Magazine Article | May 1, 2016

Is Going Against The Grain A Good Business Idea?

Source: Life Science Leader

By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL

My grandfather made his living as a carpenter. When it came to smoothing wood (especially expensive hardwoods) he knew that the best results were achieved by running his tool with the grain, not against it. This carpenters’ wisdom has since become a popular idiom (i.e., going against the grain) and is often used in reference to people or companies opting to do the opposite of what is expected. We all know that in life, as in business, there are times when it is much easier to simply “go along to get along.” But have you ever wondered when going against the grain of conventional wisdom is a good business idea? Consider the following example.

Warby Parker is an American brand of prescription eyeglasses and sunglasses. When founded in 2010, the company was starting in an industry where Luxottica controlled more than 80 percent of the global eyeglass market. Upon mentioning their business idea (i.e., taking on a monopoly by designing, producing, and selling glasses at wholesale prices directly to customers) to friends and family, these “wantrepreneurs” found themselves being blasted. Sure Zappos had pulled off a similar business model with shoes, but if doing the same with eyeglasses was such a good idea, wouldn’t it have been done already? Six years later, this private, venture-backed company is valued at over $1.2 billion, and sits atop Fast Company’s most innovative list for 2015, ahead of both Apple and Google. While there are numerous other examples of businesses in other industries going against the grain and being highly successful, what about one a little closer to home (i.e., the traditionally conservative biopharmaceutical industry)?

When John Lechleiter took over as Lilly CEO in 2008, he and other members of the company’s executive committee could see a patent cliff storm brewing on the horizon. Though the company had survived the loss of Prozac, a product that generated approximately 30 percent of Lilly’s total revenues, the patent loss time period spanning 2011 – 2014 looked much bleaker. The four products (i.e., Zyprexa, Humalog, Cymbalta, and Evista) set to expire during what Lilly insiders began referring to as “years YZ” represented about 40 percent of revenue! Conventional wisdom seemed to suggest M&A as the solution to Lilly’s patent cliff/empty pipeline problem. After all, company peers facing similar scenarios (e.g., Merck, Pfizer) were taking this approach, and they were not alone. In fact, from 2012 through the end of 2013, the biopharmaceutical sector executed 253 M&A deals. While analysts and investors advocated Lilly consider doing the same, the company went against the grain and instead opted to focus its efforts on R&D — a bold move that seems to be paying off.

Lilly’s willingness to go against the grain inspired Life Science Leader to do the same. Usually when you flip through the pages of our publication, you will find features involving a variety of different companies. This month you will find a Life Science Leader exclusive with Eli Lilly’s CFO, Derica Rice (see p. 14), sharing his insights on getting through “years YZ”, as well as the experience serving as interim CEO. But in a never previously attempted move, we opted to develop a secondary deep-dive feature involving several members of the company’s executive committee, including its CEO John Lechleiter (see p. 18). While history will support that most businesses are well served by following trends, there certainly seem to be times when going against the grain can be a good business idea. We hope you like it.