Taking inventory of life-science headcounts

Kodak once had 60,000 employees in Rochester, N.Y. Today,they have tenfold less and are operating under bankruptcy protection. Giventhat all visual records of my youth are recorded on chemistry developed byKodak, I wish them well as they reinvent themselves. The fact that they havealready been trying for over 20 years tells us it's not been easy. They triedpharmaceuticals. They tried clinical diagnostics. Remember that the Ektachemwas to revolutionize the hospital clinical lab. Kodak even invented digital imaging.They have had some of the best chemistry and materials scientists around andhired many top graduates from the best universities.

We've seen over and over how infrastructure has become abrake on speed and how successful firms become, and as a result, vulnerable tofailure. This has been well reflected in the Midwest economy. It's nearly takenout entire mid-sized cities.

Today, we hear an endless drum beat about job creation as ametric used to judge crony capitalism with its government incentives. Thinkgreen energy. Today, many still judge a person or company by how many report onthe organization chart. These are mistaken metrics.

What we really want is "wealth creation" through innovationthat truly advances the cause of customers through enhanced productivity. Thenumber of customers determines impact. Nevertheless, this, too, is notsustainable. Survival requires innovating again and again at a greater andgreater speed. Customers create jobs. No one else can.

Agriculture makes my point. Productivity replaced 95 percentof the jobs over a century, customers have more and better food than ever andwe export more soybeans in a week than we grew in a year in 1900. In thetraditions of modern journalism, but with the honesty of science, I made up thenumbers in the last sentence just like the best newspapers and politiciansoften do today. Few would think it a good idea to trade mechanized agriculturefor more jobs.

Industries have been shedding as much infrastructure aspossible. We know the $100 million factory or laboratory today can overnightbecome a $5 million auction. Success is best not measured by headcount, but bymaking a difference.

The pharmaceutical, scientific instrument and medical deviceindustries are embracing a networked ecosystem. We have a number of companiestoday that are virtual. They can be strategists and project managers, networkedwith specialists to deliver results efficiently. They can fail gracefully whenneeded, in a way that Kodak (named in 1888) cannot today. Apple is iconic inthis respect, reinventing itself over and over with very light infrastructurefor its size.

Components are sourced externally, manufacturing is in Asia,distribution is through multiple channels, some virtual, partnering with many.We are blessed here in the Midwest with the pieces that have broken off theindustrial economy icebergs as well as the new ones we've invented. Usingmedical devices and scientific instruments as examples, we have expert machineshops, injection molding firms, metal and plastics fabricators, metallurgists,automation engineers, software firms, regulatory affairs consultants,toxicologists, reimbursement experts, purveyors of clinical trials andlife-science legal practices. On the pharmaceutical side we also have a verydeep complement of contract research firms and manufacturers. Many in thisnetwork earned their battle scars at the deceased Searle, Upjohn, Marion Labs,Merrill, Parke-Davis, Guidant and others. Some also hatched from transportationand communications industries with their strengths in plastics, metals,electronics and software.

Creative destruction is alive and well. Is the value derivedfrom in-house headcount? No. The wealth creation comes from helping patientsand learning how to use the network. Jobs are now more widely dispersed andmore secure within the network, where they can be applied to many projects.Success brings capital gains that are recycled. Many young firms will fail andwe learn from each one. Along the way, careers are made, families supported andwisdom gained.

Do our state governments with their executive andlegislative branches fully grasp this networked innovation economy? I thinknot. It's certainly not intuitive or comfortable. Life-science risk rivals ourMidwest state lotteries. It's a risk we must keep taking. The origins of theanchor stores of life sciences all started with single-digit headcounts and noamount of planning guaranteed their success. Some lasted a very long time, butnot longer. The DNA of the discontinued firms listed above continues in theiracquirers, divestments and their vibrant spinouts.

It is important to value failures (common) and not focusonly on the successes (rare) as we replace the ego system with a dynamicecosystem. Could a business plan predict the origins of Illumina in Californiafrom a lab at Tufts University in Boston and the fact that Roche wants thembadly for a gazillion beans? Nope! It only took a decade from their founding inApril 1998.

Try, try again. That's our way. Plan less, do more. I'msorry about Kodak's challenges, but it is a natural process and they had afabulous run while creating a lot of wealth and happiness through enhancedproductivity.

Peter T. Kissinger isprofessor of chemistry at Purdue University, chairman emeritus of BASi and adirector of Chembio Diagnostics, Phlebotics and Prosolia.