Partner Article

How pharma can learn and benefit from disruptive entrepreneurs

British entrepreneur, Chris Lord, co-founded and sold two health tech startups within eight years for around £150m. Having filed over 1,000 patents, he is one of the country’s most prolific ‘disruptive’ innovators.

The final season of the much-hyped business drama, Succession, featured a startup streaming media entrepreneur going toe to toe with the old guard of traditional media. The Rupert Murdoch-like mogul and main character, Logan Roy, pushed for his Waystar Media incumbent, the big fish, to gobble up upstart Lukas Mattson’s disruptive business. The tables soon turned, however, when it became painfully apparent that Mattson’s business, GoJo, is the future. So the little fish got ready to eat the big one. Any smart exec knows that this fictional small screen tale could all too easily become their reality.

This case of art imitating life shows that innovation is essential to growth. And failure to innovate can lead to a slow death. In life sciences, as in any other sector, win the innovation race and you could be the next Ginkgo Bioworks or Mammoth Biosciences, but lose and you could have a Relenza or Ben-Gay Aspirin nightmare on your hands. Life sciences failures might be lower profile than consumer failures, for example, Blockbuster Video and Kodak, but the truth remains: if you’re not the disruptor, you’re probably the disrupted.

In pharma, for example, start-ups are driving innovation (particularly early-stage development), accounting for the vast majority of all new prescription drug approvals. An example of that remarkable invention record is UK-based Exscientia. Founded in 2012 it was the first AI drug discovery company, and its 2021 $510m IPO was one of the biggest ever exits in the biotech industry.

There are many reasons why startups are driving innovation, ones which I believe can help larger incumbents to innovate more.

Work on a problem that nobody tries to solve

The best entrepreneurial opportunities are those that everyone observes but few truly notice. My innovator instinct draws me to problems that, initially at least, no one else sees. Good entrepreneurs ask: what valuable company is nobody building? And how can you unlock new value that no one else has?

My first business led to an eight year startup sprint which resulted in two companies founded and sold for more than £150 million. We made one valuable business that no-one else had, and quickly set about another one, after exiting the first.

It started when my business partner and I flew to the Canton fair in China, a trade expo, to scout for ideas, around 14 years ago, and it was soon after we landed that we learned the lessons of how to find a problem worth solving.

**Get a bold idea ** Consumer-centricity needs to be the starting point for the idea. Lots of pharma companies are trying to get to that place but don’t know how to start. If you put the customer at the heart of what you’re trying to do and think about how to serve them better, you really start opening up opportunities.

Myself and my business partner, David Newns, built our first company, CN Creative, into a major medtech venture, and within just four years sold it for £40 million. In the process, we delivered a 20x return to investors.

The idea for CN creative, came unexpectedly, when we decided to go on an impromptu trip to China’s Canton fair, which showcased every product producible in China to those seeking manufacturing. Jarringly, JCBs jostled for attention next to a wall of sex toys. In my near-sleepwalking, jetlagged haze, this initially made for a disorientating and uninspiring trip.

Frustrated by my overwhelming surroundings, I reached for a cigarette, one of impossible-to-shift, my 20-a-day, 15-year habit. Then the spark hit me: not from my lighter, but one of the smallest stands in the entire exhibition, staffed by a lone person occupying a solitary table and chair. A dreary single banner above, however, said what became impossibly magical words “Electronic Cigarette.” This thing simply didn’t exist in the UK at all. I grabbed my business partner David, pulled him urgently to the stand and proclaimed: “This is the answer!” Within four years, the bold idea was very much reality, with investment from a major life sciences venture capital company, acquisition offers from pharmaceutical and tobacco companies, and the only medical license ever granted to an electronic cigarette.

**Beware consumer insights ** Large life sciences incumbents are constantly under threat from disruptive innovators. Often the same companies will turn to consumer insights to generate new ideas and get ahead of the curb. However, despite many companies relying on them for new ideas, obsession with consumer insights can really get in the way of successful innovation.

It’s important to keep in mind that customers don’t always know what they really want. Most will not challenge the status quo, or envision new, world changing possibilities. They often stick to the safe parameters of what they already know, which creates a recipe for variation not innovation. Don’t get me wrong, consumer insights are not redundant, but I’d stick to only using them for driving sales, improving a service and making slight product tweaks, like a new scent for a shampoo or a new flavour of ice cream.

**Acquire or build innovation within? ** My second life sciences company was acquired by an incumbent (for £110m) purely on the strength of its innovation capability. Not only had I created more than 800 patents within four years, but my partner and I had assembled a crack squad of just under 170 inter-disciplinary disruptors, from nuclear physicists to product designers. For a company that lacked the ability to innovate, my partner and I’s team, our company, was a ready made solution.

At the same time, joining a huge, global company for me presented an even juicier opportunity; with the far greater financial and staffing resources I wanted to build one of the world’s best innovation departments.

Large corporates can in fact build their own innovation teams, but they should seriously consider doing so by hiring (or acquiring) entrepreneurs. In my experience, as a business breed we are much more used to moving forward and exploring new innovation opportunities and we are always on the offensive.

Public companies on the other hand are far more defensive, and are more motivated to protect the revenue base and manage shareholder expectations. I recall one very large multinational I worked with hired a ‘global head of scouting’, paid well over £120,000 only to find he was afraid of flying and wouldn’t travel!

Though startups and corporates seem like business opposites, those opposites attract. Corporates want startups that have borne the risk and survived, and startups want the resources that corporates offer. The trick is for each to embrace the other. In an ideal world, incumbents can learn how to embrace entrepreneurship and innovate to make positive change a reality.

This was posted in Bdaily's Members' News section by Rob McDonald .