1.

Millennium transformed itself from a pharmaceutical company, focused on upstream activities

of value chain such as diseased focused discovery and target specific to a fully vertically
integrated company with proven capabilities in discovery research, development and
commercial arenas. Millennium as a response to uncertainties in R&D process, such as time
and cost associated in R&D to develop a marketable drug, tried to influence the source of
uncertainty by combining fields of genetics and information technologies. Rationale behind
using this response was to form a technological platform that would revolutionalize the
pharmaceutical industry by drastically improving the speed, effectiveness and cost of drug
discovery. Millennium has become very good at the process of discovering genes & ensuring
that they can become marketable drugs. In pharmaceutical industry where innovation of a
successful drug is a key to revenue generation, Millennium tried to maintain its flexibility as a
response to the uncertainties in market and technological innovations. Although millennium
retained a wide variety of rights, including ownership of any discoveries outside the scope of
strategic alliance. Rational behind maintaining flexibility was that partnership agreements
required millennium to make major capital commitments and prevented it from doing its own
research, core competency, in areas covered by the agreements. The third response to
uncertainty of mapping of human genome, a possible technological innovation, was the timing
of decision to become vertically integrated company and acquisition of ChemGenics in 1997 as
a logical downstream movement into drug development. The rational was that competitive
advantage in drug discovery was rapidly disappearing as information technology and tools
became more widely available to other market competitors. CEO’s belief was that if a
pharmaceutical company weren’t downstream, it would be history. Millennium hoped to create
a sustainable competitive advantage by creating an unrivaled drug discovery, development and
commercialization process.

2. In order to become successful vertically integrated company, Millennium would need to

develop distinctive capabilities in area of commercialization and development.
Commercialization as part of value chain of vertically integrated bio-pharmaceutical company
has inherent strategic dissimilarities. Moreover, different disease area such as cardiovascular,
oncology within commercialization require different skills sets as the target customers are
entirely different for different drugs. Although acquisition of COR has helped forming a
minimal base level in commercialization. Millennium would still need to create synergies
between its downstream core competency of drug discovery with drug development and
commercialization process. Not only do development and commercialization require very
different capabilities, they also require different planning systems, different approached to
 control and human resource management, and different top management styles and skills. As
organizations grow they need to change their structure & their strategy. Another concern in
Millennium’s case is the organization’s structure. To become into a fully integrated
pharmaceutical firm Millennium needs a structure that allows for the most efficient allocation
of resources. Millennium has a loosely defined corporate structure that is based on the business
areas it operates in. Thus Millennium needs to be able to create a more robust structure for it to
succeed & without one it won’t be successful over coming years. Striking a balance between
its R&D capabilities and commercialization, while utilizing minimum tangible resources such
as research laboratories, distribution networks in overlapping areas would be a key success
factor.

3. Organizational changes that required executing above-mentioned strategic imperatives would

mainly be a) adaptation to bounded rationality b) allocation of decision-making c) avoiding
goal conflicts. These changes would help millennium to shift its organizational structure to
have a divisional structure. Millennium is currently facing organizational problems in almost
all areas. It is finding hard to maintain high intensity and passion among employees. Executive
meetings are shifting from informal mode to professional more formal executive meetings.
Resource allocation decisions in R&D are more Political influenced than strategic. Employees
are frustrated and de-motivated because of poor recognition and relationship based
compensation system. Divisional structure would help millennium pharmaceutical to solve its
two ore root problems: allocation of resources and conflicting interest of shareholders and
employees. Divisional structure would also help promote already established entrepreneurial
spirit in millennium, solve accountability problems, provide performance base incentive
structure and establish distinctive capabilities in area of commercialization and development.
The role of CEO would be to manage linkages between millennium’s different divisions such
as drug discovery, development and commercialization. On one hand, it would help different
areas of value chain to create core competencies in their respective divisions. On the other
hand, it would allow management and CEO to create consistent and closely linked corporate
strategy, business strategy, external environment, together with the firm’s resource,
capabilities, structure, systems, leadership style and culture. A pre-requisite for success in
vertically integrated bio-pharmaceutical millennium.