Pharma's worst bet

The bet on pharma's traditional development model rarely pays off - time for a rethink

Our industry is a strange one: so many companies, all playing by the same rule book - 1, 2, 3, launch… Armed with 13 years of the Pharmaceutical Innovation Index, it is clear that, instead of putting the whole stack on one bet (the linear development model), pharma at least should be looking at some alternative approaches.

I went back to some of my older interviews, and was struck by a conversation with Safi Bahcall.

This conversation centres on Safi Bahcall's book, Loonshots, which examines why well-intentioned, capable teams often stifle groundbreaking ideas. The book uses stories from various fields, including the pharmaceutical industry, to illustrate this phenomenon.

One key concept is the "Moses trap," which refers to the misconception that great leaders should act like Moses, dictating which projects deserve attention. Bahcall argues that this model is flawed, particularly in industries like pharmaceuticals where innovation is crucial. Instead, he advocates for a "gardener" approach, where leaders foster a system that nurtures many diverse ideas, even those initially perceived as outlandish. I’ll explore those ideas in more depth further down.

Bahcall suggests that good teams kill great ideas due to a shift in group behaviour stemming from competing forces within the organisation. As companies grow, incentives change. Individuals become more focused on "perks of rank and hierarchy" than on "equity or stake in outcome." This shift can lead to risk aversion, where established teams prioritise incremental improvements over radical innovations.

The conversation also highlights the pharmaceutical industry's tendency to prioritise "franchise" products, which generate consistent revenue but may limit exploration of novel therapies. This focus on predictable outcomes can stifle the development of "moonshots," those ideas with the potential to transform the industry but carry a higher risk of failure.

Several factors contribute to this phenomenon:

● Incentive structures: Reward systems often discourage risk-taking, making it safer for individuals to kill projects than to champion potentially controversial ideas.

● Fear of failure: The pharmaceutical industry's long development timelines and high failure rates can make teams hesitant to pursue unconventional approaches.

● Over-reliance on "product" innovation: There's often an overemphasis on developing new drugs, neglecting the potential of "strategy" innovation. This could involve exploring novel partnerships, pricing models, or regulatory strategies.

Bahcall stresses that a successful leader must manage the tension between these forces, creating an environment where both "franchise" and "moonshot" projects can flourish. This involves understanding the distinct needs and motivations of different teams within the organisation.

The conversation underscores that overcoming these challenges requires:

● Rethinking incentive systems: To encourage risk-taking and reward those who champion novel ideas, even in the face of setbacks.

● Embracing serendipity: Acknowledging the unpredictable nature of scientific discovery and creating space for unexpected findings to emerge.

● Balancing "product" and "strategy" innovation: Looking beyond the development of new drugs to consider novel approaches to partnerships, market access, and regulatory strategies.

By addressing these issues, the pharmaceutical industry can create an environment that fosters groundbreaking discoveries and avoids the pitfalls of good teams killing great ideas.

What is Safi Bahcall's "loon shots" concept.

Safi Bahcall, in his book Loonshots, explores the concept of "loon shots" – groundbreaking ideas that often seem crazy or improbable at first but have the potential to transform industries. He uses examples from various fields, including the pharmaceutical industry, to illustrate how these ideas frequently face resistance and are often killed by "good teams" with the best intentions.

Here's a breakdown of the "loon shots" concept:

● "Loon shots" are akin to scientific discoveries or technological breakthroughs that challenge existing paradigms. Examples from the pharmaceutical industry include:

○ Statins: Initially dismissed as a ridiculous pursuit due to failed dietary trials and the ineffectiveness of the molecule in mouse models.

○ TNF alpha inhibitors for rheumatoid arthritis: Initially disregarded due to the perceived small market size of "old ladies" with the disease.

○ Epogen for end-stage kidney disease: Also initially perceived as having a negligible market.

(We’ll explore these ideas further down this article.)

