Case Study Description of Vertex Pharmaceuticals: R&D Portfolio Management (A)
Vertex Pharmaceuticals, Inc., a drug discovery company that recently decided to pursue a vertically integrated business model, chose to build up its clinical development and commercial capabilities and infrastructure. For the first time in its history, Vertex will select two drug candidates from its internal research portfolio of four projects to develop on its own, without the help of strategic partners. CEO Joshua Boger and President Vicki Sato are grappling with which two projects to select. Focuses on how to select projects and how to manage the process of portfolio selection.
Authors :: Gary P. Pisano, Lee Fleming, Eli Peter Strick
Swot Analysis of "Vertex Pharmaceuticals: R&D Portfolio Management (A)" written by Gary P. Pisano, Lee Fleming, Eli Peter Strick includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Vertex Select facing as an external strategic factors. Some of the topics covered in Vertex Pharmaceuticals: R&D Portfolio Management (A) case study are - Strategic Management Strategies, Financial management, Financial markets, Knowledge management, Mergers & acquisitions, Organizational structure, Project management, Research & development, Strategic planning and Technology & Operations.
Some of the macro environment factors that can be used to understand the Vertex Pharmaceuticals: R&D Portfolio Management (A) casestudy better are - – supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, technology disruption, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels,
geopolitical disruptions, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Vertex Pharmaceuticals: R&D Portfolio Management (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Vertex Pharmaceuticals: R&D Portfolio Management (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vertex Select, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vertex Select operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Vertex Pharmaceuticals: R&D Portfolio Management (A) can be done for the following purposes –
1. Strategic planning using facts provided in Vertex Pharmaceuticals: R&D Portfolio Management (A) case study
2. Improving business portfolio management of Vertex Select
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vertex Select
Strengths Vertex Pharmaceuticals: R&D Portfolio Management (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vertex Select in Vertex Pharmaceuticals: R&D Portfolio Management (A) Harvard Business Review case study are -
Effective Research and Development (R&D)
– Vertex Select has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Vertex Pharmaceuticals: R&D Portfolio Management (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Vertex Select are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Vertex Select is one of the most innovative firm in sector. Manager in Vertex Pharmaceuticals: R&D Portfolio Management (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Vertex Select is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Vertex Select is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Vertex Pharmaceuticals: R&D Portfolio Management (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Vertex Select is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Vertex Select has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Vertex Select to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Vertex Select has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Vertex Pharmaceuticals: R&D Portfolio Management (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Vertex Select has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Vertex Select has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Vertex Select digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Vertex Select has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to lead change in Technology & Operations field
– Vertex Select is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Vertex Select in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Vertex Pharmaceuticals: R&D Portfolio Management (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Analytics focus
– Vertex Select is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Gary P. Pisano, Lee Fleming, Eli Peter Strick can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Vertex Pharmaceuticals: R&D Portfolio Management (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Vertex Pharmaceuticals: R&D Portfolio Management (A) are -
No frontier risks strategy
– After analyzing the HBR case study Vertex Pharmaceuticals: R&D Portfolio Management (A), it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Vertex Select has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Vertex Select even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Skills based hiring
– The stress on hiring functional specialists at Vertex Select has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Vertex Select supply chain. Even after few cautionary changes mentioned in the HBR case study - Vertex Pharmaceuticals: R&D Portfolio Management (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Vertex Select vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Vertex Select, firm in the HBR case study Vertex Pharmaceuticals: R&D Portfolio Management (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Vertex Pharmaceuticals: R&D Portfolio Management (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Vertex Select 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Vertex Select needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Increasing silos among functional specialists
– The organizational structure of Vertex Select is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Vertex Select needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Vertex Select to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Vertex Select has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Lack of clear differentiation of Vertex Select products
– To increase the profitability and margins on the products, Vertex Select needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Gary P. Pisano, Lee Fleming, Eli Peter Strick suggests that, Vertex Select is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Opportunities Vertex Pharmaceuticals: R&D Portfolio Management (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Vertex Pharmaceuticals: R&D Portfolio Management (A) are -
Leveraging digital technologies
– Vertex Select can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Vertex Select in the consumer business. Now Vertex Select can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Vertex Select can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Vertex Select can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Vertex Select in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Buying journey improvements
– Vertex Select can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Vertex Pharmaceuticals: R&D Portfolio Management (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Vertex Select has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Vertex Select can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Vertex Select to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Vertex Select to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Vertex Select can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Vertex Select can use these opportunities to build new business models that can help the communities that Vertex Select operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Vertex Select can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Vertex Select can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Vertex Select can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Vertex Pharmaceuticals: R&D Portfolio Management (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Vertex Pharmaceuticals: R&D Portfolio Management (A) are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Vertex Select.
Environmental challenges
– Vertex Select needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Vertex Select can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Vertex Select in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Stagnating economy with rate increase
– Vertex Select can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Regulatory challenges
– Vertex Select needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Vertex Select needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Increasing wage structure of Vertex Select
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Vertex Select.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Vertex Select with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Vertex Select has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Vertex Select needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Vertex Select in the Technology & Operations sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Vertex Select high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Vertex Select demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Vertex Pharmaceuticals: R&D Portfolio Management (A), Vertex Select may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Weighted SWOT Analysis of Vertex Pharmaceuticals: R&D Portfolio Management (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Vertex Pharmaceuticals: R&D Portfolio Management (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Vertex Pharmaceuticals: R&D Portfolio Management (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Vertex Pharmaceuticals: R&D Portfolio Management (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Vertex Pharmaceuticals: R&D Portfolio Management (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Vertex Select needs to make to build a sustainable competitive advantage.
