DOI: 10.1002/joe.21797
F E AT U R E
Strategic agility and persistence: HEM’s entry into the Russian market of expendable materials for clinical laboratories Igor Gurkov
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Arcady Goldberg
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Zokirzhon Saidov
Strategic agility requires having a keen awareness of incipient trends, the ability to quickly make bold decisions, and knowing how to reconfigure business systems and redeploy resources. Strategic persistence is the ability to learn from an experiment, even if it takes a long time. Both are key features of HEM Ltd., a medium-size company based in Moscow that produces instruments, equipment, and materials used in medical laboratories. When HEM moved into the emerging ready-to-use biological culture market, these qualities enabled the firm to change its market focus, adjust its marketing mix, and develop innovative products through cooperative international alliances. Companies from developed countries looking for partners in emerging markets may want to consider organizations with these same characteristics.
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| IN T RO D U C T ION
Given that almost 80% of diagnoses made by physicians depend on laboratory tests, it is hardly surprising that clinical laboratories are an integral part of the healthcare industry. Because of the trend toward shorter hospital stays and lessened contact between patients and physicians, laboratories that gather, interpret, and deliver timely information to physicians have seen an increase in demand for their services. There has been a corresponding increase in the size of the global clinical laboratory services market, which was valued at US$174.14 billion in 2013 (Grand View Research, 2014). This market, however, is just the visible tip of the clinical lab industry iceberg. In many countries, most medical laboratories are not stand-alone entities that function as separate business enterprises. Rather, they are integral parts of government- or municipality-owned clinics and hospitals. The current technological trend for both clinical chemistry and medical microbiology is to develop tests that are conclusive and involve lower labor costs, both for carrying out the test procedures and for interpreting the results. Consequently, so-called expendable materials—low-cost, preprepared, and ready-to-use media to support the growth of various types of microorganisms—now account for a growing share of the expenditure in clinical tests. For almost 30 years, HEM Ltd. (short for hematology), a medium-size medical equipment manufacturer based in 12
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Moscow, has been a leader in the rapidly evolving Russian market for instruments and expendable materials used in medical laboratories. Throughout its history, HEM Ltd. has demonstrated a combination of strategic agility and persistence, rapidly changing its market focus, adjusting its marketing mix of its own and imported products, developing innovative products through cooperative international alliances, and finding unique ways to obtain funding for such initiatives.
2 | AN ENTREPRENEURIAL COM PANY At age 34, Stanislav Goldberg founded HEM Ltd. in 1988, at the beginning of a wave of entrepreneurship in the former Soviet Union. Still serving today as the firm’s general director, Goldberg was authorized to use several patents developed in the course of his research at another Soviet institute to make a new product to determine blood types and Rh factors. Despite the fact that neither Goldberg nor his partners had any prior commercial or manufacturing experience, they were very successful during the last years of the Soviet Union (1988–1991), when the government made large investments in public health. During that time, as soon as an innovative method was approved, it was immediately used throughout the Soviet Union. This is exactly what happened when HEM’s technology was officially recommended for use.
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Global Business and Organizational Excellence. 2017;36(5):12–19.
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Shortly thereafter, Goldberg began developing a new business concept—a “supermarket” for expendable materials used in medical laboratories. In 1995, HEM started to act as a distributor for foreign and Russian producers, and even as a retailer. Since 2000, HEM has increased its sales by 20% to 25% each year. In 2008, HEM had more than 100 full-time employees, annual revenues of US$11 million, an assortment of 2,500 products, and 1,500 loyal clients who were regularly accessed either directly or through 20 dealers spread across eight time zones. The most important part of HEM’s business was exposing existing clients to new products and recruiting new clients. This task was not easy, because physicians and other clinicians tend to be quite conservative regarding the types of tests that they use for a diagnosis. The heads of clinical laboratories are also reluctant to introduce new methods unless they are completely sure about their effectiveness and efficiency. Thus, all HEM marketing and promotional efforts were directed toward fostering the four As among physicians, clinicians, and laboratory specialists: • • • •
awareness (about new medical test methods), ability (knowledge and skills to perform the tests and to make a diagnosis using their results), acceptance (strong feelings that the new methods are better than the old ones), and application (the desire to place the order).
