Determination of Critical Success Factors for the Development of Biotechnology Clusters

Identification of External Critical Success Factors in Microbial Biotechnology Firms
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The paper will conclude with a theoretical framework that is aimed at capturing the virtuous cycle of biotechnology clusters. Hence companies can participate in the competitive success of a cluster by joining it and making it more innovative through new products and services or simply by capitalizing on the new business opportunities created by the cluster.

This definition has several implications.

First, it remains unclear what constitutes a cluster and what distinguishes a cluster from not yet being a cluster. In other words, what exactly is the critical mass that is required for the constitution of a cluster in the first place? Secondly, how exactly is this critical mass dependend upon the industry?

For instance, does a shoe manufacturing cluster in Italy require a different critical mass then a high-tech cluster in California? For the purpose of this paper the definition suggested by Porter serves as the basis for discussion of the ten case studies as the clusters described in these studies match the suggested definition in terms of geographical concentration and the fact that they all specialize in one field namely biotechnology. These case studies therefore allow to assess the suggested beneficial outcomes of clusters which are increase in productivity, new business formation and a higher rate of innovation.

We came to the conclusion that in order to verify the anticipated positive outcomes of clusters as suggested by Porter an important intermediary aspect had to be considered. To illustrate this point I am referring to the following example. New Business formation will only occur, if potential entrepreneurs anticipate market opportunities that allow their business to prosper. Simply the fact that there is an agglomeration of companies alone is not sufficient to generate business creations.

It might be the case that there is not sufficient market demand that would make entry to business an attractive choice. The company knew that without awareness and support along the entire chain, the product would not be able to achieve broad adoption. One leading MedTech company in imaging needed to improve its account prioritization strategy to accelerate revenue growth. The company found that there were certain key drivers of purchasing behavior that mattered more to particular groups of stakeholders Figure 9. Through iterative cluster analysis of validated customer responses, the company was able to identify insights specific to its customer base, which were used to develop customer segments.

With this information, the company developed a customer profiling tool that would continue to prioritize future accounts based on the key behavioral drivers.

In the end, the streamlined methodology increased sales force efficiency and accelerated revenue growth. Successful companies are investing resources in minimizing unnecessary non-selling activities such as administrative tasks and tend to perform strongly on this point. In addition to being the lowest overall performance rating for companies who did not hit their targets, balancing sales rep time between selling and non-selling activities is something that the majority of these companies said they were not addressing at all.

Optimization of sales rep time expenditure can be implemented within a very short time frame, as it requires little overhaul, and is a classic quick win for companies looking to boost their revenue numbers. One leading manufacturer of surgical consumables was looking to optimize the effectiveness of its sales force, with a focus on balancing the time the sales team spends on activities such as pre-sales, sales, account servicing, customer training, and administrative tasks Figure For Pharma and Biotech, leading manufacturers typically have sales teams focused on one product for one or two indications, depending on the size of the market and the nature of its dynamics.

Here, the important criterion to evaluate is the effectiveness of each stakeholder call Figure One example is from a leading pharmaceutical company facing increasing competition. Its blockbuster drug had enjoyed clinical and financial success since its release, but it was beginning to compete with a new wave of treatments that endangered its market position. Along with territory realignment and redefining roles and responsibilities of the sales team, the company reallocated resources based on the optimal number of calls that would activate a customer.

Moreover, customers were prioritized such that the selling time could be tailored to each stakeholder to maximize returns. Unprompted, the most commonly cited challenge for companies that did not hit their annual targets was maintaining customers over time. Customer retention received the second lowest overall performance rating for these respondents compared with performance on other sales challenges. Regardless of how well sales reps can acquire new customers, if a steady flow of existing customers continues to defect to competitors, the net amount of customers will stagnate or even decline.

To successfully maintain customers over time, companies must invest in understanding their customers and closely monitor any changes in behavior or perception that might occur. One MedTech service provider developed a customer segmentation and retention strategy that ensured there were targeted approaches for each prioritized segment. Then, marketing and sales budgets were allocated such that more valuable customers received more resources. A leading Pharma manufacturer with a blockbuster drug aimed to minimize disruption of its customer relationships while ensuring team efficiency and maximum revenue growth.

Overall, Sales Champions continue to achieve revenue targets year over year by: 1 Focusing on key market trends, like digitalization, solution selling, and personalized medicine, 2 Prioritizing customers and not just segmenting them, 3 Keeping track of how sales reps spend their time, and 4 Investing in customer retention. Taking a page out of the Sales Champion playbook may give you the edge you need in and beyond. Learn more about us. What opportunities do companies who are reaching and exceeding their revenue targets prioritize? Which challenges do they care about Figure 3? Where do they spend their time and resources?

However, Feldman argues that even though universities seem to be necessary for the development of biotech research clusters, the mere existence of a large knowledge base is not always enough. Larger companies can act as pools of skilled labor and demand special inputs such as specific products and services that may benefit smaller spinouts. The mechanisms of co-location and spatial clustering seem to be especially strong in the biotechnology industry.

