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GlaxoSmithKline and The Open Innovation Strategy

GlaxoSmithKline and The Open Innovation Strategy. Marina Shevchenko, Norrina Brown and Hui Tian June 27, 2011. GlaxoSmithKline at a Glance.

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GlaxoSmithKline and The Open Innovation Strategy

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  1. GlaxoSmithKline and The Open Innovation Strategy Marina Shevchenko, Norrina Brown and Hui Tian June 27, 2011

  2. GlaxoSmithKline at a Glance • GSK is one of the world’s premiere pharmaceutical companies ending the year 2010 with total gross profits of £20,800 in millions ($33,448 million in U.S. dollars). • GSK operates primarily in three business sectors: prescription medicines, vaccines and consumer healthcare products

  3. GSK Mission We have a challenging and inspiring mission to improve the quality of human life by enabling people to do more, feel better and live longer. • GSK is one of the few pharmaceutical organizations to tackle what the World Health Organization has deemed the “three priority diseases”: HIV/AIDS, tuberculosis and malaria

  4. GSK Strategy • Grow a diversified global business reducing its reliance on traditional “white-pill” medicine in the western world • Deliver more products of value by revitalizing the company R&D, seeking external resources and focusing on higher ROI • Simplify the operating model in order to operate in a more cost efficient manner

  5. GSK Open Innovation Strategy January 2010, GSK announced its new ‘open innovation’ strategy (OIS). The initiative will serve to aid the company in tackling diseases that disproportionately affect poorer nations. Diseases such as Malaria, Tuberculosis, and HIV/AIDS

  6. Five Component Open Innovation Model • The creation of the “Open Lab” • A maximum of 60 scientists pursue their own projects with the intent of discovering new medicines • GSK is also committing additional $8 million to help fund research at the facility. • Release 13,500 GSK compounds into public domain. • These compounds have been identified to inhibit malaria. • GSK hopes that these compounds can be built upon and developed into new medicines in order to fight the spread and contraction of malaria

  7. Five Component Open Innovation Model • Collaborations to share the intellectual property “knowledge pool” • GSK released 800 of their patents and patent applications into the public pool and allowing access to the company know-how • Affordable pricing model for most prominent malaria drug • RTS, will be priced to cover costs with a small return to be reinvested in to R&D of vaccines for other neglected diseases • GSK awards four new grants worth $2.5M

  8. GSK High Performance Behaviours

  9. Board of Directors Purpose: • To ensure the company's prosperity by collectively directing the company's affairs to meet the appropriate interests of its shareholders and stakeholders Characteristics: • More diverse in gender, nationality and ethnicity than before

  10. Board of Directors goals To meet GSK strategic objectives Special Focus on: • Global Management • Finance • R&D • Challenges and issues relating to corporate governance, corporate social responsibility and corporate ethics.

  11. Board of Directors composition • 15 people • 55 as average age • 3 females,12 males • 4 nationalities • 5 people are insiders, 10 people outsiders (independent directors)

  12. Board of Directors facts Background • 5 in Finance • 5 in Global Management • 5 in Medicine R&D Turnover • Stable structure with low turnover rate • 5 people quitted from 2007 to 2011: 3 retired, 2 left

  13. Board of Directors Evaluation • High percentage of independent directors ( 67%) • Diversity in gender and nationality • Pays more attention on education and working background • Compensate and motive with diverse short- and long-term incentive plans • Low turnover • Appointed for strategic needs: Indicated a strategic inclination towards more financial control to support its new strategy with a higher ROI rate and lower operational cost. • This board of director structure provides full governance support and directs the organizational strategy helping to ensure its success.

  14. Corporate Officers in GSK Appointed by the board of directors Responsible for the execution of the organizations strategic operations Composition: • 18 people • 52 y.o. as an average age • 2 female, 16 male Background: • 5 in Medicine • 4 in R&D • 7 in Specific managerial functions

  15. Corporate Officers in GSK Turnover • Adjusted by initial needs • 7 people quitted from 2007to 2011: 2 retired, 1 relocated, 4 left Compensation • Base pay set at a level considered appropriate to secure and retain the talent needed to deliver GSK’s strategic priorities • 75% – 85% of GSK’s total remuneration package is variable, which includes cash bonus, deferred bonus including match and performance shares • R&D Chairman in 2010 the second highest paid executive after the CEO • The level of compensation mix supports the GSK growth strategy and its focus on innovation and R&D

  16. Top corporate officers CEO: Andrew Witty • Joined the company in 1985, appointed CEO in 2008 • An academic background in Medicine as well as a strong global management background with years of experience • Brings to GSK a perspective from both Medicine and Global Business, which concretely enable the company to effectively achieve its globalization strategy in the global pharmaceutical industry Chairman in R&D: Moncef Slaoui • Joined the group in 1988 and was a key player in building GSK’s vaccines pipeline • Appointed Senior Vice President, Worldwide Business Development in 2003 • Served with the company for over 20 years and has exceptional background in medicine, R&D and global perspective • All enable him to demonstrate his innovative competency with his strong sense and ability to make R&D add value to and meet the strategic goals of GSK Chief Strategic Officer: David Redfern • Responsible for proactive exploration of new business opportunities and strategic planning. • Began his career with GSK in 1994 in Corporate Development before being appointed Finance Director of Europe Pharmaceuticals in 1999. • Important role in making strategic decisions and leading the strategic direction of the company to meet GSK’s strong expectation and requirement to align the financial strategy and the global strategy with its overall strategic goals

  17. Corporate Officers Evaluation • Appointed keeping the future needs of the organization in mind • Strong emphasize on the ability to exchange information and work cooperatively between all departments benefits GSK and allows the company to use R&D, Finance, and Strategy development to facilitate its global growth plan.

  18. Supporting actions of OIS • Strategic partnerships • Collaboration with different institutions • “Open source” tactics • PULSE Volunteer Partnership • Building relationship with local communities • Making a difference • Developing future leaders

  19. GSK HR Leadership Team • Ms. Claire Thomas (Senior Vice President of Human Resources, GlaxoSmithKline Plc) • Mr. Ronald C. Sequoia (Executive Director of HR, GlaxoSmithKline Pharmaceuticals Ltd., South Asia) • Mr. Arun Sehgal (Executive Vice President of HR, GlaxoSmithKline, Consumer Healthcare, India)

  20. Business Knowledge • Education in marketing, IT, finance • Successful work experience in salesand marketing (Ms. Claire Thomas) • High level positions at Ford company • “Outstanding European Woman of Achievement” award • Key HR roles in manufacturing and banking business (Mr. Ronald C. Sequoia and Mr. Arun Sehgal) • Critical roles in M&A processes

  21. HR Practices • Focus on transformational activities • Increasing employees engagement • Improving quality of leaders HR function can greatly benefit from three years Arun Sehgal’sexperience as Director of Global HR Shared services at Gillette. • Operational support of strategic actions • Improving the level of employees’ engagement • Mission-driven projects • R&D Innovation Awards

  22. Change Management • Experience in overseeing change management projects • New approach to compensation strategy • Participation in M&A projects • New initiative: HR function as a strategic business partner • Survey of 300 GSK’s top leaders about HR role • Developing HR professionals • Establishing centers of excellence

  23. Our recommendations • IT department as a critical function • Security, hacking, competition • Change of organizational structure • Cultural and behavioral training • Expanding into developing countries • Difference in mentality • Developing company’s female leaders • Women’s underrepresentation at the executive level • Potential benefits for the company

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