● These ideas often face resistance because they disrupt established practices and threaten existing power structures.This resistance stems from a shift in group behaviour as companies grow and individuals become more focused on career advancement and maintaining the status quo.

● Bahcall argues that traditional leadership models, like the "Moses trap," can exacerbate this issue. The "Moses trap" refers to the idea that leaders should act as the sole decision-makers, dictating which projects are worthy of attention. This approach stifles innovation as it prioritises the leader's judgement over the diverse perspectives of the team.

● Instead, Bahcall advocates for a "gardener" approach to leadership. This model encourages leaders to create an environment where diverse ideas can flourish, even those that seem crazy or impractical at first. The leader's role is to nurture these ideas and facilitate their development, much like a gardener cultivates a garden.

● The pharmaceutical industry, with its long development timelines and high failure rates, is particularly susceptible to killing "loon shots". This is due to:

○ A focus on "franchise" products: These products generate reliable revenue but limit the exploration of radical new therapies.

○ Incentive structures that discourage risk-taking: It's often safer for individuals to kill projects than to champion potentially controversial ideas.

○ An overemphasis on "product" innovation: This often comes at the expense of exploring "strategy" innovation, such as novel partnerships or regulatory approaches.

● Bahcall suggests that embracing "loon shots" requires a shift in mindset and a willingness to embrace uncertainty. He highlights the importance of:

○ Rethinking incentive systems to reward risk-taking and encourage support for unconventional ideas.

○ Recognising the role of serendipity in scientific discovery and creating space for unexpected findings.

○ Balancing "product" and "strategy" innovation to explore new avenues for developing and delivering groundbreaking therapies.

By understanding and nurturing "loon shots", the pharmaceutical industry can unlock its potential for developing truly transformative therapies and avoid the pitfalls of well-intentioned teams inadvertently stifling groundbreaking innovation.

Using physics to explain group behaviour in organisations?

Safi Bahcall draws upon principles of physics, specifically phase transitions, to explain the dynamics of group behaviour within organisations and how this can lead to the stifling of innovation. He argues that, similar to the sudden shift in the behaviour of water molecules from liquid to solid as the temperature drops below freezing, groups can undergo sudden and dramatic behavioural changes as they grow and incentives shift.

To illustrate this point, Bahcall utilises the analogy of a glass of water transitioning from liquid to solid:

● Water molecules in liquid form are free-flowing and dynamic, representing teams open to exploring novel ideas and taking risks.

● When the temperature drops below freezing, the water molecules suddenly arrange themselves into a rigid crystalline structure(ice), representing risk-averse teams focused on maintaining the status quo and resisting change.

Bahcall argues that this shift in group behaviour stems from the interplay of two competing forces:

● Binding Energy: This force represents the desire for stability, hierarchy, and perks associated with rank within an organisation. As companies grow, incentives often shift towards rewarding individuals for adhering to established practices and avoiding risk. This increases the "binding energy" within the group, making them resistant to change and less likely to embrace novel ideas.

● Entropy: This force represents the drive for exploration, experimentation, and the pursuit of new possibilities. This is often the driving force behind "loon shots" – those seemingly crazy ideas that challenge accepted norms and have the potential to disrupt industries.

Just as a small change in temperature can trigger a phase transition in water, seemingly minor shifts in incentives or organisational structure can cause a dramatic shift in group behaviour. When "binding energy" dominates, teams become risk-averse and focused on maintaining the status quo, leading to the suppression of innovative ideas.

Bahcall suggests that leaders should be aware of these forces and strive to maintain a delicate balance within their organisations. Leaders should act as "gardeners," nurturing an environment that encourages exploration and experimentation while also ensuring operational excellence. This involves designing incentive systems that reward both incremental improvements and radical innovation, creating a space where "loon shots" can thrive alongside "franchise" products.

What central idea underpins Bahcall's book, "Loon Shots"?

