Kellogg World Alumni Magazine, Winter 2000Kellogg School of Management
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Brave new business
If the Internet revolution was big, the biotech era will be colossal. The link between test tubes and MBAs may seem unusual, but Kellogg's new biotechnology major will create management leaders to propel this emerging industry towards its utopian -- and commercial--potential

by Matt Golosinski

  Professor Alicia Löffler
©2000 John Morrison Photography
Professor Alicia Löffler

Clone, sweet clone

The word is already on the tip of her tongue. It's what everyone wants to hear, and during her five-year tenure as director of Northwestern's Center for Biotechnology (NUCB), Alicia Löffler has had hundreds of conversations where this word served as a springboard for discussion and debate. She knows it can also serve as a communication barrier if she doesn't address it -- and its ethical dimensions -- before explaining the complexity of her branch of the health and agricultural industries. A branch that may ultimately redefine what it means to be human.

"The clones," she says, smiling and waving her hand in playful dismissal of something that's grown rather tiresome because of misunderstandings raised by its garish sci-fi connotations. In fact, The Clones might be a college-rock band whose antics, while amusing, have devolved through familiarity into tedium.

"Yes, yes, everyone wants to know about the clones," says the affable Löffler, who retains the accent of her birthplace, Argentina."It's all true."

Well, perhaps not all the reports of miraculous and terrible medical wizardry are true, but Löffler admits biotechnology really will produce cloning on a large scale in the next couple decades. Any ethical questions, she suggests, should be contemplated in light of the magnificent potential boon that biotech will bring to humanity.

Thanks to cloning, infertile couples will be able to have children. Doctors will tinker with the genetic material of embryos to select for desirable traits, or eradicate any abnormalities detected. From stem cells, scientists will grow replacement organs for ones that wear out from use or illness. Cancer tumors will be controlled through gene therapy. The human life span itself will enjoy significant extension -- perhaps indefinitely, one day.

"With biotechnology we will be able, for the first time, not simply to treat disease but to cure it," promises Löffler, who also emphasizes the potential of genetically engineering crops to dispel the spectre of world hunger (as long as distribution channels are not blocked).

And so what about those nightmare scenarios seemingly cobbled together out of X-Files reruns?

"The public receives only fragmented information about biotechnology that leads them to magnify its negative aspects," says Löffler, a microbiologist by training who holds a doctorate in the subject and a post-graduate in biochemical engineering.

If the field is to bring to humanity the prosperity she believes it can, there are two things that biotech must absolutely get right: ethical oversight and public transparency. Disregard either one, and people will grow suspicious and frightened. Fast.

But these are only a couple of the challenges facing an industry unlike any other, an industry that Ernst & Young reported doubled in size between 1993 and 1996, and one that remains poised to explode with activity. In addition to the obvious risks associated with biotech -- the sector is heavily regulated and products can take years and $500 million to bring to market -- a diverse workforce comprised of professionals from fields as disparate as computer science and biology demands extraordinarily talented managers to oversee the complex business.

That's where Kellogg comes in.

Professor Joel Shalowitz  
©2000 John Morrison Photography
Professor Joel Shalowitz

What's a nice MBA like you doing in a place like pharmacogenomics?

Kellogg has quickly repositioned itself to meet the demand for managers to navigate this brave new business world. In June, Dean Donald Jacobs approached NUCB with a proposal to combine programs under the Kellogg umbrella and thereby set the standard for all other schools. A deal was soon hammered out and a curriculum established.

The unique 14-course major will launch in fall 2001, as will a parallel biotech program designed to meet the needs of Kellogg's Executive Education clientele. A field research component similar to TEK Venture is also in the works to provide students with a hands-on experience. Jacobs is frank about the business school's approach to innovation.

"Some have said -- correctly, I think -- that Kellogg turns on a dime," notes Jacobs. "We are always chasing change. Our biotechnology initiative is an attempt to beat the wave, to be there as the wave crests, instead of chasing it. Biotech is the next big opportunity that will demand our interaction, causing us to change. We'll be there early."

