Mercks transition to open innovation strategy - Essay Example

? Introduction Merck is a pharmaceutical company that manufactures and markets animal and human health products. The success of Merck has been based on its strong believe in internal research and development carried out by its own personnel. This scientific culture has been the company’s historical model. In 2008, Merck suffered a decline in revenues as a result of lower sales of its products. Most of their drugs on market lost patent. This called for a strategy to be developed that would improve the company’s sales. The company decided to go for open innovation strategy in form of merging with Schering-Plough. Open innovation involves adapting research and development from outside sources (Rothaemel F. , 2008). Question 4: Can open innovation help Merck meet the needs of its customers in creative and cost effective ways that also bring value to its shareholders. Why or why not? Merck historically believed in closed innovation strategy. This involves ideas being developed from within the company and the resulting products manufactured and marketed. On the contrary, open innovation involves the search for new ideas from outside and including them in business models. This is through bringing new ideas, personnel and technologies. Open innovation also allows some knowledge to flow outside the companies to other people. Most companies do not use their original technologies because it may be too costly making these ideas unutilized. Open innovations allows some of these good ideas to be shared to companies where they will be put into use. Therefore, open innovations make companies more creative in terms of research and development. External research can therefore, be of important value for companies that want to develop new and better products (Rothaemel, 2008). As a result Merck adopted Open innovation strategy as a way to meet its customers and shareholders needs. The use of open innovation has been applied successfully in other smaller companies. Companies such as Amgen and Genzyme have used this approach and became successful companies in the biotechnology sector. Merck’s biggest competitors have already adopted the open innovation strategy and have been successful e.g. InnoCentive. InnoCentive has exchanged its technologies with other companies and has been successful in research and development. It has achieved all this success at only one sixth of the cost. Since the approach has worked in other companies, it can also work in Merck. Through open innovation, Merck can develop new cost effective ideas and products. The breakthrough for such products can bring great sales for the company thus benefiting the shareholders. (Rothaemel, 2008) Question 5: Assuming open innovative is the path to follow, what implementation issues would you expect? How would Merck overcome its cultural resistance to change? Merck has been deeply rooted in the culture of closed innovation. This is the culture that they are the best in what they do and need no assistance from outside. Merck assumed that they had the best and brightest personnel. They believe that whatever they invented was the best. Merck believed that all great discoveries were to be unveiled at Merck. This overconfident notion was deeply instilled in the minds of the people at Merck. This makes everyone in the company to be very rigid to any sought of change. Implementing the new open innovation strategy would therefore, be difficult because of this rigidness. The workers people have strong believe in themselves and would resist any new idea from outside. It would be a problem for the workers at Merck to adapt and accept this change (Rothaemel, 2008). Therefore, for successful development of open innovation at Merck, change has to start with each person. Change from the use of closed innovation to open innovation would mean that people have to change their attitudes and minds. This would erase the earlier culture of closed innovation and replaced it with open innovation. The resistance to change can be dealt with by sending top scientist to schools where they could be taught courtesy and manners. This could be important in open innovation when dealing with outsiders particularly non-Merck workers. To overcome this culture, Merck can also participate in conferences and make publications that will enhance interaction. Through publications, the researcher is finding a way of sharing information (Rothaemel, 2008). Through networking, Merck people would acquire new ideas and information. This would help reduce their resistance to the new open innovation strategy. Question 6: What positive or negative effects will the recent Schering Plough Merger have on Merck’s transition to a more open innovation strategy? As shown earlier, Merck strongly believed in its closed scientific culture. Even after introduction of the open innovation approach, many people were still opposed to the culture of sharing ideas. Despite all this differences, Merck merged with Schering Plough. There are a lot of risks associated with this kind of merging. It could lead to reduced development projects, low value to the shareholders, and it would be difficult for the two companies to integrate well (Rothaemel, 2008). Merging with SP was a risk that Merck decided to take. Nonetheless, the merging would have positive effects in enhancing Merck’s open innovative strategy. Schering Plough has more than half of its drugs originating from outside sources. Merging would therefore mean that Merck would also benefit from the technologies from external sources (Rothaemel, 2008). The merger would open opportunities for Merck to participate in open innovative initiative with other companies. The merger would therefore, help enhance the transition from a closed to open innovation system. The merger would also mean that both the companies would bring in their products to be marketed as a single unit. Since knowledge is being fetched from many sources, the merger would help create new quality products for customers. The market base would broaden and more people would be familiar with the company’s products. More people would therefore, be encouraged to attend conferences arranged by the company and also participate in other company activities. This would further enhance open innovation. Through the merger more technologies would be developed and therefore, new products (Rothaemel, 2008). Hence open innovation has turned out to be a good strategy for this company. Bibliography Rothaemel, F. (2008). Merc Open For Innovation. Compilation Case Studies on Strategic Management , 225-226. Read More