Workshop CrESIT-Assobiotec 2008 Varese, Nov 24th, 2008

1. CrESIT‐Assobiotec Workshop 2008
Business Model for Biotech Firms
Business Models for Biotech Firms
Alberto Onetti
Director, CrESIT, Insubria State University

2. Why Business Model?
Everybody talks about Business Models, but a proper definition
is still missing
Most practitioners (Linder e Cantrell, 2000; Chesborough and Rosenbloom, 2002)
Recently, some scholars focus mostly on e‐business contexts (Gordijn et al., 2000;
Hamel, 2000; Afuah e Tucci, 2001; Galper, 2001; Petrovic et al. 2001; Weill e Vitale,
2001; Gebauer e Ginsburg, 2003; Osterwalder, 2004)
Why?
Many success stories or innovative behaviors are based not on product/process
innovation but innovative ways in delivering a value proposition to customers
(Cirque du Soleil, IKEA, Benetton, Zara, …)
Innovative companies are not just firms operating in high‐tech fields, but also
players in mature contexts
Companies give different execution to the same strategy (Ryanair vs. easyJet)
Business Model can trigger company’s innovation and success

3. What is a Business Model?
Business Model is different from Strategy
Business model is not Strategy but rather reflects the strategic choices
Strategy selects the business/businesses where to compete (corporate
strategy) and defines how to position for each of them (business strategy)
Corporate strategy: single‐business vs. diversified approach
Business strategy: cost leadership vs. differentiation
Business Model defines how to execute the strategy
Business Model enables strategy (“hub and spoke”)
It allows extraction of value from the Strategy chosen
It defines how a company organizes its own activities

4. Business Model Decisions
The relevance of the different activities, i.e. the “focus” of the business
How to allocate resources to different activities?
Where to invest resources?
From where to divest?
The localization of the different activities, i.e. the “locus” of the business
Where to locate the different activities?
Which countries? Which geographical areas/clusters?
A multi‐localization approach is possible both for different activities and the same activity
The way of execution of the different activities, i.e. the “modus” of the business
Which activities to do in‐house ? Which ones to be outsourced?
If in‐house, how do you approach it?
Capital intensive? High‐Tech intensive? Labour‐intensive? “Brain”‐intensive?
If outsourced, how do you manage it?
Buy or through partnership? (i.e. market‐vendors or recurring partners involved in long‐term
stable relationship?)

5. Designing the Business model
LOCUS
FOCUS MODUS
How much Who? In-house or Third Parties?
Where?
Activity A
to allocate? How? Capital or labour-intensive?
How much tech-intensive?
Activity B
Activity C
…
Source: Onetti and Zucchella, 2008

6. How to define corporate activities?
Is a standard list available?
A standard taxonomy is difficult to apply
The “Value Chain” concept introduced by Porter (1985) is no longer entirely applicable, also for
manufacturing companies. Nowadays:
new activities and more specialized activities are required to run the business
company activities are spread among multiple companies and multiple places
activity allocation and location changes on a continuous basis
Literature talks about “value system”, “value network” or “value web” (Finger and Aronica, 2001;
Allee, 2000; Andrews and Hahn, 1998)
The “activity list” has to be built case by case, based on:
the industry the company operates in
the strategy chosen
Red Biotech is a good example
The core activity is R&D
R&D is articulated in many different phases and sub‐phases
The real Business Model choice for a life science company is about the phase or sub‐phase they
focus on

7. Designing the Business model
LOCUS
FOCUS MODUS
How much Who? In-house or Third Parties?
Where?
Activity A
to allocate? How? Capital or labour-intensive?
How much tech-intensive?
Activity B
Activity C
…
Source: Onetti and Zucchella, 2008

8. From Business Model to Value
Architecture
Activity
location
Activity
(Where?)
allocation
(What? How
much?)
Activity
Integration
/Execution
(Who? How?)
Source: Onetti and Zucchella, 2008
Value architecture
it is the output of the Business Model decisions

9. Designing the Business model
LOCUS
FOCUS MODUS
How much Who? In-house or Third Parties?
Where?
Activity A
to allocate? How? Capital or labour-intensive?
How much tech-intensive?
Activity B
• since a company has multiple (potentially infinite)
Activity C
options in terms of focus, locus, and modus
STRATEGY
…
• the output of Business Model decisions (i.e. the
Value Architecture)
BUSINESS
MODEL
• characterizes the company in a unique way
• sometimes triggers strategy change or innovation
VALUE
ARCHITECTURE
Source: Onetti and Zucchella, 2008