However, the presence of favorable conditions for example, a strong science base and a working labor market is insufficient to explain why an industry develops in a particular region. Favorable conditions in a particular locale may encourage the establishment of an industry, but its growth is determined by other factors: its structure, technological change, economic factors, and changes in the institutional base and local development policies. Many studies and strategy papers have analyzed the factors that are needed for the biotechnology sector to prosper, and most of them have come to similar conclusions.

They emphasize the role of a strong science base, a skilled workforce, supportive infrastructure, and the availability of services and financing.

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A British study 39 identified the following factors for successful biotechnology clusters:. Although many industries benefit from the factors listed above, they apply especially well to biotechnology. Biotechnology is a science-driven business, 40 which means that clustering often occurs in close proximity to key knowledge centers, usually universities or public research institutes conducting top-level research. Because this knowledge is very often tacit and tied to individual researchers or research groups, effective utilization requires close interaction between actors and multilevel partnerships.

This leaves us with some questions: How successful can these initiatives be? Is it possible for smaller and more peripheral biotechnology clusters to survive? The development of a smaller biotechnology research cluster in Turku, Finland, offers some answers to these questions. The primary data consist of detailed, interviews and analyses of industry statistics; the policy documents of national, regional, and city governments; and previous studies of the development of industrial activities in Turku, especially those conducted between the mids and Turku is home to the second largest concentration after Helsinki of biotechnology activities in Finland.

There are also many Finnish universities engaged in biotechnology-related research and education. The period — saw the sharpest rise to date in the number of new biotech firms in Finland. Turku underwent a similar growth spurt, with most new biotechnology companies emerging during the s. The Turku region is especially strong in biopharmaceuticals, but its firms are also involved in diagnostics, biomaterials, and functional foods. In March , there were approximately 80 biotechnology-related companies in Turku, employing approximately 3, people.

These firms, along with the universities and service companies, form a relatively tight drug-development network. Although the growth of biotechnology in Turku has been very rapid, the roots of the industry are much older. The first drug companies Leiras [a Nycomed Co. These mid-sized companies cooperated with the universities when such cooperation was not common practice in Finland.

A good example of this is the diagnostic company Wallac, which already cooperated with universities in the s. Interactions with university researchers were institutionalized in many ways, and this culture seems to have diffused to other companies. Older, larger companies have provided local expertise in business and development activities, as well as labor pools for new spinouts. In fact, many key people in the universities and the smaller companies have worked for these larger companies at some point. Many ideas have also been exported by individual workers leaving their jobs and establishing new start-ups or by dedicated spinout strategies of larger companies.

Several studies have noted that in biotech, the performance, strength, and width of the scientific base are perhaps the most important factors affecting industry development. Moreover, the level of scientific research in biotechnology-related fields has been on par with top research around the world. The establishment of spinouts owes much to strong academic links with the United States.

When the molecular biology revolution occurred in the s, many Ph. During their time abroad, they witnessed the birth of commercialized biotechnology firsthand and saw the many ways that academics can become involved in the business of medical biotechnology. A few leading researchers subsequently returned to Turku and became intimately involved in the establishment of both the Center for Biotechnology and several promising start-ups.

Various government agencies support science-based and resource-intensive businesses. Many of the institutions and organizations affiliated with the national biotechnology innovation system are located in the Helsinki region. In the late s, the Ministry of Education started the first biotechnology research program. Since then, public funding in the form of various research and technology programs especially those provided to universities by The Center of Excellence and public venture capital have all increased tremendously.

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The Ministry of Education has also created new centers of excellence in universities. These efforts have paid off: in , nine of the 26 most highly ranked university departments in Finland were in the field of biotechnology. In Turku, the impact of the national science and technology policy has been remarkable. Partly because local actors have been active in national development programs, the newly dedicated university research units have received a lot of public funding. Public venture capital has also played a big part in the growth of new firms.

However, in Turku, national institutions have been used as resources for local activity rather than initiating new activities themselves. Turku was not very visible in the biotechnology industry compared with, for example, Helsinki until the late s.

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Die Lebensmittelanalytik bildet als angewandte Wissenschaft die Basis zur Untersuchung und Beurteilung von Qualitat und Sicherheit unserer Lebensmittel. When the molecular biology revolution occurred in the s, many Ph. Networks linking Turku with the rest of the globe are quite extensive and important for research and commercialization. In terms of numbers of biotech firms, Finland ranks tenth in Europe. First, a good educational system is important. Figure 9: Prioritization of high potential customer segments 3.

The development of Finnish biotechnology has been aided not only by national policies but also by the local efforts of actors in business, academia, university administration, and city governments. Individuals have promoted change, whether or not they had strategic support from their own institutions; this is important to note because the role of individuals as instigators of change has often been overlooked.

Particularly important was the first dedicated project for improving biotechnology research, the South-West Finland Biotechnology Project SWB , started in the mid s.

