TON Program on Innovation and Outsourcing/Offshoring

March 25, 2015

We had a stellar program yesterday at LEO where our host was Mats Persson along with his R&D colleagues. The theme was, fittingly, Innovation and Development in Outsourcing and Offshoring.


Zoran Perunovic, Associate Professor, DTU, the “circus master” for the day, kicked off the sessions with a short sketch of a couple of frameworks for innovation and outsourcing processes (from both the client and the vendor perspective). Pulling the “red thread” together at the day’s end, Zoran said that while we may use the terms “outsourcing and innovation,” what we seem to really be talking about is “innovation leadership and management.” Food for thought.


Michael Mol, Professor, CBS then took us through a brief on the changes that have challenged the traditional bias and practice against outsourcing in R&D/development; key among them are keeping entry barriers high, efficiencies of co-location, and a not insignificant investment. The changes that have turned this nostrum on its head include the increasing complexity of product development and innovation along with the steep decline in transaction costs with suppliers. Greater still is the growing belief in open innovation and the benefits of a diversity of sources. This leveraging of external knowledge and ideas is powerful precisely because it can often bring something to the table that a single organization does not possess. Michael sounded a note of caution in that this is challenging to implement and is not associated with an increase in patents. Yet, the art of being able “to know more than you make” is a significant competitive advantage in today’s business.


Mats Persson, Executive Director R&D Partnership Management, LEO Pharma, gave us an overview of R&D and outsourcing at LEO. The company is investing an impressive 14% of turnover in R&D. At the same time, external pressures such as patient expectation for individualized care, competition from generic drug manufacturers, reimbursement models and fierce market competition have demanded that LEO fully integrate outsourcing into its business model in R&D.


Mats’ colleague, Fredrik Johansson, Senior Manager, PharmTech Innovation, gave us insight into LEO’s work with patient-insight driven innovation. Outsourcing is one tool in the toolkit for being better able to address the issues in obtaining and analyzing patient insights that can then be used for development. While outsourcing has primarily been used tactically, typically due to a need to access certain competencies, Fredrik noted that the growth opportunity is in leveraging outsourcing for generating insights and ideas.


Fredrik and Mats’ colleague, Niclas Nilsson, Senior Scientist and Open Innovation Rockstar, Early Pipeline & Innovation Center, brought us through the practice of open innovation at LEO. Niclas highlighted the need to move from the classic CRO model where the client provides the solution parameters to a model that is more diverse and open. This means actively pursuing external innovation via multiple paths such as open science, crowd sourcing, open access, and outsourcing where the focus is on needs rather than requirements. A remarkable statistic that Niclas quoted was that 80% of the solutions coming from a recent open innovation effort came from people without a background in pharma. That’s a provocative finding.


Anders Nielsen, Legal Counsel, IO Interactive, contributed to the day’s program with an informative (and entertaining) presentation on protecting IP rights while outsourcing. Central to Anders’ focus was protecting inbound IP rights; that is rights on the assets produced by vendors and the freelancers, contractors and employees that they may use. While this might sound straightforward, the various tools to acquire IP rights along with differing choice of law and forum along with chances for enforcement throughout the various markets in which IO Interactive is working, means that that the level of uncertainty is quite high. Anders noted, “Trust is good. Control is better.” In fact, trust in this kind of situation is a recipe for disaster.


Our formal program for the day ended with a short challenge presented by Claus Holm, Director Strategic Projects, GN. Claus described the challenge of involving suppliers in early-stage product development and roadmapping. Key to the challenge is the ability of GN and the supplier to share a vision for a longer product development horizon than they currently do. The TON network had a chance to brainstorm and develop some ideas for Claus and his colleagues. Central to many of the ideas was finding a way to motivate the suppliers along with engaging a broader range of stakeholders earlier in the process.


Our pair, plenum and small group discussions throughout the day gave us great opportunity to discuss how our own organizations are grappling with these concepts and challenges


TON is a peer-learning network focused on outsourcing and offshoring. Our next program will be held on May 28 at DTU’s School of Executive Education. If you would like to learn more about or join our network, please contact Katie Gove at