The central idea underpinning Safi Bahcall's book, Loon Shots, is that organisations often inadvertently stifle groundbreaking ideas, or "loon shots", due to a shift in group behaviour as they grow and evolve. Bahcall utilises principles of physics, specifically phase transitions, to explain this phenomenon.

Similar to how water molecules abruptly transition from a fluid state (liquid) to a rigid structure (ice) when the temperature drops below freezing, groups within organisations can undergo sudden shifts in behaviour as incentives change and the desire for stability overtakes the drive for innovation.

Here's a breakdown of the key elements:

● "Loon Shots": These are the radical ideas, often initially perceived as crazy or improbable, that have the potential to transform industries. The book uses examples like statins, TNF alpha inhibitors, and Epogen – all initially dismissed or disregarded – to illustrate this point.

● Phase Transitions in Group Behaviour: Bahcall argues that as organisations grow, a subtle shift occurs, moving from a state that embraces risk and exploration to one that prioritises stability and maintaining the status quo. This shift stems from:

○ Increased "Binding Energy": This refers to the allure of hierarchy, perks of rank, and the desire to conform to established norms within the organisation. As companies mature, incentive structures often reward this behaviour, leading to risk aversion and a reluctance to challenge the status quo.

○ Diminished "Entropy": This represents the drive for exploration, experimentation, and embracing uncertainty, which is essential for nurturing "loon shots". As "binding energy" increases, "entropy" decreases, making organisations less receptive to radical innovation.

● The "Moses Trap": Bahcall argues that traditional leadership models, where leaders act as the sole decision-makers, can exacerbate this issue. This "Moses" approach stifles innovation by prioritising the leader's judgement over the diverse perspectives within the team. He advocates for a "gardener" approach where leaders foster an environment that nurtures diverse ideas.

The book underscores that managing the tension between these competing forces - "binding energy" and "entropy" - is crucial for fostering an environment where both incremental improvements ("franchise" products) and radical innovations ("loon shots") can thrive. Bahcall highlights the importance of:

● Strategic Incentive Design: Organisations need to create reward systems that encourage risk-taking and support for novel ideas, even in the face of setbacks.

● Embracing Serendipity: Leaders should recognise the unpredictable nature of scientific discovery and create space for unexpected findings to emerge.

● Balancing "Product" and "Strategy" Innovation: The focus should expand beyond developing new drugs to encompass novel approaches to partnerships, market access, and regulatory strategies.

By understanding and addressing these challenges, organisations can unlock their true potential for groundbreaking innovation and avoid the pitfalls of "good teams" inadvertently killing "loon shots".

How does Bahcall illustrate the concept of "Loon Shots"?

Safi Bahcall illustrates the concept of "Loon Shots" through compelling real-world examples and insightful analogies from various fields, including the pharmaceutical industry. He highlights instances where seemingly "crazy" or improbable ideas that challenged established norms ultimately led to groundbreaking innovations that transformed industries.

Here are some key ways Bahcall illustrates "Loon Shots":

1. Real-World Examples from the Pharmaceutical Industry

Bahcall uses numerous examples from the history of drug discovery to showcase how "Loon Shots" were initially dismissed but ultimately became blockbuster successes:

● Statins: The pursuit of statins as a cholesterol-lowering therapy was initially deemed "ridiculous" due to failed dietary trials and the molecule's ineffectiveness in mouse models. However, a Japanese scientist, Akira Endo, persisted with his research, eventually leading to the development of statins – a drug class with cumulative sales of approximately a third of a trillion dollars.

● TNF alpha inhibitors for rheumatoid arthritis: Many pharmaceutical companies dismissed this class of drugs as targeting a small market of "old ladies." However, Amgen persevered, and these inhibitors became a highly successful treatment for rheumatoid arthritis, generating billions of dollars in revenue.

● Epogen for end-stage kidney disease: This drug, initially perceived as having a negligible market, also defied expectations and generated significant revenue for Amgen, exceeding ten billion dollars annually.

