Eli Lilly & Co Innovation in Diabetes Care, Case Study Example

Eli Lilly enjoyed a heavy market share regarding insulin sales in the United States during the late 1980’s and 1990’s but they did not share the same competitive advantages globally. During the late 1980’s multiple areas of innovation were taking place in the areas of insulin improvement, measuring devises, insulin delivery methods and education around the administration, sustainment and diabetes as a disease. The market was moving at a fast pace but in the same instance the pipeline to garner the benefits for innovation was long and drawn out due to regulatory tollgates and administrative processes that must be followed.

Eli Lilly made great strides in insulin production, efficiency, and integrity in it relation to speed to market and its ability to replicate the insulin produced by a human. There are a few issues that lead to Eli Lilly not optimizing the profitability of their insulin product that mimicked that of a human. The first area was the total return on investment over the short term. The investment far outweighed the estimated gains. The transformation in the United States took over ten years to replace the obsolete and pharmaceutically inadequate insulin with the new and improved insulin they were currently producing (Christensen 2004). The problem is that with all of the investment the perceived value of the insulin the consumer was utilizing was exactly the same as the more expensive alternative in which they did not necessarily have to use unless mandated. Eli Lilly provided a good to the consumer that they did not need nor want coupled with the fact that they were not initially educated on the benefits and premiums that lied within the new insulin product.

Eli Lilly also wanted to enter into the insulin delivery market in which Novo-Nordisk had already established itself in foreign markets, most notably that of the European market. Prior to Eli Lilly trying its hand at the market in the United States, Novo-Nordisk attempted to enter the market under the pretext that the U.S. market wanted to have a quicker way to inject themselves but quickly found out after approximately two years pushing their injectors that the U.S. markets needs did not fall within the parameters of the injection pen business model. Americans were trained and acclimated to injecting themselves once a day even though the task was cumbersome and not always 100% in line with the amount or level of insulin needed to control their diabetes.

Since the Americans did not adopt the multiple injection model Novo-Nordisk did not accomplish their goal of establishing market share dominance as they would have hoped. Eli Lilly subsequently followed the same model as Novo and expected different results. With the same inputs and process Eli Lilly saw the same outcomes as Novo which were less than stellar results and adoption was not achieved. This occurred because insulin injection is seen as a necessary and unpleasant commodity which in most people lives has come to a space of complacency and tolerance for one injection a day regardless of the inefficiency and time consummation. Eli Lilly followed a flawed business plan that resulted in a flawed output.

Eli Lilly organized their business into a functional organization structure. This meant every functional area, such as insulin production, had their own president, vice-president, directors, section managers and so on. Each section followed the guidance set forth by leadership and their goals and objectives tied into the goals and objectives of their leaders. The problem that comes from a purely functional organization is that there is a lack or void of communication between organizations. Marketing never talks to new product development and sourcing does not fully understand the demand of the market because they do not talk to the forecasting department and this leads to an under-informed value chain. Each department became a silo of problem solving and did not enjoy the benefits of each organization’s expertise, knowledge or experience.

Many aspects of Eli Lilly’s business was focused on creating new products and how to get them to the people to use them but the market segments they were looking at were already consumers purchasing their products. Ten years after the introduction of the superior insulin created by Lilly the market was consuming it because instead of creating a new product with a new demand Eli Lilly created a comparable product at a higher price and no increase in demand. Eli Lilly was cannibalizing their profits with their own new product introductions.

Their focus should have moved from their current 80% market share in the United States to other areas of the world in which diabetes is becoming more prominent. The United States and Europe have the lion’s share of demand regarding insulin due to their higher rate of diabetes throughout the world. As countries develop other negative ramification could follow. Eli Lilly should have focused on other areas of the world that would need premium insulin and the ability to measure their levels of sugar as well as administer the insulin. Markets could be created through marketing and education to increase the quality of life among other countries while also increasing market share and demand for the products.

Eli Lilly should have focused more on consumer demand in new markets and not on markets in which they already controlled a large majority market share. They should have also used cross-functional teams to increase information flow between departments in order to ensure all departments were communicating the same message and delivering the proper product to market.

References

Christensen, C. (2004). Eli lilly and company: innovation in diabetes care. Harvard Business School. 9-696-077.

Adams, R. (2004). A good hard kick in the ass, basic training for entrepreneurs. Crown Publishing. Pages 43-71

Adams, R. (2004). A good hard kick in the ass, basic training for entrepreneurs. Crown Publishing. Pages 237-263