Lectures conducted every other week by HEM’s staff for lab specialists were a primary mechanism for this outreach. Each year, the company also organized five to seven professional development conferences for medical lab directors in various parts of Russia at its own expense. The economic crisis at the end of 2008 seriously affected HEM’s business, however, with sales falling by 20% in the face of increasingly fierce competition. Goldberg started to look for new business opportunities.
3 | A C EN T R A L FAC TO RY FOR RE A DY M E D IA Recognizing the market potential of ready-to-use culture media—or “ready media,” in Russian medical jargon—in November 2009, the leaders at HEM developed a new project. Culturing and isolating microorganisms in a special media is the gold standard for laboratory diagnosis of an infection (Truant, 2016). The aim is to identify the infection and determine whether an antibiotic will assist in treatment. A mix of nutrients that microorganisms need to grow, the culture media are generally prepared from measured quantities of known substances that are formulated to give highly repeatable results. Each organism has its own special growth requirements. Besides medical applications, biological
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culture media are also used for microbiological control in cosmetics (for quality control of face creams and, in particular, shampoos), in the food industry (for ensuring the absence of pathogens such as salmonella in beef and poultry), and for examining the quality of water used to prepare beer and soft drinks. In the past, labs prepared the media themselves, but now it is common for them to use ready-made (or ready-to-use) media manufactured at facilities where production and quality control can be standardized. Such ready-to-use media are usually placed in Petri dishes (see Exhibit 1). Modern plastic Petri dishes typically feature rings and/or slots on their lids and bases to assist stacking; multiple dishes can also be incorporated into one plastic container to create a multisection plate. Plastic Petri dishes are expendable and usually disposed of after tests because cultures might contaminate each other.
The economic crisis at the end of 2008 seriously affected HEM’s business, however, with sales falling by 20% in the face of increasingly fierce competition. In Russia in 2009, almost 95% of ready-to-use culture media were prepared inside laboratories, leaving the share of purchased media at a mere 5%. The aim of HEM’s new project was to increase the share of purchased media in Russia from 5% to 15%. The company, however, lacked the manufacturing expertise for such a complicated endeavor. During a trip to Israel, Goldberg visited NOVAMED Ltd., a privately owned life sciences company. NOVAMED products include culture-based devices for the rapid diagnosis of infections and the detection of microorganisms in food and dairy products. HEM Ltd. became a Russian dealer for NOVAMED and started to court the Israeli company as a partner for the production of biological culture media in Russia. E X HI B I T 1 Petri dish with colonies of microorganisms
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In November 2010, HEM learned that NOVAMED wanted a controlling interest (at least more than 50% ownership) in the proposed joint venture. NOVAMED also wanted HEM to pay substantial licensing fees and royalties after the project’s launch. HEM’s leaders were not inclined to give up control of the new venture but lacked the financial resources to purchase the needed license and install the production facilities on their own. Therefore, in February 2011, HEM began looking for potential investors. In November 2011, the Department of Science, Industrial Policy, and Entrepreneurship of the City of Moscow offered to subsidize HEM’s project. The following February, HEM applied for funds from the Russian Federation Ministry for Industry and Trade. Both sources offered similar opportunities and limitations: a subsidy form of financing, which meant that a substantial part of the costs would be paid by the government, with strict limitations on the total amount of and use of the funding. Only expenses for equipment and R&D would be partly covered. Therefore, HEM needed to find additional sources of financing. For a modest amount (€110,000 to be paid in five installments, plus a share of the royalties), NOVAMED would provide