● VEGF and Avastin: Judah Folkman, a pioneer in angiogenesis research, faced widespread criticism and ridicule for his pursuit of VEGF as a target for cancer therapy. He persisted for 32 years, even facing pressure to resign from his institution, before his work led to the development of Avastin.

These examples demonstrate how "Loon Shots" can be found in unexpected places and often face resistance from those who are invested in the status quo.

2. Analogies from Physics: Phase Transitions

Bahcall draws parallels between the behaviour of groups within organisations and the physical phenomenon of phase transitions, specifically the transition of water from liquid to solid (ice). He explains that:

● Just as water molecules suddenly shift from a fluid, dynamic state to a rigid, crystalline structure when the temperature drops below freezing, groups within organisations can undergo abrupt changes in behaviour as they grow and incentives evolve.

● The "liquid" phase represents teams that are open to exploration, experimentation, and risk-taking – the very qualities needed to nurture "Loon Shots".

● The "solid" phase represents teams that become risk-averse, bureaucratic, and focused on maintaining the status quo. This shift can kill innovative ideas.

This analogy illustrates how seemingly small changes in an organisation's environment, such as shifting incentives or increasing emphasis on hierarchy, can trigger a dramatic shift in group behaviour that stifles innovation.

3. Contrasting Product and Strategy Innovation

Bahcall emphasises the importance of balancing "product" and "strategy" innovation. He argues that organisations often become fixated on "product" innovation – developing new technologies or improving existing ones – while neglecting "strategy" innovation.

He illustrates this concept through the example of Pan Am and American Airlines. Pan Am, known for its focus on "product" innovations like introducing jet airliners, ultimately went bankrupt. Meanwhile, American Airlines, led by Bob Crandall, focused on subtle but significant "strategy" innovations, like the frequent flyer program and the Sabre reservation system. These strategic shifts helped American Airlines not only survive but thrive, even in the face of industry deregulation.

This example demonstrates how overlooking "strategy" innovation, which often involves less tangible changes but can be equally impactful, can be detrimental to an organisation's long-term success.

4. The Role of Incentives and the "Moses Trap"

Bahcall explores how incentive structures within organisations can inadvertently discourage risk-taking and the pursuit of "Loon Shots". He argues that it's often safer for individuals to kill projects than champion potentially controversial ideas. This is because:

● Killing a project is rarely punished, as the idea never has a chance to prove its worth.

● Supporting a project that fails can be detrimental to an individual's career prospects.

Bahcall also critiques the "Moses Trap" – the leadership model where leaders act as sole decision-makers, anointing the chosen projects.He suggests that this approach stifles innovation by limiting diverse perspectives. Instead, he advocates for a "gardener" style of leadership, where leaders nurture an environment that allows a variety of ideas to flourish.

By illustrating "Loon Shots" through these diverse approaches, Bahcall aims to help readers understand the complex dynamics at play in organisations that can either foster or stifle innovation. He emphasises the need for leaders to be aware of these dynamics and to actively create an environment where "Loon Shots" can thrive.

What are the two competing forces driving group behaviour?

Safi Bahcall argues that two fundamental forces are constantly at play within groups, shaping their behaviour and ultimately influencing their ability to foster innovation: Binding Energy and Entropy.

Binding Energy represents the force that pulls individuals towards conformity, stability, and the perks associated with rank and hierarchy within an organisation. As companies grow, incentive structures often shift to reward individuals for adhering to established practices, minimising risk, and maintaining the status quo. This effectively increases the "binding energy" within the group, making them resistant to change and less receptive to novel ideas.

Here are key characteristics of Binding Energy:

● Focus on Stability: Individuals prioritise maintaining their position within the hierarchy, avoiding actions that might disrupt the established order or jeopardise their standing.

● Risk Aversion: There is a reluctance to champion ideas that challenge conventional wisdom or deviate from proven practices. The potential consequences of failure outweigh the potential rewards of success.

