study were published in the Academy of
We focused our examination on two new
biotechnologies that emerged in the late
1980s and that gathered lots of attention:
monoclonal antibodies and gene therapy.
Both technologies represented a radical departure from traditional chemistry-based
therapies, faced a high degree of scientific
and commercial uncertainty, and required
established companies to invest in new
competences. Despite the challenges, many
established companies initiated research in
both technologies and generated patented
inventions. But we observed that the extent
to which established companies’ research investments led to drug development activities
differed significantly between monoclonal
antibodies and gene therapy. While inventions were being readily translated into
downstream drug development and commercialization in monoclonal antibodies,
that was not the case for gene therapy.
This can be explained in part by the fact
that monoclonal antibodies and gene therapy differ significantly in their fit with the
existing pharmaceutical business model.
Monoclonal antibodies, like traditional
chemistry-based drugs, are standardized
treatments targeted at mass markets and
prescribed over the long term, resulting in
recurring costs for patients and insurers. As
a result, monoclonal antibodies represent a
good fit with the traditional pharmaceutical business model.
In contrast, gene therapies are typically
one-off or significantly less frequent personalized treatments for patients with
genetic disorders, administered by specialized physicians. Consider an application of
gene therapy to treat hemophilia A and B.
Such treatment is predicated on a one-time personalized injection, which not
only threatens the existing market for hemophilia treatment but also presents a lack
of clarity regarding how such a new treatment would be priced and reimbursed.
Hence, gene therapy represents a case of a
technology that disrupts the existing busi-
ness model. As we confirmed through our
interviews, it is this disruptive nature that
made it difficult for gene therapy inven-
tions within established companies to
garner resources toward subsequent devel-
opment and commercialization.
We also explored how managers could
overcome this challenge — and discovered
that the answer lies in the organizational
design through which companies pursue
emerging technologies. We found that gene
therapy research that was conducted in-house
or via external research contracts, where the
established pharmaceutical company made
the development and commercialization
decisions, was less likely to move toward commercialization because of the conflict with the
company’s existing business model. Companies were more likely to pursue subsequent
gene therapy development and commercialization when the research was conducted via
alliances with startups and universities, or
within a separate research unit that was
acquired. In such situations, the decision
making with respect to drug development
and commercialization was structurally separated from the parent organization and
involved outsiders from startups whose
mental models differed from those of executives within established companies.
The implication of our research for executives is clear: When evaluating emerging
technologies, managers should assess not
only the new functionality and associated
competences that their companies may need
to develop but also whether the emerging
technology has a significantly different customer value proposition and profit equation.
(Think, for example, of digital imaging and
photographic film manufacturers, gene therapy and pharmaceutical companies, or
self-driving cars and automakers). The greater
the incompatibility between the emerging
technology’s business model and the company’s existing business model, the greater will
be the organizational challenge that the company will face in commercializing it.
Managers can then mitigate this challenge by creating an organizational structure
where resource allocation and decision
making around emerging technologies are
decoupled from the established company
and involve outsiders with different mental
models. This can be achieved through strategic alliances and acquisitions of startups or
research units. Alliances may offer greater
flexibility, whereas acquisitions may provide
greater control over the technology and intellectual property. Alternatively, pioneering
companies could create new units such as
Amazon’s Lab126 and Google X through aggressive hiring. However, such a structure
often comes with an added burden for a
company’s leaders, since they must manage
the competing demands of the core business
and the emerging technology initiatives.
Today many businesses are confronted
with disruptive technologies such as 3-D
printing, artificial intelligence, cloud computing, the internet of things, personalized
medicine, and renewable energy. An important consideration for managers is to move
beyond the decisions of whether and when
to invest to the question of how to invest in
such emerging technologies. While executives may initiate preliminary explorations
in these technologies, they may be constrained by the logic and decision-making
processes underlying inventions and their
subsequent development and commercialization. But with appropriate organizational
designs, executives can help sustain their
companies’ success — even in the face of an
ever-shifting technology landscape.
Rahul Kapoor is an associate professor of
management at the Wharton School of the
University of Pennsylvania in Philadelphia,
Pennsylvania. Thomas Klueter is an assistant professor of entrepreneurship at IESE
Business School at the University of Navarra
in Barcelona. Comment on this article at
http://sloanreview.mit.edu/x/58220, or contact the authors at firstname.lastname@example.org.
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