a production plan, documentation concerning raw materials, technical assistance for installations at the production site and product launches, training of production personnel, and follow-up consulting. Suppliers of the major product components (dry culture media and Petri dishes), well-known and respected firms from France and Germany, were also brought on as long-term partners of both HEM and NOVAMED and promised discounts (up to 60%) on the regular prices of their components, based on the belief that Russian sales could increase fourfold within 3 years. The total cost of the project was estimated at €1 million. HEM Ltd. had already invested €170,000 and was ready to invest an additional €230,000. That left HEM with a balance of €600,000 to secure. HEM Ltd. was prepared to accept almost any solution to funding the balance that enabled the firm to retain control of the company that would be established to launch the project. For this reason, NOVAMED’s initial proposal to become an equal partner was rejected and a bank loan was not considered. “Once you start to borrow, you are dependent,” said Goldberg. In June 2012, a commercial director from HEM met for the first time with Russian Venture Corporation (RVC), a state institution for venture financing that HEM believed had almost unlimited financial resources. Negotiations with RVC—more precisely, with one of its venture fund subsidiaries, Biopharmaceutical Investments RVC Ltd. (BioFund)—were difficult, however. Six months were spent on preliminary negotiations with fund managers. In November 2012, HEM convinced BioFund of the project’s feasibility and efficacy, and BioFund accepted two of HEMs proposals:
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to accept a minority stake (35%) in the proposed venture and to behave like an investment fund and accept a guaranteed return on its investments.
Subsequently, the initial financial model proposed by HEM was re-examined. BioFund managers ran numerous project simulations and finally approved the 21st version of the financial plan. The key change was that instead of agreeing to a stable rate of return, BioFund required HEM Ltd. to accept a variable scale. Therefore, higher profits would result in increased payments to BioFund. The financing from BioFund enabled HEM to begin the new venture in earnest. For starters, significant work had to be done to convert a rented manufacturing facility into a high-tech production site consisting of four interconnected cleanrooms. Exhibit 2 shows a machine in one of cleanrooms that handles an intermediate operation: covering and folding plates in which ready media have been placed. NOVAMED personnel helped HEM staff members choose equipment suppliers and install the equipment. More important, NOVAMED supplied the new venture with numerous standard operating procedures for virtually all manufacturing operations, including: • • • • • • • • • •
receipt; identification; labeling; handling; sampling; use and storage of test and reference substances; maintenance and calibration of measuring instruments and equipment for environmental monitoring; preparation of reagents and culture media; feed record keeping, reporting, and storage; maintenance of premises containing the test system, receipt, transportation, accommodations, descriptions, identification, and care of test systems;
E X HI B I T 2 Cleanroom machine for covering and folding plates
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treatment of test systems; decontamination or disposal of test systems; and implementation of a quality assurance program.
The new factory was inaugurated on November 12, 2013, and representatives of the Russian Federation’s Ministry for Industry and Trade, the general director of BioFund RVC, and various customers, including the head of the largest Russian chain of private medical clinics, attended the opening ceremony. Everyone was optimistic. All the necessary next steps—producing a test batch of laboratory devices, submitting it for testing by the authorizing agency, receiving a permit, and starting a massive promotion and sales campaign—were expected to be completed within a month. According to the business plan, the breakeven point was expected in the fifth quarter after BioFund’s initial investment: May or June 2014.
The key change was that instead of agreeing to a stable rate of return, BioFund required HEM Ltd. to accept a variable scale.