The link between the scientific world of biotechnology and that of the typical MBA student may initially seem unclear, but upon consideration the marriage appears far less strange.

"Biotech is all about making products," explains Löffler, who will remain, despite the move to Kellogg, in the leadership position at the Center she has occupied since 1995. "It's an industry that's highly entrepreneurial and moving extremely fast. When you move that fast, the traditional business models break down, so you need to develop new ones."

Furthermore, Löffler suggests that traditional managerial models fail to address the complexity of the biotech industry, which includes a broad variety of endeavors from agribusiness to medicine. "It took us a long time to realize that biotechnology is an information science," adds Löffler. At its heart, she says, biotech is about DNA and DNA is about information and how it is communicated. Having managers who not only understand these technical details, but know how to raise the extraordinary capital demanded by biotech and who, further still, can address the complicated PR issues surrounding the industry requires a turbo-charged MBA. Old-school business paradigms, says Löffler, simply cannot keep pace with biotechnology¹s dynamics.

Among the business challenges biotech presents to managers, contend Löffler and Joel Shalowitz, M.D. and professor of health industry management, is an industry heavily grounded in technology, but also one that is ethically charged and populated by engineers, scientists and physicians. The new major will offer a range of courses from different departments that prepare students to address these challenges.

The curriculum will require no laboratory work, although one important goal of the major is to familiarize students with the lexicon and concepts involved in healthcare's cutting-edge. Classes will emphasize, among other things, public health policy, entrepreneurial finance and intellectual property strategies.

Shalowitz ¹82 points out that biotech does not exist in a vacuum -- somebody has to use and pay for it. Unless health industry managers understand who the product's customers, users and payers are they will not fully appreciate the range of biotechnology, or the sophistication of Kellogg's biotech major.

In addition, Shalowitz says that while many of the technologies that helped engender the Internet have also enabled biotech, there exist significant differences between the two sectors that some students do not always appreciate.

"The business models in biotech can be very different than those in e-commerce," especially the intellectual property issues, explains Shalowitz. "On the Internet, people are talking about IP relative to business methods, to formatting on a screen. In biotech we encounter actual manufacturing issues -- specific genetic coding issues."

Kellogg Associate Dean for Academic Affairs, Dipak Jain, appreciates the distinction Shalowitz raises. "Marketing of biotech products and services is going to be challenging," notes Jain. "Our biotechnology curriculum has courses that will cover these critical issues."

Edward Zajac, Kellogg professor of health industry management, agrees that its complex structural dynamics make biotechnology an industry that places special demands on the managers who lead it. He highlights yet another complication.

"The challenge of rapid scientific discovery has important business consequences," says Zajac. "No one biotech firm has the R&D capabilities and financial resources to work in isolation. As a result, biotech is significantly shaped by strategic alliances between biotech firms and between biotech and pharmaceutical firms."

Zajac's courses such as Creating and Managing Strategic Alliances, and Advanced Strategic Management, have proven especially popular because of their ability to discuss the frameworks for ensuring effective strategic adaptation to quickly changing environments, especially in the health industry.

"Knowing how to structure alliances, how to protect intellectual property exchanges and how to manage these relationships is one of the most important managerial challenges," contends Zajac.

  Scott Saywell, R. Tyler Smith and Katie Arnold (all ’02)
©2000 John Morrison Photography
Scott Saywell, R. Tyler Smith and Katie Arnold (all ’02)

Genies in the bottle

Kellogg's student response to the new curriculum has already been overwhelmingly positive. There are plans underway to establish a Biotech Club that will, among other initiatives, develop and organize a Biotech@Kellogg conference scheduled for April 28, 2001. Three students have been especially instrumental in working with Kellogg faculty and administration to help shape the club, as well as provide feedback on the new major. Katie Arnold, Scott Saywell and R. Tyler Smith (all '02) express optimism for the school's biotech program.