Red biotechnology in Germany

This was a very informal organization, composed of approximately 30 people, most of them drawn from industry and academia. The Turku Technology Center Ltd. The second stage of the technology center, BioCity, was built in , after DataCity achieved some success. People with different needs joined for a common cause: the real estate business saw a new business opportunity; biotechnology firms saw an opportunity to gain more contacts and influence by cooperating with universities; and universities saw an opportunity to obtain better resources for research and education.

Because city governments played a central role in planning five of the seven technology parks existing in Finland in , 53 it is interesting that the city of Turku did not participate in the planning of BioCity. It was not merely a physical structure but an ambitious new concept.

Its founders wanted to create synergy between industry and academia by gathering a critical mass of researchers in various fields. Today, the BioCity Turku research community consists of more than 50 research groups and more than people working in different fields. A recession in Finland in the early s made local actors and the Turku city government look for new industries to develop. This was partly because of the local industrial structure—the impacts of economic restructuring in the s and s were not as severe as in many other cities. The Finnish recession and the collapse of the Russian markets, which were important for many local industries, also made local authorities pay more attention to economic development.

Since then, the city of Turku has been very active in promoting new industries, particularly biotechnology, and investing in infrastructure. The government has encouraged life-sciences research and commercialization in Turku, partly because the city did not have pre-existing information-technology-related skills and industry like many other midsize cities in Finland. Local authorities have supported the national Center of Expertise program, which organizes cooperation within the biotechnology sector in Turku.

In general, local actors have taken advantage of opportunities provided by national and regional policies regarding science and technology. The use of biotechnology as a leading theme in city marketing should not be underestimated.

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Turku has created a successful biotechnology cluster, but substantial efforts have been needed to guarantee its success. Below is an analysis of the aforementioned factors for successful biotechnology clusters, as they apply to Turku:. Turku has been able to overcome the weaknesses mentioned above for two reasons: strong national support and the ability of local actors to exploit both internal and external resources.

Despite its relative success in compensating for the missing success factors, Turku still faces problems. First, its small size makes it difficult to maintain local services. Lack of foreign VC is also a potential problem, because public support for biotechnology is limited. Technology transfer mechanisms are still underdeveloped, even though there are close connections between university researchers and companies. In addition, universities do not have a clear strategy for capitalizing on biotechnology research.

The biggest problem, however, is that Turku lacks many parts of the value chain. There are few services, venture capitalists, and big MNCs with expertise in commercialization and marketing. This is a problem because external links are usually more difficult and costly to maintain than internal ones, especially for small companies.

A small, peripheral biotechnology cluster can prosper under the right conditions. First, a strong local science base must already exist. Second, there must be a way to compensate for any missing links in the value chain. Turku has been fairly well able to provide adequate conditions for its biotechnology industry. Both national innovation policies and strong local initiatives have been important in overcoming obstacles.

Several lessons can be learned from the Finnish experience. First, a good educational system is important. There are many ways to compensate for missing links in the value chain, but it is extremely difficult to build new entrepreneurial activity in biotechnology without a good local knowledge base. It is difficult for developing countries to compete with major research centers in Europe and the United States. However, biotechnology requires the best available scientific knowledge and expertise.

If it is difficult to attract people from abroad, locals should go abroad to study, conduct research, and build international networks.

Porter´s Position

It is easier to attract expatriates than it is to attract foreigners. Third, the development of clusters is path-dependent and based on previous historical events and existing capabilities. It is extremely difficult to build new clusters from scratch. It is therefore advisable to match research activities and start-up formations to the existing strengths of the region. In many countries, this may mean concentrating on specific fields, such as agriculture or health care, in which local expertise is strong.

A strong health care system is important for the development of biotechnology because it is a consumer of local products, a source of new ideas, and an environment for testing and clinical trials. Many successful clusters in emerging technologies have been created around older but related industries. For example, the biotechnology industry was created around pre-existing food and medical industries in Turku, and the semiconductor industry was created around a pre-existing electronics industry in Silicon Valley.

Fourth, local and national policy support of emergent industries is important, especially if there are problems with the innovation support system. Fifth, the role of individuals, especially in the early stages of cluster formation, should not be underestimated.

The Finnish experience demonstrates that local networks of key individuals increase the capabilities of the cluster as a whole and help different actors achieve consensus. Support for key individuals in enterprises, universities, and research institutes is therefore important, and networking should be promoted. There is indeed hope that smaller and more peripheral biotechnology clusters can prosper. However, it is also clear that strong, well-designed policy support is needed to overcome the various setbacks that these small clusters tend to face.

Of course, there still remains the question of how this should be accomplished. There also remain the perennial questions of how much a government should invest, and how much it would be ready to invest, in a new industry sector such as biotechnology. Success in such endeavors is not guaranteed. Towards Regional Science Policy? The Rationale from Biosciences. In Comparing the development of Biotechnology Clusters ed.