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Taking inventory of life-science headcounts
April 2012
by Peter T. Kissinger  |  Email the author
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Kodak once had 60,000 employees in Rochester, N.Y. Today, they have tenfold less and are operating under bankruptcy protection. Given that all visual records of my youth are recorded on chemistry developed by Kodak, I wish them well as they reinvent themselves. The fact that they have already been trying for over 20 years tells us it's not been easy. They tried pharmaceuticals. They tried clinical diagnostics. Remember that the Ektachem was to revolutionize the hospital clinical lab. Kodak even invented digital imaging. They have had some of the best chemistry and materials scientists around and hired many top graduates from the best universities.  
 
We've seen over and over how infrastructure has become a brake on speed and how successful firms become, and as a result, vulnerable to failure. This has been well reflected in the Midwest economy. It's nearly taken out entire mid-sized cities. Today, we hear an endless drum beat about job creation as a metric used to judge crony capitalism with its government incentives. Think green energy. Today, many still judge a person or company by how many report on the organization chart. These are mistaken metrics.
 
What we really want is "wealth creation" through innovation that truly advances the cause of customers through enhanced productivity. The number of customers determines impact. Nevertheless, this, too, is not sustainable. Survival requires innovating again and again at a greater and greater speed. Customers create jobs. No one else can.
 
Agriculture makes my point. Productivity replaced 95 percent of the jobs over a century, customers have more and better food than ever and we export more soybeans in a week than we grew in a year in 1900. In the traditions of modern journalism, but with the honesty of science, I made up the numbers in the last sentence just like the best newspapers and politicians often do today. Few would think it a good idea to trade mechanized agriculture for more jobs.
 
Industries have been shedding as much infrastructure as possible. We know the $100 million factory or laboratory today can overnight become a $5 million auction. Success is best not measured by headcount, but by making a difference.  
 
The pharmaceutical, scientific instrument and medical device industries are embracing a networked ecosystem. We have a number of companies today that are virtual. They can be strategists and project managers, networked with specialists to deliver results efficiently. They can fail gracefully when needed, in a way that Kodak (named in 1888) cannot today. Apple is iconic in this respect, reinventing itself over and over with very light infrastructure for its size.  
 
Components are sourced externally, manufacturing is in Asia, distribution is through multiple channels, some virtual, partnering with many. We are blessed here in the Midwest with the pieces that have broken off the industrial economy icebergs as well as the new ones we've invented. Using medical devices and scientific instruments as examples, we have expert machine shops, injection molding firms, metal and plastics fabricators, metallurgists, automation engineers, software firms, regulatory affairs consultants, toxicologists, reimbursement experts, purveyors of clinical trials and life-science legal practices. On the pharmaceutical side we also have a very deep complement of contract research firms and manufacturers. Many in this network earned their battle scars at the deceased Searle, Upjohn, Marion Labs, Merrill, Parke-Davis, Guidant and others. Some also hatched from transportation and communications industries with their strengths in plastics, metals, electronics and software.
 
Creative destruction is alive and well. Is the value derived from in-house headcount? No. The wealth creation comes from helping patients and learning how to use the network. Jobs are now more widely dispersed and more secure within the network, where they can be applied to many projects. Success brings capital gains that are recycled. Many young firms will fail and we learn from each one. Along the way, careers are made, families supported and wisdom gained.  
 
Do our state governments with their executive and legislative branches fully grasp this networked innovation economy? I think not. It's certainly not intuitive or comfortable. Life-science risk rivals our Midwest state lotteries. It's a risk we must keep taking. The origins of the anchor stores of life sciences all started with single-digit headcounts and no amount of planning guaranteed their success. Some lasted a very long time, but not longer. The DNA of the discontinued firms listed above continues in their acquirers, divestments and their vibrant spinouts.
 
It is important to value failures (common) and not focus only on the successes (rare) as we replace the ego system with a dynamic ecosystem. Could a business plan predict the origins of Illumina in California from a lab at Tufts University in Boston and the fact that Roche wants them badly for a gazillion beans? Nope! It only took a decade from their founding in April 1998. 
 
Try, try again. That's our way. Plan less, do more. I'm sorry about Kodak's challenges, but it is a natural process and they had a fabulous run while creating a lot of wealth and happiness through enhanced productivity.  
 
Peter T. Kissinger is professor of chemistry at Purdue University, chairman emeritus of BASi and a director of Chembio Diagnostics, Phlebotics and Prosolia.                       
 

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