"We anticipate the Biotech Club to have more than 100 members," says Arnold. "We believe this number to be realistic, if not conservative, based upon the strong response from students during our petition for signatures. We've been very pleased and excited with the number of students voicing strong interest in the club and biotech industry."

What makes biotechnology such a draw among students, explains Smith, is partly the entrepreneurial possibilities associated with the field, and partly the diversity of research disciplines that must come together to build a successful biotech endeavor.

"Biotechnology is compelling because of the enormous potential for therapies and diagnostic tools," Smith adds. "There are tremendous commercial opportunities far beyond human health. We've barely scratched the surface."

Smith notes that because the industry is an exciting fusion of different technologies and sciences, there exist special roles for MBAs interested in biotechnology. While working at a biotech company, Smith discovered that "being a good scientist does not always translate into being a good manager." Many scientists, he found, don't have the proper skills to manage a company. Yet he claims that frequently companies will promote scientists to oversee managerial roles within the organization, roles better suited to b-school graduates.

Further, the extraordinary R&D costs (as much as 54 percent of the industry's capital gets funneled into development, according to Löffler; IT by comparison spends seven percent) faced by firms operating in this arena demand long-term investment strategies, claims Smith. Companies will need to establish and maintain ties to the investment community, specialized knowledge that many scientists may not have been trained to do.

"By providing companies with the proper management skills and industry knowledge," believes Smith, "Kellogg graduates will be able to contribute quickly to the industry, allowing companies to free up their scientists to focus on what they do best."

This ideal division of labor, agrees Saywell, makes it possible for business students to play leadership roles within biotechnology, regardless of their previous academic training.

"Since biotech is fundamentally based on science," remarks Saywell, "many 'non-science' people shy away from it, leaving a demand for well-trained managers. Kellogg has already proven its expertise in entrepreneurship, technology, finance, healthcare, strategy and marketing. We just need students with a basic understanding of biotechnology [who can] apply this business expertise towards the biotech industry."

Professor Ed Zajac  
©2000 John Morrison Photography
Professor Ed Zajac

Unintended consequences

Every so often science produces an invention or discovery so startling that it changes the way humanity thinks and lives. Particle physics and computer science were last century's revelations. Biotech will likely serve as this century's predominant disruptive force, sending epistemological shockwaves through our culture.

Beyond the metaphysical and ethical considerations associated with biotechnology, other important considerations will arise. Even biotech's most ardent boosters admit there will be both unintended and unexpected consequences related to advances in healthcare. Even what seems an unqualified utopian victory, for instance, may pose its own significant side effects.

For instance, controlling cancer or replacing diseased organs would result in vast numbers of people living longer. But these advances also mean society will have to find the resources --financial and otherwise -- to support this super-aged population and ensure its members remain a viable part of the community.

"From the economic point of view," agrees Löffler, "extending the normal life span will pose challenges. But the speed of diagnosis and treatment will be accelerated and something we take for granted."

How quickly biotech develops into full flower depends on many variables, including the prevailing attitudes of those in the medical profession. "It's very simple," says Shalowitz. "From a physician's standpoint they want to know 'what is it, and how am I going to get paid?' The biggest obstacle to technology implementation is whether or not physicians accept it. Obviously if something is so overwhelmingly right that it becomes a standard of care, it doesn't matter whether physicians accept it or not. But if there's a choice of equivalent therapies, that depends on physician acceptance."

As always, technological advances bring with them additional questions and challenges. As far as Löffler is concerned though, the healthcare industry will undoubtedly result in longer, happier lives for people. The era of biotechnology is one she has long anticipated, and she is dedicated to sharing the possibilities of the field with others.

"Ours is the best program in the country, and the first of its kind," Löffler reports. "Five years ago there were no others; today there are 36. My dream has always been to build the best biotech program in the world. Now, with Kellogg, I don't have any excuses not to do it."

©2001 Kellogg School of Management, Northwestern University