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4.1 | Identifying options to survive the downtime HEM’s managers attempted to figure out what options were available to survive the downtime. The first option, to kill the entire project, was unacceptable: too much had already been invested in obtaining the license and equipment, and in installation work. No one would purchase a company with such sunk costs and the significant liability of the guaranteed payback to BioFund. Moreover, Goldberg did not intend to give up on a project that had consumed considerable nonrefundable expenses and 4 years of significant effort. The second option was project suspension. Such suspensions often occur in biotech and pharmaceutical firms because of volatility in regulations, shifts in targeted markets, loss of initial investment sources, and other reasons (Hu, McNamara, & Piaskowska, 2017). The major difference between project failures and project suspensions is that a project that has been killed is unlikely to be restarted, whereas a suspended project can be more readily restarted. A failed project typically is permanently stopped; in contrast, a project may be suspended because the timing is not right. Suspended projects may continue at a later date when resource constraints, prioritization, and timing issues have been resolved (Cooper & Edgett, 2012). Once resources become available, such projects can simply be reactivated.
A R EG U LATORY Q UAG MIRE
During its existence, HEM Ltd. successfully registered 45 types of products, and in 2013 its production portfolio included 28 types of products, all registered with the Russian Federal Services on Surveillance in Healthcare (RFSSH) “for an indefinite period of time.” An influential leader in the medical devices industry, Goldberg was also a member of the Presidium of OPORA Non-commercial Partnership, an organization that embraced 117 associations of entrepreneurs from most industries and Russian regions. Yet, HEM’s general director was worried about the registration procedures for new types of laboratory devices. As a veteran of the medical equipment business, he was familiar with the hurdles of Russian bureaucracy. The registration phase for the products that would be produced by the Central Factory for Ready Media (CFRM) took far longer than even Goldberg expected, however. For almost a year, the RFSSH stalled. Nothing was wrong with CFRM’s products or processes; the regulatory authority was simply overloaded with other demands. A government order issued in December 2012 required the agency to re-register all medical devices that were currently in production—more than 40,000 products. But no examination techniques or people were available to carry out the re-registration, and no approved documents or re-registration forms existed.
No one would purchase a company with such sunk costs and the significant liability of the guaranteed payback to BioFund. There are several ways in which projects can be suspended. The first is to simply turn off the lights: Fire the employees and put the entire site on a conservation regimen with minimal utility payments. For CFRM, such a decision carried two major risks: •
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Lack of the highly trained personnel that would be required at restart: Approximately 6 months was spent finding and training employees for the new plant. If they were fired, there was no guarantee that they would return. If CFRM restarted production after the permit had been issued, the factory might remain idle for months because of a shortage of adequately trained personnel. Lack of necessary raw materials and supplies: A German company, SIFIN, provided the dry culture media; Gosseline, a French company, supplied the Petri dishes. Both had promised generous discounts with the expectation of a rapid increase in sales. Turning off the lights could be taken as an indication that the project would be postponed indefinitely, with the consequent breakdown
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of trust and goodwill. Although both suppliers had been long-term partners with HEM, their products were registered for sale in the Russian Federation, making them easily marketable by a different distributor. Suspending operations could have led to penalties for violating the procurement contract for CFRM, which would also endanger HEM’s position. A second form of project suspension would be to continue paying employees during the downtime and to keep the production site in a state of 2-day readiness—that is, able to restart operations within 48 h. This solution would not, however, address the problem of accumulating costs of salaries, utilities, rent, and safety stock replenishment. Moreover, it would be difficult to keep trained personnel motivated under such conditions. In light of these considerations, HEM developed a third option for CFRM: turn the factory into what was effectively a gift shop. This allowed for production processes to be started with the minimal level of capacity utilization that was possible. The parent company, HEM Ltd., would purchase the products made at CFRM and distribute them to clinics and medical laboratories as complimentary gifts. Accepting such gifts is not forbidden, and this option would also create a legally acceptable way to replenish the current assets of CFRM Ltd. and to cover some of its operating expenses, even