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Does Maxygen’s life history tell us something about the applicability of the evolutionary perspective to organization design and development? We would not say that Maxygen has “evolved” in the past five years. Rather, it has “differentiated” along a growth program that makes two kinds of evolutionary sense. First, Maxygen is itself the descendent of a very successful “cell line”—companies started by Alejandro Zaffaroni. Zaffaroni founded Affymax in 1988, which begat Affymetrix, Symyx, and then Maxygen—which, as we’ve seen, has sown another generation of seeds. It appears that Zaffaroni has created an organizational species for which the company is indeed an idea’s way to make another idea.
Second, the three stages of Maxygen’s life to date are well-adapted for a founder population in a new environment: first use the inheritance (in the form of intellectual property, people, cash, and growth behavior) endowed by the Zaffaroni parent to expand the nascent capability and explore the available niches; second, migrate to the most hospitable niche while recovering the investment in the initial capabilities; and third prune what’s not needed.
In so doing, doesn’t Maxygen sacrifice its ability to adapt in the event of an invasive competitor or shift in its niche? Howard acknowledges that it does. But it has become accepted wisdom that as organizations age, they face “The Innovator’s Dilemma,” in which a company’s competitive strengths become its constraints. In It’s Alive, BP’s Chairman Lord Brown explained that, for an oil giant, “the creation of the capacity to respond is the essence of strategy.” The Zaffaroni growth program, in contrast, concedes the capacity for an organization to change itself in favor of giving the next generation a good upbringing, a creative education, and a small trust fund.
In the industrial economy, in which the creation of physical capital was a signal achievement, we have tended to look at the preservation of the organization as a life and death issue. But as economists we agree with Howard’s point of view—if companies can’t adapt, they should release their intellectual, human, and financial capital for redeployment. Perhaps in a Biomolecular Economy, we are developing a perspective in which companies are instrumental, rather than central, to both investors and individuals.
If in such an economy organizational death is seen as natural and productive, what of the individuals and their careers? In Maxygen, there has been acceptance that the company should contain different people at different growth stages. Perhaps people will learn to move among organizations of the type that suits them—“serial entrepreneurs” will seem as natural a population as “salarymen” in Japan. When I asked Howard how he’d managed to be the right CEO for the several seasons of Maxygen’s life so far, he said: “Is there a time when it will be right for me to leave the company? I could see that happening when we get to the commercial phase. I’m not particularly interested in being the CEO to get up and describe global earning every quarter—others would be better at that.”
In 2001, we profiled Maxygen because we had a theory that the seeds of the next organizational model would be found in a molecular biology company; in 2007, we’re convinced that we are seeing at least one possible future for organizations, one that, like the basic limited liability model developed for the capital-scarce industrial revolution, can give investors and individuals the chance to profit from a new set of economic opportunities. This time, the new challenge is not amassing vast quantities of financial capital, but focusing sufficient talent on exploring and exploiting opportunities that are developing faster than anyone can keep track of them. Maxygen may not yet have proven to be the next organizational paradigm, but it looks to be a new organizational haplotype.
If true, the adaptive enterprise is good news for those with new capabilities, but where does it leave the established pharma companies? And what of the Biopharma startups that enter at Maxygen’s stage three, with a target market in mind and an idea of a product to commercialize? When a new species starts feeding in your habitat, some adaptation is required. For large companies, as in other industries, focusing on the white space and getting fresh market input requires active attention—otherwise, the structures built to protect existing market positions will dominate management decisions. (As an example, one network hardware company we’re familiar with pursued innovation through several promising acquisitions, then proceeded to give their products away as a means of reducing prices for the core offering.) Large-scale research efforts—the first refuge of “not invented here” thinking—have not proven to be an effective answer.
But there is an approach that has worked in other industries and can work in drug development, as well. Large movie studios, for example, are opting out of producing their own movies, and now focus on marketing and distributing films made by others, Little Miss Sunshine, say. Even their most reliable sequel blockbusters—for example, Spider Man 3—are financed with partners. Such arrangements can be good for those developing the asset and those bringing it to market.
The rights to develop molecules are already bought and sold, though not yet traded in an efficient market. Perhaps they will be soon. Viewing the myriad opportunities as tradable options rather than corporate birthrights will help pharmas and biotechs alike understand their role in the evolving market and, as a result, do a better job of collaborating. Amgen, Roche, and others have seen the wisdom in picking up where Maxygen left off in exploiting its technologies. And venture capitalists have, to a degree, begun to act like investors in movie productions, investing, selectively, in biopharma startups.
The “studio” model has had successes in bringing targeted drugs to defined niches. The Zaffaroni/Maxygen model seems to revolve around the explore/exploit cycle for new capabilities. Whether the incumbents have a financially advantageous model—in contrast to, say, telecommunications companies overpaying for new net-related capabilities—remains to be seen.
Christopher Meyer is chief executive of Monitor Networks, a member of the Monitor Group management consulting firm based in Cambridge, Massachusetts. Joan Chu is a Senior Partner in the biopharma practice at Monitor Group.
