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Question:
Discuss about the Business Model of GSK for Innovation and Business Development.
 
 
Answer:
Introduction:
Business Model:

Business model is a conceptual framework to fulfill the objectives of any organization. It includes purpose, goals and ongoing plans that are to be achieved in the organization. Business model can be evaluated by six components that are competitors, customers, economy, management, products and suppliers.  It is basically representation about how organization creates and delivers values to make money (Afuah, 2014). A business model consists of 9 building blocks which are essential in the model. The building blocks are:

Customer Segments: The most important customers for the company.

Value Propositions: The values and services are offering by company.

Channels: Types of channel of communication and distribution are used.

Relationship with customers: Types of relationship customers want to establish.

Revenue streams: Those values, on which customers want to pay.

Key resources: Types of resources those are necessary to make business plans.

Key activities: Types of key activities those are required to implement business model.

Key partners: Those partners who want to participate in business model.

Cost Structure: Important costs incurred in business model.

Business model is helpful to increase operational efficiency and gain competitive advantage. So basically, it is a plan implemented by a particular company to generate profit from its operations (Kalpan, 2012). So, business model is a set of resources of company, which creates the value that is helpful to the customer and sale of that value to generate the revenue for the company.

Disruption is an unplanned disturbance that changes any planes or events in any company. Disruption can be defined as all those factors of interruption that drove out the firm to get success and destroy its future (Gans, 2016). It disestablishes and destroys any established system. Some company take disruption as opportunity and they make new business plans and models to generate profit. Disruption leads innovation because company becomes more able to fulfill its goal and to generate economic growth (Rosen, 2014). Because of innovation, disruption turns into new changes and it crates disruptive innovation. Disruptive innovation is basically defined as an innovation that creates new market and disrupts or replace existing market in a particular company. Disruption is more than transformation. It comes from a workable business model where growth and progress is going on (Kloefkorn, 2016). There are many disruptive models which can be used by companies to do transformation in existing business strategies.  The benefit of disruptive innovation is that it enables company to identify the requirements of customers and to satisfy them according to their requirements.

The best example of the company which has changed old business model and adopted new business model is GlaxoSmithKline Australia. It is a healthcare company and develops a wide range of innovative products of pharmaceuticals, vaccines and consumer healthcare. The company started its business in Australia since 1886. The mission of the company is to provide value based service to its customers. Company has three objectives that are, increase growth, reduce risk and provide long-term services to its customers (GlaxoSmithKline, 2016).

 

GSK has recently changed its business model to lead the industry in the world. The company has a unique service named medical education which is mainly for patients and doctors. It has done some major changes for the comfort of its patients. In the old business model, First thing was that the sales team was focus only to deliver the medicines and services in all over the world. There was less checking on the sales representatives for their working on the field. Second, Company has a medical education facility for doctors so that they will be able to prescribe right medicine to the patients and for that company made payments to them who delivered information related to the medicines vaccines but Company gave payments to GSK staff. There was shortage of professionals who can provide the right information to the individual on company’s behalf. Third, Medical education system is run by GSK itself (GlaxoSmithKline, 2016). In traditional model, the company had ‘closed innovation’ strategy. The ideas for producing any medicine were generated internally using internal resources. But it will not fruitful for the company.

GSK has now made some shift in its business model and adopted a new business model which came in to effect on 1st January 2016. Company has done three changes: First, Company will describe about every medicine and vaccines and for the medical support it will increase the number of professionals and academics. Second, the medical education which is provided by GSK will be accessed by third parties also so that information can be provided to everyone. Third, GSK will stop pay directly to healthcare professionals and give payments to those who will provide knowledge on the behalf of GSK. Recently, GSK and Zymwork have also collaborated to develop Bi-specific antibodies (Businesswire, 2016). In the revised model, the company has adopted ‘open innovation’ strategy. It is basically designed to bring a change in innovation strategy. As a pharmaceutical company, company needs to understand its patients and their requirements. Open innovation is helpful to understand the needs of any individual.