though this option would result in a loss for HEM Ltd. The first registration documents were issued in November 2014 and the final documents were received in April 2015 (each type of ready-to-use culture media required separate registration). For more than a year, CFRM kept employees on its payroll and produced minimal product batches. During this time, HEM Ltd. purchased the products produced by CFRM and gave them away to clinics and medical laboratories so that they could be used to train staff on new microbiological testing methods. Meanwhile, HEM’s partners—BioFund and NOVAMED—were fully aware of the situation and cooperated. BioFund agreed to payment holidays for HEM Ltd.’s interest and debt principal, while NOVAMED asked only for symbolic royalties. In May 2015, CFRM started to sell properly registered products in a normal manner. Immediately, a new problem arose. Clinics and medical laboratories were eager to order CFRM products, but the individual orders were too small. Instead of asking for 1,000 to 1,500 Petri dishes filled with a particular type of media, the average individual order was for 50 to 100 dishes. This reflected a new economic situation in Russian medicine following a twofold devaluation of the ruble in December 2014 and the government’s subsequent measures to optimize budget expenses. Small individual orders required small-batch production. Since producing a batch of any size required a set of common auxiliary operations (moving and storage, among others),
unit costs increased. In addition, the core of the production line—“Hell’s Kitchen,” the location of an autoclave where the media are prepared (see Exhibit 3)—was designed for higher volumes; therefore, a significant amount of media was wasted in the preparation of small batches. In light of this problem, HEM Ltd. decided to make further investments in CFRM. In December 2015, the company purchased and installed a new, smaller device that allowed small batches to be made without large amounts of waste. Until February 2016, however, sales remained low at 15,000 to 17,000 Petri dishes per month.
5 | NEW CLIENTS, NEW PERSPECTIVES, NEW CHALLENGES Demand for HEM’s products increased dramatically in February 2016, with two new types of client: breweries and poultry farms. Since 2013, the number of large beer producers in Russia had been decreasing, leading to an uptick in the number of smaller breweries producing craft beers. These breweries needed to establish proper microbiological control of their product and contacted CFRM for Petri dishes with the specific type of media they needed. Because of a selfimposed embargo on food imported from developed countries, in 2015 Russia increased its poultry production by 8%, or 325,000 tons. Dozens of new large poultry farms were opened, and turkey production also expanded. Previously, turkey was a niche product; however, in 2015, Russia’s turkey market production reached 180,000 tons. New poultry producers also needed to establish proper microbiological controls, particularly to prevent and control salmonella, the scourge of poultry farms. The major advantage of ready-to-use culture media ordered by breweries and poultry producers was that such products did not require registration with RFSSH as medical products. Thus, CFRM tripled sales in March 2016 from 17,000 to 50,000 Petri dishes filled with ready-to-use media. E X HI B I T 3 “Hell’s Kitchen” media preparation area
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This rapid expansion of CFRM’s production presented new challenges for the parent company, HEM Ltd: •
•
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Many of the employees that had been kept on the payroll for 18 months with minimal workloads were not ready to work at normal—that is, much higher—intensity. Newly recruited employees lacked the necessary skills and sometimes violated NOVAMED’s carefully designed standard operating procedures. Thus, shop managers sometimes needed to work as operators for an entire shift, demonstrating that a high level of intensity could be maintained for a full working day. The suppliers of the new types of ready-to-use culture media needed by the breweries and poultry producers were untested. This meant that more stringent inspection procedures for the new types of ready-to-use culture media had to be developed and implemented. Management was concerned about how its business partners, BioFund and NOVAMED, would react to CFRM’s diversification away from the initial target of medical clinics and laboratories. These concerns proved unfounded, however. BioFund’s reaction was positive, for it was pleased to be able to end the payment holidays and to start receiving the interest and principal of its credit, and NOVAMED’s reaction also was positive.
During 2016, CFRM began to approach the breakeven point, and the marketing plan for the first half of 2017 foresaw a steady increase in sales. All regulatory problems were successfully solved and CFRM planned to obtain registration of new types of ready-to-use culture media to expand their offerings. More important, HEM had found a new, very promising segment of the ready-to-use culture media market: chromogenic media that changes color depending on
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the results of the analysis, a technique similar to that used in pregnancy tests. Exhibit 4 summarizes CFRM’s experiences.
