Page 47 - ENTREPRENEURSHIP Innovation and entrepreneurship

53231_Innovation and Entrepreneurship.qxd 11/8/2002 10:50 AM Page 40

40 THE PRACTICE OF INNOVATION

lobbied for it, or because a good customer asked for it and could not be
turned down. But nobody expects it to sell; in fact, nobody wants it to
sell. And then this “dog” runs away with the market and even takes the
sales which plans and forecasts had promised for the “prestige,” “qual-
ity” line. No wonder that everybody is appalled and considers the suc-
cess a “cuckoo in the nest” (a term I have heard more than once).
Everybody is likely to react precisely the way the chairman of R. H.
Macy reacted when he saw the unwanted and unloved appliances over-
take his beloved fashions, on which he himself had spent his working
life and his energy.
The unexpected success is a challenge to management’s judgment.
“If the mini-mills were an opportunity, we surely would have seen it
ourselves,” the chairman of the big steel company is quoted as saying
when he turned the mini-mill proposal down. Managements are paid
for their judgment, but they are not being paid to be infallible. In fact,
they are being paid to realize and admit that they have been wrong—
especially when their admission opens up an opportunity. But this is
by no means common.
A Swiss pharmaceutical company today has world leadership in
veterinary medicines, yet it has not itself developed a single veteri-
nary drug. But the companies that developed these medicines
refused to serve the veterinary market. The medicines, mostly
antibiotics, were of course developed for treating human diseases.
When the veterinarians discovered that they were just as effective
for animals and began to send in their orders, the original manufac-
turers were far from pleased. In some cases they refused to supply
the veterinarians; in many others, they disliked having to reformu-
late the drugs for animal use, to repackage them, and so on. The
medical director of a leading pharmaceutical company protested
around 1953 that to apply a new antibiotic to the treatment of ani-
mals was a “misuse of a noble medicine.” Consequently, when the
Swiss approached this manufacturer and several others, they
obtained licenses for veterinary use without any difficulty and at
low cost. Some of the manufacturers were only too happy to get rid
of the embarrassing success.
Human medications have since come under price pressure and are
carefully scrutinized by regulatory authorities. This has made veteri-
nary medications the most profitable segment of the pharmaceutical
industry. But the companies that developed the compounds in the first
place are not the ones who get these profits.