Comparing to both the model, it can be analyzed that there are major changes is done by GSK in its business strategy. These changes have been done for the long journey of company. The major part of transformation is to increase the number of professionals for medical education. When new medicine and vaccine come in market, it is the responsibility of subject matter expert to communicate about those medicines.  The new model of the company is disrupted the existing model because this change in business model will be beneficial for the patients and doctors who want high quality of information (mukharjee, 2016). By open innovation strategy, the step of increasing peer to peer discussion with GSK professionals will increase the strength of the company. In 2015, the sales representative got no incentives for target but in new model, they will get incentive with new responsibilities. Because of its innovations, GSK has achieved the position of powerful industry in healthcare sector (ward, 2015).

GSK adopted open innovation strategy in which idea of new products is always generated from internal and external sources. By Open innovation, Company has get opportunity to target more and more patients. Company is also working with a charity service to save the venerable children in the world (Hunter & Stephens 2010). By changing the responsibility of sales persons, Company has given a new identity to them. Now they are not only sales persons, they are also representative of the company. This would be difficult but not impossible to deliver information with the medicine to individual person (Bistrong, 2014).

In conclusion, Business model is a crucial part for the success of any company. It is very important to make right and proper business model to achieve the objective of company. With this it is also can be analyzed disruption is similar to innovation. It creates disruptive innovation that leads any company to the way of success. The high level disruptive theories encourage companies so company should replace its business model carefully.

It can be clearly seen that GSK has done innovations its strategy in manufacturing process of product and the result is that it is a leading and powerful pharmaceutical company. Medical education is a major service provided by the company. It helps those who want to gain knowledge about medicines and vaccines. It also helps doctors to prescribe right medicine to patients.

 
References 

Afuah, A., (2014), Business model innovations: concepts, analysis and cases, NY:Routledge

Bistrong, R., (2014), GSK. “Free samples,” and a new business model, accessed on 17th August from 2016 from https://richardbistrong.com/gsk-free-samples-and-a-new-business-model/

BusinessWire (2016), Zymeworks and GSK Enter Second Strategic Collaboration to Develop and Commercialize Bi-Specific Antibodies, accessed on 17th August 2016 from https://www.businesswire.com/news/home/20160426005295/en/Zymeworks-GSK-Enter-Strategic-Collaboration-Develop-Commercialize 

Gans, J., (2016), The Disruption Dilemma, USA: Sabon LT Std

GlaxoSmithKline, (2016), accessed on 17th August 2016 from https://au.gsk.com/en-au/about-us/

GlaxoSmithKline, (2016), GSK first in Australia with new business model for the pharmaceutical industry, accessed on 17th August 2016 from https://au.gsk.com/en-au/media/press-releases/2016/gsk-first-in-australia-with-new-business-model-for-the-pharmaceutical-industry/ 

Hunter,J., & Stephens, S., (2010), Is open innovation the way forward for big pharma?,accessed on 17th August 2016 from https://www.nature.com/nrd/journal/v9/n2/full/nrd3099.html

Kaplan,S., (2012), The Business Model Innovation Factory, Canada:John Wiley & Sons

Kloefkorn, S., (2016), What Is Disruptive Innovation and How Does It Work, accessed on 17th August 2016 from https://www.linkedin.com/pulse/what-disruptive-innovation-how-does-work-sheila-kloefkorn

Mukharjee, R., (2016), GSK rolls out code for ethical marketing, accessed on 17th August 2016 from https://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/gsk-rolls-out-code-for-ethical-marketing/articleshow/53075482.cms

Rosen, A., (2014), Disruption Is A Byproduct, Not A Business Model, accessed on 17th August 2016 from https://www.forbes.com/sites/amyrosen/2014/06/30/disruption-is-a-byproduct-not-a-business-model/#44d0b0f95e95

Ward, A.,(2015), GlaxoSmithKline:Out of Step, accessed on 17th August 2016 from https://www.ft.com/cms/s/2/3a7f8df0-f7b7-11e4-9beb-00144feab7de.html#axzz4HfxbofFA

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