6 | THE VALUE OF STRATEG I C AGILIT Y AND PERSISTENCE The success, albeit delayed, of the CFRM project enabled Stanislav Goldberg to devote his attention to new directions for HEM. During 2016, he found new foreign partners for new types of products to be distributed in Russia: a Scottish company, E&O Laboratories Ltd., for the distribution of donor animal blood products harvested from stress-free animals, and Microbiologics Inc. for the distribution of various clinically defined strains of microorganisms. In addition, HEM was considering establishing a new manufacturing facility to manufacture products for use in express diagnoses at the point of care, such as at the patient’s bedside. For this project, HEM expects to rely again on NOVAMED’s expertise and is working with a new technology partner, Polymed Therapeutics, Inc., a US-based company with state-of-the-art manufacturing facilities, regulatory-approved good practices, and R&D laboratories in China. HEM Ltd.’s history perfectly illustrates the concept of strategic agility. As defined by Doz and Kosonen (2008), it entails the ability of large corporations to have early and keen awareness of incipient trends and to make bold decisions and reconfigure business systems and redeploy resources quickly (Doz & Kosonen, 2011; Fourné, Jansen, & Mom, 2014; Weber & Tarba, 2014). Although scholars have mostly focused on strategic agility as a characteristic of large corporations, several consultants and practitioners have presented a simpler view of strategic agility that can be exhibited by small and medium-size companies (Bazigos, Smet, & Gagnon, 2015; Winby & Worley, 2014). According to Winby and Worley (2014, p. 226), “organization
EXH IB IT 4 HEM Ltd.’s CFRM project milestones November 2009: HEM recognizes the market potential of ready-to-use culture media. November 2010: Negotiations with NOVOMED; refusal to give up the controlling stake in a proposed joint venture. February 2011: The active search for potential investors begins. November 2011: The Department of Science, Industrial Policy, and Entrepreneurship of the City of Moscow offer a subsidy for the project. February 2012: HEM initiates the application for funds from the Ministry for Industry and Trade of the Russian Federation. February 2013: Money from BioFund starts to pour into the project, which begins in earnest. 12 November 2013: New factory is inaugurated. November 2013-November 2014: Working at minimal capacity utilization levels. November 2014: First registration documents are issued April 2015: Last registration documents are received May 2015: CFRM starts to sell properly registered products. December 2015: HEM Ltd. purchases and installs a new device that allows it to make small butches without a large amount of waste. February 2016: Two new types of clients: breweries and poultry producers. December 2016: CFRM approaches the break-even point.
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agility is a cultivated capability that allows the organization to make timely, effective, and sustained change when changing circumstances require it. Also known as dynamic capability, agility represents the capacity to sense opportunities and threats, solve problems, and change the firm’s resource base.” Strategic agility consists of four routines: • •
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Strategizing: establishing an aspirational purpose, developing a widely shared strategy, and managing the climate and commitment to execution. Perceiving: broadly, deeply, and continuously monitoring the environment to sense changes and to communicate these perceptions to decision makers quickly; the decision makers then interpret and formulate appropriate responses. Testing: setting up, running, and learning from experiments. Implementing: maintaining the ability and capacity to implement changes, both incremental and discontinuous, and the ability to verify the contribution of execution on performance.
