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Failure Framework
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When Lilly first launched Humulin, the market did not respond according to the
company’s expectations. Humulin was an innovation as the 100% pure human-equivalent
insulin product, however, Lilly suffered the classic problem of “overshooting” with this
product. This happens when the trajectory of performance attribute (functionality —
insulin purity) has surpassed the trajectory of market needs. Using Christensen
article’s on “failure framework”, here are three main reasons why Lilly failed to reap
success with Humulin.
· Enhanced cost in R&D and new manufacturing plants Humulin (nearly a billion dollar
investment) forces Eli Lilly to pass some of these costs onto the customers. The market
response to a 25% premium over animal insulin was sluggish, the growth of Humulin
sales was disappointing.
· Eli Lilly’s high market share in North America (85%) was slow to substitute Humulin
from existing animal insulin. Perhaps, the marginal benefits (the increasing purity) was
not worth the increased cost for the existing diabetic patients. Instead, the market
responded slowly, and the customers did not convert to Humulin and stayed with the
cheaper option.
Th f tt ib t i i d li bilit Whil M t h h
· The new performance attribute is convenience and reliability. While Match may have
Open
similar challenges to Humulin functionally, the product meets the Getfor
in app needs
market started
a more
reliable, convenient fast-acting insulin before meals. By using Match, patients no longer
need to inject insulin 40 minutes before a meal. Like the Novo pen, Match can be
successful by competing on the trajectory of convenience.
· Take advantage of the U.S. dominant market share. Eli Lilly should not worry that Match
will cannibalize its U.S. insulin market. The product meets an unfulfilled need of diabetic
patients, and thus does not have overshooting problem. Eli Lilly should test Match in the
U.S, and subsequently launch the product in lesser share market like Japan.
Marketing myopia
Novo’s emphasis on developing insulin pens rather than emphasizing improving insulin
purity alone shows that it did not fall victim to marketing myopia. According to Dr. Raj
Echambadi, the key to avoid marketing myopia is to ask oneself the question “What
business are we in?” Novo did a good job defining their business and building
capabilities, allocating resources following such definition.
Novo recognized while they are one of three dominant insulin manufacturers, they are not
just in the insulin business. They recognized patients’ increasing needs for a convenient
way to take insulin. By focusing on developing insulin pens instead of improving insulin
purity, Novo resisted the temptation to overshoot market needs — which was satisfied by
existing purity level of insulin.
Novo allocated the resources appropriately to build capabilities for its insulin pens:
Novo marketed its pens first in Europe in 1985, and subsequently in Japan. These markets
were not yet dominated by Eli Lilly (its main competitor) in 1980 (Exhibit 9, Eli Lilly case).
Garnering 30% price premium over insulin vials, Novo pens were a financial success,
helping Novo gain the major market shares in both Europe and Asia. With this success,
Novo planned to challenge Eli Lilly’s dominance in the U.S by 1995.
the patients of large managed care organizations more cost effectively (Eli Lilly case, p.
11). Lilly is transforming itself from a drug company to providing value-added total
solutions to the diseases.
CDS aimed to provide a total management regimen, with a dietary plan, exercise routine
and a system to test glucose and to take insulin or oral medication.
CDS is Lilly’s effort to transform its business model to provide diabetic care beyond
insulin.
The company is facing tremendous competition from Novo and failure from Humulin
launch. CDS is the company’s innovation to change its basis of competition, from
functionality to customer service and education.
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