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CASE REPORT

Organization and Strategy at Millennium (A)


Core Problem:

With a shift in the industry trend and technology being available to common people through
government and private sponsored scientists, Millennium needed to grow as a better forward
integrated company which was capable of commercializing its own products. However, as the basic
organization structure of Millennium was informal, with no performance management system, lack of
managerial accountability and influence of Levin at the top making majority of decisions, it was
difficult for Millennium to change its organizational structure and core business strategically.

Situation Analysis:

 Mark Levin founded Millennium in 1993, he was biomedical engineer with experience in a biotech
company and also worked in a venture capital firm. So he possessed both technical as well as
commercial acumen. His vision to create a genomic company to revolutionize drug development
technology was very relevant in the prevailing general environment.
 Millennium leveraged its proprietary technologies such as RADE, large scale DNA sequencing and
high throughput expression cloning for forming strategic alliances with Pharma firms for Drug
development and commercialization.
 Millennium tried to increase the value appropriation through diversifying into development and
commercialization of the drugs. This helped in enhancing the Economy of Scope. Millennium
tried to leverage knowledge to create patient management services.
 The Genetic drug had inherent disadvantages such as Lower productivity, heavily time consuming
and extremely expensive. Only 1 of 10,000 drugs were marketable and out of that for only 30%
the revenues generated exceeded the R&D cost. Avg. cost of Marketable drug was $800 million.
So there was great opportunity for technological intervention.
 The technology and tools getting widely diffused as govt. and international players venture in this
business in late 90s compelled Millennium to move towards forward integration to survive.
Millennium embarked on the journey through quick acquisitions in order to save time and to
avoid other difficulties of organic expansion.
 Millennium started making heavy losses since 1999 due to the technical bubble burst in 2000 and
subsequent fall in stock prices by 78% of its highest value. Dunsire, the prospective successor of
Mark Levin had to ensure the following:
- Profitability
- Productive Relationship with Management
- Disease class re-evaluation
- Optimal resource deployment
Analysis of Sources of Problems:

Key issues
1. The Organizational Structure of Millennium also needed transformation from Unitary or
functional structure to a Multidivisional form as they pursued vertical integration. Due to
Levin’s extensive control over the decision making, the senior executives did not have much
autonomy and hence were resigning in quick succession. It seems the company lacked the
Organizational learning, Cultural change is not easy it needs time and effort for
institutionalization.
2. Other Performance Management issues such as lack of an effective appraisal process and the
central tendency problem often led to frustration among top performers. The managers also
lacked the sense of accountability. The managers had to overstretch but the compensation
was not linked to their performance. There was very narrow dispersion of remuneration of a
High performer and a low performer.
3. The company had built its business with state-of-art proprietary technology as a core.
However, the changes in the general environment made the technology, tools and
information used by Millennium easily accessible and imitable.
4. Too many alliances demanded huge capital commitments and did not allow Millennium to
focus on R&D in depth as committed in agreements to avoid conflict of interest.
5. Though the company had diversified into the development and commercialization of the
drugs but the core culture of commitment to science and clinical data left marketers with no
room for expressing opinions on competing in marketplace. Their approach of market
development through education and promotion were not accepted. A mere aggregation of
resources doesn’t result in success unless they are congruent.
6. Lesser focus on commercialization led to lean and overstretched commercial team which
compelled sales representatives to often go to the market unprepared.
7. High resource and fund allocation to non-feasible projects Project-241 due to personal biases
did hurt the company badly.
8. The two new drugs Velcade and Integrilin did not do as well as expected.
9. The sudden growth and success of Millennium through alliances such as one with Monsanto
attracted many competitors who also ventured into genomics to encash the opportunity
which intensified the competition.

Way Forward:

Way Forward Pros Cons


1. Formalize the performance  Give a direction to employees  Since the employees are
management in the and motivate the high used to an informal
organization and link performers. culture, it is likely that
individual targets to  It will also solve the Agency employees may resist to
organizational targets problem that the researchers such a change.
have trying to extend
unprofitable projects with
individual lobbies
2. Dunsire can absolve the  Direct reporting would be  It would require
Head-R&D position and beneficial as Dunsire could significant time of
make the 3 SVPs report directly control the R&D expenses Dunsire
directly to her  The three SVPS would not be  It would distract her
demotivated from other pressing
areas
Way Forward Pros Cons
3. The current spending on  This will help the company to
R&D is 407% of the total control the immediate issue of
revenue which needs cash bleed.
immediate optimization
4. Provide the already existing  The concerned  The sudden autonomy
divisions with autonomy to departments(specially marketing) could lead to rash
take cognitive decisions will get sense of responsibility decision making.
regarding their area of and ownership and will strive to
function perform better
5. The company should focus  Increase in the projected sales  These efforts would
more on increasing the would help the firm regain its incur extra costs
market share for its shareholder’s trust
increasing products , this  It would also help them
could be achieved by strengthen their position on the
strengthening of specialized commercial front
salesforce and proper
training and development.