November 12, 2008

Biotech scarcity revisited

I would like to continue where I left off the last time in my exploration of intangible offerings by answering some questions that I have received about the blog post. There were some questions in regards to how the conception of scarcity can be more important than the uniqueness, brand value or connection to other brands. The point that I argue is that the perceived uniqueness or attached claims (e.g. brands, other objects, values) are the types of necessary parameters to create the illusion of scarcity. It is only by intellectually coupling the offering to something scarce that the receiver/customer/end-user will experience the object as being of any value. Few known examples of this comes to mind in regards to biotech, but some more widely known examples are for instance CD records (music + physical discs), Nike shoes (Michael Jordan’s “brand” + physical footwear), Nespresso coffee (coffee gourmet concept + physical plugs of ground coffee beans), all of which most of us (including me) gladly pay premium prices for.

This is to some extent still an untapped market for the biotech industry since the regulation for marketing is different than for everyday goods, but it is not impossible to imagine that future biotech drugs could be associated to celebrities having a certain (probably mild and non-visual) disease. An example, that we are bound to hear more about in the future in relation to the retail DNA test kit, from 23andMe, that I wrote about in a previous posting is the company’s connection to Google since one of its founders, Anne Wojcicki, is married to Sergey Brin.

The sort of loyalty and trust that we see in brand values, such as Google’s connection to 23andMe above, constitutes a promise of future value that we as customers experience as real, and therefore would be willing to invest in. Thinking about this makes it quite intuitive that most of experienced values in the biotech industry is built upon this very notion of trust, e.g. the next big blockbuster drug will soon reach the market, candidate drug X will soon enter Phase III trials, etc.. These are the types of promises that makes us “see the value” in these intellectual objects as it would be close to impossible to distinguish these claimed visions from the actual objects (which in this case would be a drug candidate molecule). Even the word “drug candidate” has a normative impact on how we perceive the molecule in question, in the same way as we experience a “patentable invention” more valuable than a simple invention. The article The Seven Deadly Sins of Business Development implicitly uses this way of creating value by stating in the first “sin” that the negotiators should focus on the utilities by discussing the market value and future potential of the drug rather than going into the functional facts about the Science behind. The bundling of IPRs and claims (e.g. of reputation, goodwill) is further emphasized in one of the latest Bioentrepreneur articles Five IP Tips to Spread Your Business Wings.

So do I think that this is wrong? Absolutely not, but I feel that it is important to understand and fully utilize these underlying structures to create tomorrow’s biotech innovations in an ethical way and that is why I will continue this deconstruction in a later blog post.

Tobias Thornblad

2 comments:

  1. Just a note on the scarcity stuff..
    A person with excellent insights on the whole scarcity vs. abundance discussion in relation to business models (http://www.techdirt.com/articles/20080522/1545021204.shtml) is Mike Masnick @ Techdirt (http://www.techdirt.com) Really enjoyable reading especially on open innovation and ICT and music.
    // M M

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