MBA 501 Assignment 3 Case Study

MBA501: Dynamic Strategy and Disruptive Innovation
Assessment 3
Organisation Case Study – Millennium Health Sciences (MHS)
Company
MHS was established in 1968 by two scientists who wanted to develop

dermatologically tested skin care products. They came out with several skin care
products that were ahead of its time. The innovative spirit of the founders can still
be seen throughout the company, but significant changes have taken place over
the years. Today it is a $2.2 Billion revenue company with 800 staff spread across
the country.
Currently, there are two business units within the MHS group. Neutrino
manufacture Vitamins and Dermatech produces advance skin care products.
Each business unit is headed by a General Manager, and they report to the MHS
CEO and the Board of Directors. The GMs have significant autonomy and tightly
control each business unit. The managerial structure is ‘top-down’ meaning that
all decisions such as project appraisal and selection are made by the GM and
senior executive team of each business unit and then filter down to the lower levels
in the organisational hierarchy. Both companies compete for resources from the
holding company MHS which is listed in the stock exchange. According to one
insider “, each unit is trying to outdo the other, and I feel the Board likes it that
way, competitive, secretive, divide and rule.”
The company culture is such they believe senior executives should come up
through the ranks. Therefore, most of the top executives have worked at MHS for
an extended period and in most cases worked at only one business unit. The
average age of the senior management team (the executive committee – fifteen
executives) is 53 years and the next level leadership is also not far behind. Junior
executives call the executive committee, the senior citizens club. Experience at
MHS is seen as one of the key criteria for promotions irrespective of your
experience elsewhere.
Most of the senior staff (60-70%) have a Degree in pharmacology or

microbiology. Even those who head the marketing functions have been scientists
first and then moved into marketing and sales. It is a standard practice that the
Human Resources department when hiring staff, considers anyone coming from
pharma or microbiology background as having an advantage. According to an
executive who joined recently “first few months at MHS is difficult, but after you
learn to ask less questions and follow order, life becomes easier and honestly
you can stick around for a long time.”
MHS has consistently given dividends to shareholders since listing ten years ago.
Even during low profit years, MHS did not miss out on dividends. The new CFO
1
is of the view that the company should build a better relationship with the
shareholders so that some of the dividends can be directed towards high-
potential long-term R&D projects. However, the executive committee and the
board of directors are worried to upset the status quo thinking that it would send
the wrong message and impact the share price. “last thing we want is the stock
price to go down, it will take ages to pick up and by that time we will be retirees
with stock options, so, why upset the Apple cart?” was the response given by one
senior executive.
MHS products are available over the counter. However, doctors may recommend
certain skin care products and vitamins to patients. Similarly, skin care clinics,
spas, and specialized beauticians also play a major role in promoting the
products.
About the two businesses
Neutrino
Neutrino research, develop, and manufacture vitamins and supplements. The

Neutrino R&D is known for their research and commercialisation of different
herbal extracts. The R&D centre is located in Adelaide; the staff at the centre
are older than most other R&D staff at MHS but experienced in vitamins,
supplements, and regulatory requirements. Recently they developed and
commercialised a new product that can be orally administered to enhance the
vitality of the skin. Although years of research into a known seaweed costed
the company $12.0 million, this new product range Poseidon is expected to
generate $350 million a year in revenue from 2023 onwards.
Dermatech
This is the oldest product group of the company and demonstrates

tremendous potential. In recent years, export markets have done well where
Australian made products are received positively. The state-of-the-art R&D
centre is in Sydney. According to the company website, Dermatech defines
their operating domain as “Cosmetic Dermatology” and “Cosmeceuticals.”
Export markets are handled through distributors, and few staff are familiar with
the export operations. The marketing manager only visited two of the main
export markets (China and Indonesia) last year although 30% of the profits
and 20% of the revenues are coming from export sales. According to a senior
executive, “export markets are good, but we don’t have the expertise, or the
energy to run around Asia. We are an Australian company and our primary
focus should be Australia. If we do well here, then the distributors will come to
us.”
The company has received several offers to set up a R&D joint venture that
target the Asian market. Several companies are keen on collaborating and
setting up an R&D centre in Singapore where the government regulations are
favourable for this kind of R&D and the government is proactively promoting
such investments. In fact, some of the products that are not performing well in
Australia seems to have found a good market in some of the Asian countries.
For example, according to Dermatech marketing manager, the CLEO product
range is doing well in Indonesia, Malaysia, and even China though the sales
2
are stagnating in Australia. The product is appealing to Asian skin types and
the consumers are willing to pay a relatively premium price.
Poseidon product range
Years of research and $12 million after, Neutrino developed and commercialised
the Poseidon product range successfully. The active ingredient was developed
based on a seaweed extract. Neutrino R&D managed to develop a synthetic
version of the active ingredient for which they are seeking a patent (some believe
they should keep the process as a trade secret). The product comes in liquid and
tablet form. The project was code-named Poseidon and kept top secret; along
the way, sketchy details were also given to the Board of Directors.
Simultaneously Dermatech was also developing a skin cream based on the same
know seaweed. The company spent close to $8 million on the project and
research is still on-going. Presentation of field trial results from Project Poseidon
to the Board was a joyous occasion for Neutrino especially given the potential of
the new product range. However, all were taken by surprise when Dermatech
GM presented the partial results of their seaweed project.
It was evident that there were significant overlaps in the research with
unnecessary duplication. Neutrino head of R&D charged a trainee lab technician
who moved to Dermatech might have revealed the existence of the project. For
their part, Dermatech vehemently denied the allegations and contested some of
the field results presented by Neutrino.
The situation has raised some serious concerns for the senior executives of
MHS. According to the CEO “it is time we reflect critically on how we operate and
plan to progress as a company.” The questions were raised as to why R&D effort
was not consolidated.
R&D and Marketing
Traditionally, MHS has been an R&D driven company. The scientist

conceptualizes and develop products. Then the marketing team is expected to do
the rest. Although most marketing staff coming from a pharma or microbiology
background helps, for most part, these two departments work independently. As
noted above (Poseidon case), the two R&D teams work separately and so does
the two marketing teams. Most of the insights from the market (customers,
pharmacists, doctors, skin care clinics, beauticians, etc.) are recorded by the
marketing team and presented during the monthly marketing meetings; none of
the other departments take part in these meetings. Two sales teams (Dermatech
and Neutrino) approach the same customers. Majority of the customers do not
know both companies belong to MHS.
Note: This is a hypothetical case study with hypothetical market situations. You
are not expected to research the different industries mentioned in the case study.
The focus should be on researching, analysing, and applying disruptive
innovation, and organisational innovation capacity related theories, concepts, and
scholarly views.

MBA 501 Assignment 3 Case Study

Uploaded by

Copyright:

Available Formats

MBA 501 Assignment 3 Case Study

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MBA 501 Assignment 3 Case Study

Uploaded by

Copyright:

Available Formats

MBA501: Dynamic Strategy and Disruptive Innovation

Organisation Case Study – Millennium Health Sciences (MHS)

MHS was established in 1968 by two scientists who wanted to develop

Most of the senior staff (60-70%) have a Degree in pharmacology or

About the two businesses

Neutrino research, develop, and manufacture vitamins and supplements. The

This is the oldest product group of the company and demonstrates

Poseidon product range

R&D and Marketing

Traditionally, MHS has been an R&D driven company. The scientist

You might also like