● Emphasis on Hierarchy and Rank: Individuals are motivated by climbing the organisational ladder and accruing the perks associated with higher positions. This can lead to competition and a focus on individual achievement rather than collective innovation.

Entropy, on the other hand, represents the force that drives exploration, experimentation, and the pursuit of new possibilities. It is the force that fuels "loon shots" — those seemingly outlandish ideas that have the potential to disrupt industries. Entropy is essential for fostering a culture of innovation, where individuals feel empowered to challenge assumptions and pursue novel solutions.

Here are key characteristics of Entropy:

● Embrace of Uncertainty: Individuals are comfortable with ambiguity and are willing to take risks, even in the face of potential setbacks.

● Focus on Exploration and Experimentation: There is a culture of curiosity and a drive to test new ideas, even if they seem improbable at first.

● Value of Diverse Perspectives: Individuals are encouraged to share their unique insights and challenge the prevailing assumptions, fostering a collective pursuit of groundbreaking solutions.

Bahcall contends that the interplay between these two forces determines whether a group will embrace or stifle "loon shots". As organisations grow, the tendency is for "binding energy" to increase, leading to a decline in "entropy" and a shift towards risk aversion. This shift can inadvertently kill groundbreaking ideas before they have a chance to flourish.

Bahcall suggests that leaders must be cognisant of this dynamic and strive to maintain a delicate balance between these two forces. They should foster an environment where "entropy" can thrive, encouraging exploration and experimentation while simultaneously ensuring operational excellence and the successful execution of "franchise" products.

How does Bahcall characterise the leadership styles of successful innovators?

Safi Bahcall argues that leaders who successfully foster innovation tend to adopt a "gardener" style of leadership, as opposed to the more traditional "Moses" approach. He contrasts these two styles throughout the source material.

The "Moses Trap"

Bahcall criticises the "Moses Trap," where leaders position themselves as the sole decision-makers, dictating which projects deserve attention and resources. This model, often associated with charismatic figures like Steve Jobs in his early days at Apple, can stifle innovation by:

● Limiting diverse perspectives: The leader's judgement becomes paramount, potentially overlooking valuable insights from others within the team.

● Creating an environment of fear: Team members become hesitant to challenge the leader's decisions or propose alternative ideas, hindering open discussion and exploration.

● Discouraging risk-taking: Individuals prioritize aligning with the leader's vision, even if it means sacrificing potentially groundbreaking but unproven ideas.

The "Gardener" Approach

In contrast, the "gardener" style of leadership focuses on cultivating an environment where a diverse range of ideas can flourish. Leaders who embody this approach act as facilitators, fostering collaboration, encouraging experimentation, and nurturing a culture of innovation.

Bahcall highlights several key characteristics of the "gardener" leader:

● Balancing "artists" and "soldiers": They recognise the need for both creative exploration ("artists") and disciplined execution ("soldiers") within an organisation, ensuring that neither side dominates and stifles the other.

● Managing tension between groups: They understand that conflict between teams with different objectives (e.g., research and development versus regulatory) is natural and even beneficial. Their role is to manage this tension, ensuring it remains productive and doesn't escalate into destructive conflict.

● Nurturing "loon shots": They create systems and incentives that encourage and protect radical ideas, even those that challenge accepted beliefs or appear to have limited market potential initially.

● Embracing serendipity: They recognise the unpredictable nature of scientific discovery and create space for unexpected findings to emerge, understanding that rigid adherence to pre-determined plans can limit innovation.

● Strategic incentive design: They prioritize developing reward systems that motivate individuals to support and champion novel ideas, even in the face of setbacks, mitigating the natural human tendency to prioritize self-preservation over risk-taking.

By fostering this "gardener" environment, leaders can create organisations that consistently produce both incremental improvements to existing products ("franchises") and groundbreaking innovations ("loon shots"). They understand that their role is not to dictate the "right" answers but to cultivate the conditions where the best ideas, regardless of their origin, can emerge and thrive.

