As I’ve been doing some research about implementing innovation as a consulting capability – I’ve started with some classic books. I’ve just finished ‘The Innovator’s Dilemma’ by Clayton Christensen and it was really, really interesting. It’s an old book by digital standards – it was written in 1994, but it’s still just as relevant today.
I’ll tell you about one of my biggest takeaways from the book. It’s from a case study about Eli Lilly, a large pharmaceutical company headquartered in the US.
Eli Lilly is a world leading insulin manufacturer – insulin for diabetics. Back in the 1970s, research funded by Eli Lilly experimented with the use of synthetic insulin in order to replace that of the insulin that was currently being extracted from the ground-up pancreases of cows and pigs. Animal insulin caused a fraction of diabetic patients to develop a resistance meaning it was rendered useless. Eventually, in partnership with some other technology companies, they managed create insulin proteins that were the structural equivalent of human insulin proteins which were 100% pure and did not cause a resistance build-up.
However – it didn’t sell. Or at least, not very well. Eli Lilly found it hard to sustain a premium price for the ‘Humulin’ instead of using cheaper, animal insulin. Growth was slow.
On the face of it, this just looks like a classic case of supply and demand. In fact, consumers were quite happy with insulin from pigs and Eli Lilly had offered a premium price product where there was actually no need.
Instead of focusing on the insulin itself, Novo, a much smaller company started developing insulin ‘pens’ to provide a much more convenient alternative to the fiddly and potentially dangerous process it was at the time. Instead of taking out all of the equipment, measuring the correct amount, flicking the syringe and finally inserting it, the pens meant that you can have multiple days supply of insulin in one pen and it measured the amount itself. All you had to do was press a button for easy application.
It was due to this that Novo increased its share of the market substantially – across the world, leaving Eli Lilly in the dust.
With the benefit of hindsight it seems obvious that Eli Lilly made the wrong decisions, after all only a fraction of people with diabetes develop insulin resistance. If they’d done some more research, wouldn’t they have found out from patients that what they really want is something easier to use?
Christensen relays some of his students’ comments on the matter:
“What is obvious in retrospect might not be obvious in the thick of battle. Of all the physicians to whom Lilly’s marketers listened, for example, which ones tended to carry the most credibility? Endocrinologists whose practices focused on diabetes care, the leading customers in the business. What sorts of patients are most likely to consume the professional interests of these specialists? Those with the most advanced and intractable problems, among which insulin resistance was prominent.
What, therefore, were these leading customers likely to tell Lilly’s marketers when they asked what should be done to improve the next-generation insulin product?”