Merck Case Study

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preferred method?

This approach is best implemented when potential users for rapid change products, such as high technology, will not have the real-world experience needed to problem solve and provide accurate data to inquiring market researchers. In contrast, lead users are users whose present strong needs will become general in a marketplace months or years in the future. As a result, the lead-user research method provides a unique way to uncover rich information on emerging and future customer needs. By studying the innovations of users at the leading edge of an industry and mining the insights of those users who have solved analogous problems in other industries, a company may find the next breakthrough innovation. The method can help a company break away from “me-too” product extensions and accelerate the creation of new markets, products, platforms, or even strategic directions.

6. When is the supplier codevelopment the best option?

This approach to innovation is best suited when a firm cannot be competitive in the world market unless it deals with suppliers who share similar objectives and have the same level of performance. Thus, helping suppliers to make them more competitive and efficient will automatically help buyers to become more competitive and efficient. By using a supplier’s additional resources, skills and capabilities, especially a supplier’s greater design responsibilities, companies can develop and maintain a competitive advantage by reducing costs and cycle time and by offering more customized product characteristics or better product quality. This approach to innovation is mostly found in the automotive industry, in view of the fact that in the automotive industry up to 75 % of the cost of a vehicle comes from parts sourced from outside suppliers.

7. How should SP be involved in the new merged effort to implement open innovation?

Instead of being faced as an acquisition of SP by Merck, they should start integrating their R&D departments as one of the open-innovation suggestions: creating a joint venture. Merck would be able to absorb all innovation and diversify its products with the innovative ideas from the SP R&D, while providing to SP their high knowledge (capability) in early-stage collaborations in new drugs development. In additional, the market diversification (growing their sales outside the U.S) possible through this involvement with SP, will give Merck fresh air and new perspectives about different customer inputs. If this proves itself as successful, all the corporate culture alignment required for the merge will come easier.

8. Pretend you are at the meeting discussed at the beginning at the end of the case advising Dr. Turner. What would you recommend he do in the short/midterm (1-3 yrs.)?

We believe that the single most important step towards open innovation (OI) for Merck, as it is for majority of companies in within and outside of the industry, is to start at evaluating and implementing the change in organizational culture. It has been noted in the case that the company has been suffering from the “not invented here” (NIH) syndrome that can be explained by the culture of thinking that the smartest people are already working for the company. Research has shown that when there is a company with a strong one culture in place, the true shift in organizational culture will start at top only. Dr. Turner will have to make sure that the top management is directly involved in the open innovation implementation process. We would also advise that to make sure of the leadership playing a key role in the OI implementation - Dr.Turner should create independent OI teams. We believe that the members of those teams should be the key individuals in R&D, marketing, procurement and the legal department. The top management will play an important role by making sure that the operational staff (members of independent OI teams) are convinced of the need for change. Another key issue that needs to be tacked by Dr.Turner at the short/midterm is the NIH syndrome - people do not value ideas or technologies that are not generated from within their own company. In additional to the “charm school” that Dr.Turner has been using, we recommend:

• involving people in the decision-making process;

• improving internal communication;

• setting a good example;

• establishing adequate reward systems (regulative - based on rules or appreciative - on appreciating certain behavior).

9. What would you recommend in the long term? (>3yrs)

In the long term, we believe that Dr.Turner should focus on four main areas:

• OI culture (Please see question 8)

• OI procedures - OI teams that can create a space where scientists can interact safely and freely with other experts, they can also link the functions and the relevant pool of skills in within the OI process.

• OI skills - these same OI teams should know where to go for the skills required in the company. Dr.Turner needs to be aware that Merck needs internal competences to be able to assess and review external capabilities and opportunities.

• OI motivation - overcoming the NIH (for more details please refer to question 8).

As mentioned in question 8, the top management gives the fundamental push to establish an OI implementation team, and its support is instrumental in achieving OI rollout across the whole organization. This same level of responsibility on top management should remain relative for the long term OI implementation process.