STRATEGIC DECISION-MAKING SCENARIO - GENENTECH

Genentech, a biotechnology company that had been founded in 1976 to produce protein-based drugs from cloned genes. After building sales to $9 billion and profits to $2 billion in 2006, the company's sales growth slowed and its stock price dropped in 2007. The company's products were reaching maturity with few new ones in the pipeline. To regain revenue growth, management decided to target autoimmune diseases, such as multiple sclerosis, rheumatoid arthritis, lupus, and 80 other ailments for which there was no known lasting treatment. This was an enormous opportunity, but also a very large risk for the company. Existing drugs in this area either were not effective for many patients or caused side effects that were worse than the disease. Competition from companies like Amgen and Novartis were already vying for leadership in this area. A number of Genentech's first attempts in the area had failed to do well against the competition.

The strategic decision to commit resources to this new area was based on a report from a

British physician that the Genentech's cancer drug Rituxan eased the agony of rheumatoid arthritis in five of his patients. CEO Arthur Levinson was so impressed with this report that he immediately informed Genentech's board of directors. He urged them to support a full research program for Rituxan in autoimmune disease. With the board's blessing, Levinson launched a program to study the drug as a treatment for rheumatoid arthritis, MS, and lupus.

The company deployed a third of its 1,000 researchers to pursue new drugs to fight autoimmune diseases. In 2006,Rituxan was approved to treat rheumatoid arthritis and captured 10% of the market. The company was working on some completely new approaches to autoimmune disease. The research mandate was to consider ideas others might overlook. "There's this tremendous herd instinct out there," said Levinson. "That's a great opportunity, because often the crowd is wrong''.

Questions

Advise CEO Arthur Levinson on more analytical, more appropriate for dealing with complex and changing environments strategic decision-making process.