Expert Commentaries
1
Pergamon European Management Journal Vol. 19, No. 4, pp. 438–442, 2001 EXPERT COMMENTARIES MICHAEL BARRETT, Judge Institute of Management Studies, University of Cambridge The Urge to Merge is a common theme across a number of industries, particularly those that have been labelled knowledge intensive industries. It represents a strategic positioning by leaders of organizations that seek to manage in what scholars such as Beck and Giddens have referred to as a ‘risk society’. Of course, there have always been risks and traditional strategy formulation has long recog- nized the need to assess the opportunities and thre- ats which mark the landscape of an industry. How- ever, what Beck would suggest is that the types of risks, their profiles, and their implications for industries and individuals is significant in today’s environment. These risks include techno-scientifi- cally induced ones which challenge traditional knowledge claims. In the pharmaceutical industry for example, we see traditional knowledge and knowledge processes around R and D, clinical trials, and patent processes being challenged with the development of genomics and rational drug design. Then there is the perceived role of the Inter- net which has presented significant risk and uncer- tainty for leaders as new web-enabled distribution channels develop which challenge traditional methods and often involve the all consuming affair of attempting to colonize the end-consumer. In responding to these techno-scientific risks and the recent changes enacted by institutions such as the CMOs and HMOs, leaders of pharmaceutical firms have adopted multiple risk positions to man- age strategically. This involves hedging against uncertainty and considering multiple futures. These risk positions include not only big bets on scale and scope through mergers and acquisitions but also the adoption of new science from genetics, technological development techniques such as rational drug design, and new business strategies 0263-2373/01 $20.00 2001 Elsevier Science Ltd. All rights reserved. PII: S0263-2373(01)00053-6 European Management Journal Vol. 19, No. 4, pp. 438–442, August 2001 438 that seek to build and strengthen customer relationships. The appreciation of time and timing by leaders is heightened in a risk society and goes beyond more traditional views of time such as ‘time to market’ or other metrics of operational effectiveness which, though important, are a necessary but not sufficient approach for adequately appreciating the temporal dimensions of strategy in fast-moving environments. Finally, partnering is often a strategic positioning tac- tic to buy time and defend one’s position, to acquire needed technologies or build increasingly requisite competencies to be competitive in an industry. Part- nerships also act as a hedge against risks from known competitors within the industry as well as from unknown competitors in an increasingly convergent marketplace where there are multiple uncertain futures. Whilst these reasons are increasingly over- shadowing the more traditional reasons relating to operational effectiveness, the difficulties in achieving this effectiveness need to be emphasised. Combining and integrating core technological systems and archi- tectures such as enterprise resource planning systems is often difficult due to their inherent rigidity, and this is further compounded by the need for organiza- tions to once again re-engineer and coordinate their business processes to optimize the operational effec- tiveness of the merged entity. Perhaps, more importantly, the processes of knowledge generation and sharing which are so critical in innovating block- buster medicines (so as to meet targeted growth rates of the merged entity) are not easily achievable. The psychological switch for partnering firms to move from being rivals to team players will likely be a chal- lenge, particularly when there are contrasting man- agement styles and approaches. In such a case, the implications for cultivating a culture and environ- ment for knowledge sharing built on trusted relation- ships are profound.
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Transcript of Expert Commentaries
PergamonEuropean Management Journal Vol. 19, No. 4, pp. 438–442, 2001
EXPERTCOMMENTARIESMICHAEL BARRETT, Judge Institute of Management Studies, University of Cambridge
The Urge to Merge is a common theme across anumber of industries, particularly those that havebeen labelled knowledge intensive industries. Itrepresents a strategic positioning by leaders oforganizations that seek to manage in what scholarssuch as Beck and Giddens have referred to as a ‘risksociety’. Of course, there have always been risksand traditional strategy formulation has long recog-nized the need to assess the opportunities and thre-ats which mark the landscape of an industry. How-ever, what Beck would suggest is that the types ofrisks, their profiles, and their implications forindustries and individuals is significant in today’senvironment. These risks include techno-scientifi-cally induced ones which challenge traditionalknowledge claims. In the pharmaceutical industryfor example, we see traditional knowledge andknowledge processes around R and D, clinicaltrials, and patent processes being challenged withthe development of genomics and rational drugdesign. Then there is the perceived role of the Inter-net which has presented significant risk and uncer-tainty for leaders as new web-enabled distributionchannels develop which challenge traditionalmethods and often involve the all consuming affairof attempting to colonize the end-consumer.
In responding to these techno-scientific risks andthe recent changes enacted by institutions such asthe CMOs and HMOs, leaders of pharmaceuticalfirms have adopted multiple risk positions to man-age strategically. This involves hedging againstuncertainty and considering multiple futures.These risk positions include not only big bets onscale and scope through mergers and acquisitionsbut also the adoption of new science from genetics,technological development techniques such asrational drug design, and new business strategies
0263-2373/01 $20.00 2001 Elsevier Science Ltd. All rights reserved.
PII: S0263-2373(01)00053-6
European Management Journal Vol. 19, No. 4, pp. 438–442, August 2001438
that seek to build and strengthen customerrelationships.
The appreciation of time and timing by leaders isheightened in a risk society and goes beyond moretraditional views of time such as ‘time to market’ orother metrics of operational effectiveness which,though important, are a necessary but not sufficientapproach for adequately appreciating the temporaldimensions of strategy in fast-moving environments.
Finally, partnering is often a strategic positioning tac-tic to buy time and defend one’s position, to acquireneeded technologies or build increasingly requisitecompetencies to be competitive in an industry. Part-nerships also act as a hedge against risks from knowncompetitors within the industry as well as fromunknown competitors in an increasingly convergentmarketplace where there are multiple uncertainfutures. Whilst these reasons are increasingly over-shadowing the more traditional reasons relating tooperational effectiveness, the difficulties in achievingthis effectiveness need to be emphasised. Combiningand integrating core technological systems and archi-tectures such as enterprise resource planning systemsis often difficult due to their inherent rigidity, andthis is further compounded by the need for organiza-tions to once again re-engineer and coordinate theirbusiness processes to optimize the operational effec-tiveness of the merged entity. Perhaps, moreimportantly, the processes of knowledge generationand sharing which are so critical in innovating block-buster medicines (so as to meet targeted growth ratesof the merged entity) are not easily achievable. Thepsychological switch for partnering firms to movefrom being rivals to team players will likely be a chal-lenge, particularly when there are contrasting man-agement styles and approaches. In such a case, theimplications for cultivating a culture and environ-ment for knowledge sharing built on trusted relation-ships are profound.
