Lots of biotech companies today say they want to be great for a long, long time. But which of today’s companies are actually doing it? Which ones are truly visionary, and built to last?
These questions have been on my mind since I re-read “Built to Last: Successful Habits of Visionary Companies” in preparation for an Xconomy event in San Francisco on Dec. 9. The classic book by James C. Collins and Jerry I. Porras came out in 1994. The authors spent six years identifying and studying the common characteristics of companies that had long runs at the top of their industries.
Any time you pick up a book that’s 20 years old, some things will sound dated. Names like Boeing, Disney, Ford, HP, IBM, Merck, and Walmart are held up as exemplars in this mid-1990s context. Many have suffered damage to their reputations, which made me wonder how well they were truly “Built to Last.”
Then again, if you look at the criteria the authors used for what makes a “visionary” company, there were (and probably still are) powerful concepts at work in those companies that never go out of style. The authors laid out six criteria for what makes a great, enduring company, and asked readers to think of a handful of companies they know today that pass the test.
Here are the criteria Collins and Porras used:
1. Premier institution in its industry
2. Widely admired by knowledgeable businesspeople
3. Made an indelible imprint on the world in which we live
4. Had multiple generations of chief executives
5. Been through multiple product (or service) life cycles
6. Founded before 1950
I bring this up now because biotech has been going through something of an identity crisis the past decade. When the industry was getting started in the 1980s and 1990s, most companies aspired, more or less, to be the next Merck (without the stuffy parts of pharma company culture).
Things are different today. People now know how long it takes, how risky it is, and how expensive it is to develop a new drug, device, or diagnostic test. Despite a couple years of go-go returns in the public markets, many investors are afraid of/intimidated by biotech. The financial world today is obsessed with short-term gains. Many investors don’t want to bet on some hope for the “next Genentech” in hopes of making returns 20 years from now. They want to make money next quarter, they expect a bigger return, and they want less risk.
Now that first-generation biotech powerhouses like Genentech and Genzyme have been swallowed up by larger pharmaceutical companies, we’re left with a smaller pool of biotech companies that are built with aspirations to long-term greatness, and with the product diversity and cultural resiliency that goal demands. Over the summer, I lamented that Onyx Pharmaceuticals—one of the few mid-sized biotech companies that could have been an industry pillar for years—chose to be acquired by Amgen. For today’s column, I thought it would be fun and interesting to try to apply the Collins/Porras criteria to see which of today’s biotechs appear “visionary.” I’m going to ignore the “founded before 1950” part because the industry didn’t exist then.
Here are three examples of companies that I think Collins and Porras would consider “visionary” if they were doing a study of biotech today.
Gilead Sciences: the Foster City, CA-based company (NASDAQ: [[ticker:GILD]]) built itself through acquisitions into the world’s largest maker of HIV drugs in its first act. The company’s second act—spread over the last decade—is all about diversifying into promising new fields like
