case study: MonogramBio (formerly ViroLogic) Founded in 1996 Genentech spin-off Currently 350 people, $40M in revenue Public in 2000, acquired by LabCorp in Aug 2009 (2,800 people, $4B in revenue) Lines of Business: molecular diagnostic products Personalized Medicine Tailored drug therapy, resistant tests for HIV (75% of revenue) Testing for Pharma Companies, working on new HIV drugs 25% of revenue From 2004 they are diversifying from virology to oncology They bought Aclara BioSciences, Mountain View, CA
  6. 6. Case study: MonogramBio Focus LABS & SALES Source: Onetti-Zucchella 2009
  7. 7. Case study: MonogramBio Lesson learned The company diversified but did not change its business model They manage oncology in the same way they did virology Managers have the feeling to approach different lines of business in different ways Frequently they adopt the same model They reshaped the Business Model during the life of the company Locus No change, it was and still remains a Bay Area Company Modus: Billing: initially out, then back in Focus Initially R&D, thereafter Labs and Sales
  8. 8. Second Issue: Business model can evolve and change The Business Model may change over the time Day by day company makes decisions that may affect Focus, Locus and Modus Each decision, separately considered , is not necessarily a radical change, often just a fine tuning of prior decisions But the sum of all these decisions may radically change the way the company works and its Business Model The Focus may change as the company evolves Life Science firms typically change focus as their research moves from early to later phases Some companies do not (“satellite" companies, CROs) Not just Focus, but also Locus and Modus Companies can locate activities in different places This can open up to new business opportunities or exploit new partnerships Companies can initiate new alliances Partnerships can change the way the company works (“platform” companies) The more parameters are modified, the more radical is the business model change In some cases business model changes are so radical to drive strategy change
  9. 9. Case study: Napo Pharmaceuticals Founded in 2001 Napo bought Shaman's library of compounds, including crofelemer It raised approx. $300M Currently approx. 30 people (over 100 a few years ago) Public in 2006 Business: development and commercialization of proprietary pharmaceuticals
  10. 10. Case study: Napo Pharmaceuticals ACTIVITY LIST FOCUS Strategic Importance (1=low - 10=high) Pre-Clinical 4 Phase 1 6 Phase 2 10 Phase 3 3 Pilot Manufacturing/Tech Transfer Focus Registration Business Development Manufacturing and Sales EARLY STAGE RESEARCH London Source: Onetti-Zucchella 2009
  11. 11. Case study: Napo Pharmaceuticals ACTIVITY LIST FOCUS Strategic Importance (1=low - 10=high) Pre-Clinical 2 Phase 1 3 Phase 2 3 Phase 3 6 Pilot Manufacturing/Tech Transfer 6 Focus Registration 8 Business Development 8 Manufacturing and Sales 2 REGISTRATION & BD London Source: Onetti-Zucchella 2009
  12. 12. Where may the Business Model tool help? Plan & manage your evolution, not just be driven by events “Models evolve, change, often react to where the science or the money is” “We figured it out based on the environment” How do you see your company in 3 years? What actions are required to reach your new Destination? Check the evolution path and learn from your past Are we today what we wanted to become? What drove my evolution? The analysis of the past can help plan for future actions Communicate what your company does Life science and high tech companies are not easy to pitch Scientists do not talk business, but business people and venture capitalists do not like to hear science (for more than 40 secs) Our tool analyzes and wraps-up how the company actually works It is the snapshot of your company as it is now 3 years ago the company probably looked different 3 years from now it will likely be different The worst thing for a manager is to be surprised about that

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