Every
idea has its place under the sun. Two industries, pharmaceuticals and aviation
which are known to be ‘high risk – high gain’ business are strikingly employing
similar practices in order to maximize productivity and profits.
Everyone
would agree that both aviation and pharmaceutical businesses require ‘deep
pockets’ to start and sustain. Both have long periods of gestation but if run
properly then returns can be huge eg. Pfizer, Merck, Emirates etc.
Let
us look at the paradigm shift being brought about by the major aviation
companies and pharma giants to improve sustainability of their respective
businesses. In aviation, big players
like Etihad, Emirates, Singapore airlines utilize their home base airports of
Abu Dhabi, Dubai and Singapore respectively as hubs which then is used to
improve/increase traffic. Traffic is brought in from various airports around
the world and the hubs provide seamless connectivity options to their respective
customers – a typical hub and spoke model!
Similar
kind of approach is now being utilized by the pharma giants to increase their
R&D productivity. R&D is the base on which any pharma company stands.
But with increasing drought of blockbuster drugs coming out from the stable of
Merck, Pfizer et al., it has become imperative for them to look for other ‘innovative’
means. The answer- ‘reduce expenditure on internal R&D efforts and create
smaller hubs to scout for interesting research done in smaller
companies/universities’. The companies feel this would help them to maximize
R&D productivity and will be better focused on bringing in a stream of new
deals. This is another version of ‘hub and spoke model’.
There
are critics of this approach but with increasing cost burden, lack of
nimbleness in the big pharma set up it is probably important to decentralize
and open up.