The Eli Lilly and Co. Case – Innovation in Diabetes Care: What Went Wrong? Why? and What Should the Next Step be?
As a company, Eli Lilly may have achieved more success had they read chapters two and nine of Adams’ “ A Good Hard Kick in the Ass: Basic Training for Entrepreneurs.”
Despite efforts of high investment to maintain it’s dominant position as an insulin manufacturer, the company began to see it’s worldwide position weaken. To add to the devastation, Lilly missed several waves of innovative opportunities within the diabetes care market. At the time of the case, Lilly was engaged in a determined effort to strengthen it’s position in insulin and grow beyond that single product, exploring alternative products and services (Unger, 2012).
Eli Lilly dropped in overall market share in diabetes care from 1980 to 1995 (Christensen C.M., 1996). What mistakes did Lilly make in its product and service initiatives, and why did this happen? Is Eli Lilly & Co. talking to the right persons or groups to determine what product features or advancements would be most appreciated by the “diabetes related market?”
Lily launched three innovative insulin products: the “Insulin pens”, “Match” and “Humulin,” all priced premium in comparison to your traditional insulin and/or insulin delivery syringes (HBS, 2004). Unfortunately, Lilly’s tendency to invest significant amounts of funding into commodities proved to be one of leading factor in Lilly’s decreasing market share. Usually, a customer will become more price sensitive if satisfied with a certain commodity; therefore, the buyer is less likely to purchase the product without some sort of substantial gain (Anthony Romano, date).
Additionally, Lilly and Novo launched several of the same products simultaneously in a race to place first in the market. This marketing assault of new products outweighed customer demand, presenting yet another downfall (Christensen C.M., 1999).
Lastly, the behavior of a majority of the patient population towards the treatment and care of their diabetes shifted, becoming substandard by patients determining their own ways of therapy. In order to utilize insulin pens, patients must effectively monitor and administer multiple insulin shots daily. Though it may be an arduous and lengthy process for all parties, putting forth efforts that will change the behavior of this majority could prove successful in repairing the damage that has been done.
Lily appears to avoid speaking or listening to the appropriate group of individuals that can significantly improve their positions by determining products and featuring advancements.
Lessons Learned & Next Steps
What should we learn from this case? Should Adams’ way be our model?
Lesson Learned 1: The Shifting Basis of Competition – Develop a Sense of Pain
While other companies are constantly developing and introducing new products and services, along with making incremental improvements to existing ones, Lily refuses to play on on a static competitive space.
Adams, discussing “customer pain,” suggests that Lily ought to put themselves in the shoes of potential customers to “develop a sense of their pain” (Adams R, 2002). This way, Lily can obtain the knowledge necessary to release products that are of high customer demand.
Lily should be looking for wicked, brutal, vicious, hideous pain amongst potentials – the type of pain that makes people want to fix their situation immediately.
Lily should ascend the market-validation pyramid by practicing the following, step-by-step: Lily must lay down the groundwork by: verifying the pain around the problem, along with a likely market, using secondary research (i.e. the internet, analyst reports, the industry press) in order to discover market data, market size, and direction of market trends.
ñ Stage 1: Explore the pain. Use questionnaires to do quantified market research which will in turn uncover the target market. Then:
◦ Perform customer interviews to locate the greatest pain.
◦ Create a heat map to visually represent where the worst pain lies.
◦ Generate several hypotheses about target markets.
ñ Stage 2: Envision the solution. Test the target market hypothesis found in Stage 1 against a set of quality influences. Then:
◦ Develop and sharpen a presentation and product prototype.
ñ Stage 3: Establish credibility. Evoke excitement in leverage influencers (thought leaders, analysts, consultants, and editors) about your company, product, and prospects.
Lesson Learned 2: Explore new opportunities
Undoubtable are the difficulties that may arise if Lily were to change their way of thinking, transcending normal patterns of thought, as they have historically been consistant in their ideas about what can be made possible. This fact makes reaching that place in Lily’s imagination in which they hold the power to predict customer desires, but, despite this obvious hurdle, understanding of potential clientele allows for successfully understanding the products in which they need to deliver.
“Discovering what has been discovered: What Job was your Product Hired to Do?” (Christensen C.M., 1999b).
As much as Lily ought to know what the customers are demanding, they must follow out these steps in order to be successful:
ñ Step 1: Watch and ask actual customers the way in which they use the product, what their values consist of, and what they prioritize, starting with the most important aspects, in the product.
ñ Step 2: Ascertain the advantages of alternative products that customers could have opted for. This will help to identify the competition and open up different social and emotional dimensions of the customer experience.
ñ Step 3: After product requirements have been identified, back track to the lower left-hand corner of the Exploration Space Matrix because solutions and improvements need to be based on what is possible (Christensen C.M., 1999b).
Lesson Learned 3: Validate Markets
Lily only has a one-time snapshot. Losing your edge is the first step to becoming dead meet, so one must keep implementing effective ongoing strategies for assessing customers and their needs in order to validate the market again and again. Never stop focusing on the customer! (Adams R, 2002).
Adams R. (2002) A Good Hard Kick in the Ass: Basic Training for Entrepreneurs New York: Random House/Crown Business
Christensen C.M. (1996) Eli Lilly and Company: Innovation in Diabetes Care Harvard Business School Publishing, Boston, MA 02163
Christensen C.M. (1999) Innovation and the General Manager Boston, MA: McGraw-Hill Irwin. Module 2 – Finding New Markets for New and Disruptive Technologies. (pp. 95-102)
Christensen C.M. (1999b) Innovation and the General Manager Boston, MA: McGraw-Hill Irwin. Section 2.3 – Discovering what has been Discovered: What Job was your Product hired to do? (pp. 169-178) (eReserve)
HBS 9-696-077 (April 2004). Eli Lilly and Company: Innovation in Diabetes Care.
Anthony Romano, (date), Eli Lilly and Company: Innovation in Diabetes Care
Unger. (2012). Lecture 3, course MET AD 741, Boston University
Eric Tse, Richmond Hill, Toronto
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