Another quality required for strategic agility is the ability to see stakeholders (customers, suppliers, technology partners, investors, etc.) as suppliers of resources. Once organizational leaders define an opportunity, resources—in particular, the support and approval of multiple stakeholder groups—need to be mobilized to vet the strategy. This mobilization was evident throughout the history of HEM. From the beginning, HEM did not just realize market opportunities; it also created new local markets, albeit small ones, similar to the market of culture media that was produced in-house. Because such a broad aspiration was strongly articulated, top management and, particularly, the controlling owner, Goldberg, became not simply passive recipients of information, but also boundary spanners who obtained and interpreted the information. For example, Goldberg’s membership in OPORA Non-commercial Partnership allowed him to maintain a wide network beyond his own industry and to recognize broader market trends. HEM demonstrated testing and implementing routines during the forced delay in launching newly established production capacities. Instead of considering the entire project a failure or suspending it, management found a creative solution to keep operations running at a minimal scale. This solution was a maximin solution—selecting the best of the worst— that minimized the losses of all of the project’s stakeholders: the venture fund that invested money in the projects; HEM’s technology partner, NOVAMED; the various raw materials suppliers; the company’s employees; and HEM itself. This solution enabled losses from manufacturing operations to be covered, but avoided the much heavier losses that would have resulted from the suspension of the complete project. In addition, customers were able to learn new clinical test methods free of charge, and to enjoy three of four As—awareness,
ability, and acceptance—even though they had to miss out on the last A, application. The history of HEM also demonstrates another quality: strategic persistence, which is essential to strategic agility. To be of value, an experiment needs to last for some time; it cannot be stopped and given up too quickly. Persistence is deeply rooted in HEM’s top management. Although it can be argued that paradoxical leadership (Lewis, Andriopoulos, & Smith, 2014) is necessary to enable strategic agility, some researchers have related strategic persistence to other, less exotic leadership qualities. For example, in a case study of a U.S.-based, mid-size chemical company, Kisfalvi (2000) described the strategic priorities of its founder and owner, which are similar in many ways to those expressed by HEM’s Goldberg (Gurkov, Goldberg, & Settles, 2012): • • • • • • •
staying informed by making himself available to employees, walking around the facility, taking part in conversations; seizing opportunities to diversify and minimize risk; optimizing partnerships by seeking partners that can furnish the expertise that the company lacks; centralizing important financial decisions; engaging in constant product development and viewing new products as a means to survive in future markets; negotiating the best deals, which is especially important during crises; and being involved and paying attention to details.
In both companies, these qualities were embodied by firstgeneration entrepreneurs in their late 50s who started their business careers between the ages of 30 and 35, experienced a quick initial success, and later managed their companies through several difficult situations caused by economic crises, excessive market volatility, and other business uncertainties. Although it is not possible to make generalizations from these two cases, the striking similarity of the profiled leaders’ strategic priorities suggest that they could be common to highly experienced entrepreneurs in high-tech industries. Since those priorities resulted in a stronger inclination toward strategic persistence, they could have profound implications, not only in Russia but also elsewhere. Biotechnology companies from developed countries often rely on local partners for their expansion into emerging markets. This may be because establishing a wholly owned subsidiary is too costly or, because they are not be able to overcome barriers to entry into local emerging markets where governments favor local firms for government tenders and contracts. In such situations, the search for local partners— especially when the proposed partnership is simultaneously exploitative (seizing existing market opportunities) and explorative (creating new market opportunities)—amounts to identifying local entities that are both agile and persistent.
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It would seem that established companies that display the qualities of strategic agility and strategic persistence and that are owned and managed by founders who are now age 45 to 60 should be a primary target in such a search.
