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