The Ambidextrous Manager: A Case Study
Thinking strategically doesn’t come easy. As employees grow through the corporate rank they often find it difficult to eschew the tried and tested, hands-on ways of thinking and doing and to embrace the distant and the broad. They would rather err on the side of being directionally wrong than being operationally ineffective. Alas, most firms and careers wind-up not so much owing to inefficiencies as much to inaction.
One must be able to think about the future while act in the present — look at the big picture while being attentive to details — scan the periphery while being in touch with ground reality. This calls for Ambidexterity.
In this case study, we take a situation that warrants a manager to act with ambidexterity — look into the future and the present, involving big picture thinking as well as specifics. We learn the importance of stakeholder management and how to make decisions under uncertainty.
So, here’s the case study. Please note that it is a fictional company and situations are designed solely to enable class discussions and glean managerial insights.
Introduction
Alchem is a mid-sized pharmaceutical company based in India. It deals with manufacturing and marketing of generic medicines in the therapeutic areas of cardiovascular and diabetology, two of the fastest growing segments in India. It has four manufacturing facilities, two in Gujrat and two in Telangana, and has sales and marketing offices across major metros in India. In FY 2022–23, the company’s turnover was INR 550 cr., a bottom line of INR 100 cr. and 2000 employees across various core and support functions.
Alchem’s profit margins stands at 18%, which is healthy for a generic pharma company. The EBITDA margin for generic pharmaceutical companies is typically between 10% and 25%. At 2000 employees, the leadership is running a tight ship.
A bulk of the employees are engaged in manufacturing and allied areas, like quality, sourcing, plant maintenance, etc., followed by sales. The company has traditionally been keeping most of its workforce in-house, with a limited dependence on contract labor.
R&D comprise about 10% of the workforce, and Alchem has forged joint development projects and competence sharing programs with various Indian universities and R&D centers, including NCL and NCBS.
External reality and internal conflicts
Lately, the global pharma industry has been disrupted over multiple fronts. The advent of AI and affordable super-computation means that the dream of personalized medicines is well within reach. The traditional chemical synesis based drug discovery is rapidly giving way to biologics, which are much effective and targeted. The changing demographics also means that the diseases in developed markets are growingly seen in emerging markets, and so are the price points.
All these development are further on the backdrop of emergence of alternative medicines and lifestyle changes, where the entire notion of allopathy is getting questioned. Hitherto tight doctor-pharmacist hegemony is getting fractured and there is a rising role of social influencers and alternate voices.
Internally, there is a perennial conflict between the manufacturing-sales nexus and the R&D teams. While manufacturing performance is measured on a tight leash, the R&D is said to be given high latitude. Sales, on the other hand, often finds it difficult to penetrate new markets and sell higher value products. All this ensure the present state prevails.
Managerial dilemma
The leadership team of the company aims at expanding the footprint of Alchem beyond the narrow therapeutic classes and engage in high value products. At present the growth rate (10% y-o-y) looks healthy and the profit margins are also in the higher bracket of the industry, which means there is no sense of urgency in the team to strive up the value chain.
Further, where do funds come from? Breaking out of the mold require significant investment in R&D, which is by nature risky, and that would mean pulling away funds from elsewhere, chiefly manufacturing and sales and marketing. Such areas giving steady cash flow, should the company risk such a gambit?
Another avenue of funding is to raise capital, either as debt or equity. Debt for R&D activities is a bet, and diluting equity would mean that the promotors would lose grip over the business and staring at conflicting motivations between investors and management.
How to bring about the sense of urgency and the actual transition?
Discussion points
You are to discuss on the following points and come up with a coherent plan of action.
- Who are the various stakeholders involved in the growth decision? Identify their conflicting motivations. (Refer to the Stakeholder Map).
- How do you build a business case for change. Take into context the commoditizing generic space in India and the larger socio-economic-tech changes in the background. (Refer to the Strategy Frameworks).
- What recommendation would you have for the growth strategy and why?
Keep the recommendations brief and laden with strategic management tools and frameworks.