ACK NOW LE D G ME N T This work was supported by the Faculty of Business and Management of the National Research University Higher School of Economics (Moscow). The authors are extremely grateful to Stanislav Goldberg, the general manager of HEM Ltd., for his time spent in interviews and for allowing us to disclose the history of his company. The support of Dr. Lubov Vilenchik during manuscript preparation is also greatly appreciated. REFERENCES Bazigos, M., Smet, A. De , & Gagnon, C. (2015). Why agility pays. McKinsey Quarterly, 4, 28–35. Cooper, R. G., &. Edgett, S. J. (2012). Best practices in the idea-to launch process and its governance. Research-Technology Management, 55(2), 43–54. Doz, Y., & Kosonen, M. (2008). The dynamics of strategic agility: Nokia’s Rollercoaster experience. California Management Review, 50(3), 95–118. Doz, Y., & Kosonen, M. (2011). Letter to the editor—Nokia and strategic agility: A postscript. California Management Review, 53(4), 154–157. Fourné, S. P. L., Jansen, J. J. P., & Mom, T. J. M. (2014). Strategic agility in MNEs: Managing tensions to capture opportunities across emerging and established markets. California Management Review, 56(3), 13–38. Grand View Research. (2014). Clinical laboratory services market analysis by test (human & tumor genetics, clinical chemistry, medical microbiology & cytology, other esoteric tests), by service provider (hospitals, stand-alone laboratories, clinics) and segment forecasts to 2020. Retrieved from http://www.grandviewresearch.com/ industry-analysis/clinical-laboratory-services-market [Accessed 25 January 2017]. Gurkov, I., Goldberg, A., & Settles, A. (2012). HEM Ltd.: A bloody innovative Russian business. Case No. 312-033-1. Cranfield: The Case Centre. Hu, Y., McNamara, P., & Piaskowska, D. (2017). Project suspensions and failures in new product development: Returns for entrepreneurial firms in co-development alliances. Journal of Product Innovation Management, 34(1), 35–59. Kisfalvi, V. (2000). The threat of failure, the perils of success and CEO character: Sources of strategic persistence. Organization Studies, 21(3), 611–639. Lewis, M. W., Andriopoulos, C., & Smith, W. K. (2014). Paradoxical leadership to enable strategic agility. California Management Review, 56(3), 58–77. Truant A. L. (Chief Ed.) (2016). Commercial methods in clinical microbiology. Hoboken, NJ: Wiley Blackwell. Weber, Y., & Tarba, S. Y. (2014). Strategic agility: A state of the art. California Management Review, 56(3), 5–12. Winby, S., & Worley, C. G. (2014). Management processes for agility, speed, and innovation. Organizational Dynamics, 43(3), 225–234.
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AUTHOR BIOGRAPHY Igor Gurkov, ScD, PhD, is a professor of strategy at the National Research University Higher School of Economics in Moscow. His research interests include industrial innovations, corporate strategies, international management, and organizational design. The author of five books, including two textbooks on strategic management, Dr. Gurkov has written more than 100 articles for international refereed journals and various Russian academic and business journals. He also has headed several consulting projects in strategic development and organizational design for leading Russian corporations. He earned his doctoral degrees from the Russian Academy of Sciences and Lomonossov Moscow State University and has taught at Rotterdam School of Management in The Netherlands and at the University of Michigan in Ann Arbor. He can be reached at
[email protected]. Arcady Goldberg is an executive, consultant, and business trainer and executive director of the Russian Association of Laboratory Specialists “Federation of Laboratory Medicine.” He also teaches in the MBA and executive programs at the National Research University Higher School of Economics and the Russian Academy of the National Economy and Civil Service in Moscow. Having earned a Master of Science degree in strategic management from the National Research University Higher School of Economics, he worked at HEM Ltd. from 2003 to 2013 in various positions, including commercial director from 2011 to 2013. He subsequently served as deputy director of The Nuclear Medicine Center of the National Research Center Kurchatov Institute (Moscow). He can be reached at
[email protected]. Zokirzhon Saidov, PhD, is a senior lecturer in the Department of General and Strategic Management, National Research University Higher School of Economics, Moscow, Russia. His doctoral dissertation was devoted to strategic actions under extreme uncertainty. Dr. Saidov has authored or co-authored several articles in various journals, including Employee Relations, International Journal of Human Resource Management, International Journal of Organizational Analysis, and Journal of East-West Business. He can be reached at
[email protected].
How to cite this article: Gurkov I, Goldberg A, Saidov Z. Strategic agility and persistence: HEM’s entry into the Russian market of expendable materials for clinical laboratories. Global Business and Organizational Excellence. 2017;36:12–19. https:// doi.org/10.1002/joe.21797