How does Bahcall contrast "Moses" and "gardener" leadership styles?

Safi Bahcall, throughout the source material, contrasts two distinct leadership styles - "Moses" and "gardener" - to illustrate their impact on fostering innovation within organisations. He argues that while the "Moses" style, with its focus on top-down decision-making, might appear effective on the surface, it often hinders the development of groundbreaking ideas, or "loon shots". In contrast, the "gardener" style, with its emphasis on nurturing a fertile environment for diverse perspectives and experimentation, proves more conducive to cultivating successful innovation.

Here's a breakdown of the key differences between the two styles:

Moses Leadership:

● Centralized Decision-Making: The "Moses" leader acts as the primary decision-maker, dictating which projects and ideas deserve attention and resources. This approach often stems from the belief that a single visionary leader is best equipped to identify and champion successful innovations.

● Emphasis on Authority and Hierarchy: This style reinforces established hierarchies and power structures within the organisation. Team members primarily focus on aligning with the leader's vision, potentially leading to a reluctance to challenge decisions or propose alternative approaches.

● Focus on "Anointing the Chosen Project": The "Moses" leader often fixates on a single, seemingly promising project or product, directing all resources and attention towards its success. This can result in the neglect of other potentially valuable ideas that don't align with the leader's pre-determined vision.

Gardener Leadership:

● Decentralized Approach: The "gardener" leader prioritizes creating an environment where a diverse range of ideas can flourish. They act as facilitators, fostering collaboration and encouraging experimentation across teams, rather than dictating specific solutions.

● Balancing Competing Forces: "Gardeners" recognize the inherent tension between different groups within an organisation, such as those focused on creative exploration ("artists") and those dedicated to disciplined execution ("soldiers"). They understand that this tension, if properly managed, can drive innovation. Their role is to maintain balance, ensuring neither side dominates and stifles the other.

● Nurturing a Culture of Experimentation: "Gardener" leaders encourage risk-taking and view failures as valuable learning opportunities. They prioritize developing systems and incentives that reward individuals for pursuing and championing novel ideas, even in the face of setbacks. This approach helps mitigate the natural human tendency to prioritize self-preservation and avoid potential career risks associated with unconventional thinking.

Bahcall argues that by shifting away from the "Moses" model and embracing the "gardener" approach, organizations can create a more fertile ground for "loon shots" to take root and thrive. He emphasizes that the leader's primary responsibility is not to single-handedly select winning ideas, but to cultivate an environment where a diversity of perspectives can emerge, interact, and ultimately lead to groundbreaking innovations.

What are the two types of innovation Bahcall identifies?

Safi Bahcall identifies two primary types of innovation, categorising them as "P-type" and "S-type" innovations. He uses these terms to distinguish between innovations focused on tangible products and those driven by strategic shifts.

P-Type Innovations (Product Innovations):

● These innovations centre around developing new technologies, products, or processes.

● They often represent breakthroughs that challenge existing scientific understanding or technical capabilities.

● Examples include the transistor, the telephone, the personal computer, the jet engine, and many groundbreaking drugs like statins.

● P-type innovations are often easier to recognise and publicise, as they involve tangible advancements that capture public imagination.

S-Type Innovations (Strategy Innovations):

● These innovations stem from novel approaches to business models, market positioning, or organisational structures.

● They do not necessarily rely on new technological breakthroughs, but rather on identifying and exploiting previously overlooked opportunities.

● Examples include Walmart's strategy of focusing on rural locations, American Airlines' adoption of the "hub-and-spoke" model and the Sabre reservation system, and Apple's strategic decisions under Steve Jobs' leadership, like acquiring smaller companies and launching iTunes.

● S-type innovations are often more subtle and harder to quantify, yet they can be equally transformative, as demonstrated by the success of companies like Walmart and American Airlines.

Bahcall argues that both P-type and S-type innovations are essential for sustained success, particularly in industries like pharmaceuticals and technology, where competition is fierce and the landscape is constantly evolving.

He suggests that companies and leaders often overemphasise P-type innovations, focusing on developing "bigger, faster, better" products while neglecting the potential impact of strategic shifts. He uses the analogy of "speedboats" and "helicopters" to describe the different levels of exploration represented by these innovation types, advocating for a balance between incremental improvements ("speedboats") and more radical departures ("helicopters").

Bahcall stresses the importance of recognising and cultivating both types of innovation to achieve long-term growth and maintain a competitive edge.

How do Bahcall's ideas apply to the pharmaceutical industry?

Safi Bahcall's insights into innovation, as detailed in the source material, offer valuable lessons for the pharmaceutical industry, particularly as it navigates a period of rapid change and faces increasing pressure to deliver both groundbreaking therapies and sustainable business models.

Here's how his key ideas apply to this specific sector:

1. Balancing the "Two Phases" of Pharmaceutical Innovation:

● The industry needs both "blockbuster" drugs ("franchises") that generate consistent revenue to fund research and development and "loon shot" therapies that address unmet medical needs and disrupt existing treatment paradigms.

● This mirrors Bahcall's analogy of the "liquid and solid" phases of water – both states are essential but require different conditions to exist.

● Leaders must create separate systems and incentives to support each type of innovation, recognizing that a "one-size-fits-all" approach will likely stifle breakthroughs.

● This involves balancing the "artists" who drive early-stage research with the "soldiers" responsible for clinical development, regulatory affairs, and commercialisation.

● Failure to achieve this balance can lead to the premature dismissal of promising "loon shots" due to misaligned incentives and risk aversion.

2. Overcoming the "Moses Trap" in Drug Development:

● The pharmaceutical industry, like many others, is susceptible to the "Moses trap", where a single leader or a small group dictates which research projects receive funding and progress.

● This approach can stifle innovation by limiting diverse perspectives and prioritising projects that align with the leader's pre-conceived notions of market potential.

● Bahcall advocates for a "gardener" style of leadership that nurtures a broader range of research projects, allowing for unexpected discoveries and serendipitous breakthroughs.

● This involves empowering scientists to pursue "loon shot" ideas, even if they challenge conventional wisdom or initially appear to have limited commercial viability.

● Leaders must create a culture of experimentation and learningwhere failure is viewed as a necessary part of the innovation process, rather than a career-ending setback.

3. Embracing "S-Type" Innovations in a Changing Landscape:

● The pharmaceutical industry is undergoing a period of significant change, with increasing pressure on drug pricing, evolving regulatory landscapes, and the rise of personalized medicine.

● "S-Type" innovations – those focused on strategic shifts rather than new products – will become increasingly crucial for companies to adapt and thrive in this new environment.

● Examples of "S-Type" innovations in pharma could include:

○ Novel partnerships with payers and providers to ensure patient access to high-cost therapies.

○ Innovative clinical trial designs that leverage real-world data and reduce development costs.

○ Strategic collaborations with technology companies to leverage data analytics and artificial intelligence in drug discovery.

○ Developing new pricing models that align with value-based healthcare delivery.

4. Learning from Historical Examples:

● Bahcall's historical examples of companies like Pan Am (which failed to adapt strategically) and American Airlines (which embraced strategic innovation) offer valuable lessons for the pharmaceutical industry.

● Companies that cling to outdated business models and focus solely on "P-Type" product innovation risk being disrupted by competitors who are more agile and strategically savvy.

● Leaders must encourage a culture of continuous learning and adaptation, fostering an environment where strategic experimentation is valued alongside scientific discovery.

By applying Bahcall's framework, pharmaceutical companies can create the conditions necessary to balance the development of both "blockbuster" and "loon shot" therapies, overcome the limitations of the "Moses trap," and embrace strategic innovations that will enable them to thrive in an increasingly complex and dynamic healthcare landscape.