Modeling Coherence At CDI

Brilliant recap

The most striking example I have studied took place at Cellular Dynamics, Inc. (CDI) between 2006 and 2008. At the time, there were actually two closely related companies, CDI and its sister company Stem Cell Products (SCP) commercializing the ground-breaking research of Dr. James Thomson. The entities shared one management team and research facilities. Together they operated at the leading edge of stem cell research and manufacturing. More than $30 million had been raised to fund development at both firms. By the end of 2006, however, more funding was needed. But fundraising efforts were not successful.

We can see how the organization was structured using the most simple RTV framework and adding in the Narrative element.

Executives understood that the iPS technology was going to be critical to the company’s success. But it was not obvious how all of the business model elements worked together. Even more interesting, there were two different narratives describing the company's business model.

What would happen? Would the organization completely fracture into two entirely separate businesses that raised funds and built value in completely different ways?

That might have been the obvious conclusion, but the executives took a very different approach. They saw a different vision, in which some of the potentially conflicting elements of the organization could still be connected. The iPS technology platform offered significant benefits to both narratives.

Rather than completely split the company, the executive team merged all operations, and made the therapeutics research subordinate to the tools and manufacturing efforts. The narrative shifted from two business models to one. Rather than a tools business and a therapeutics business, Cellular Dynamics became a platform technology company. The overall narrative shifted to commercializing iPS to advance cell-based medicine.

As part of a detailed case study, we created a neural network simulation to examine possible business models for Cellular Dynamics. I do not expect you to run a similar situation! But it is helpful to get the general sense of what we did and

First, we mapped the various elements and identified which ones were connected to each other. We observed the organization and also asked the President of the company to help us. That generated the map shown in Figure 8.5.

The lines are connections between business model elements. Solid lines connect business model elements that naturally work together. For example, the stem cell culturing capability was closely connected with developing assay materials. The assays were sold to customers, mostly other biotech and pharmaceutical companies, who used them to develop their own therapeutics. All of this was linked to a narrative of being a “tools” business: a company that provided critical research tools for the development of pharmaceuticals. At the same time, the company was actively conducting research to try to develop a blood therapeutic. Although these efforts were linked, the therapeutic research was connected to a very different narrative: attempting to become a company that produced treatments for disease.

Executives understood that the iPS technology was going to be critical to the company’s success. But it was not immediately obvious how all of the business model elements worked together.

What was especially interesting to us was that not all of the business model elements worked together perfectly. Some of them even seemed to be hindering each other. The dotted lines in the map show that the narrative of “tools” and “therapeutics” were not completely in sync. What would happen? Would the organization completely fracture into two entirely separate businesses that raised funds and built value in completely different ways?

That might have been the obvious conclusion, but the executives took a very different approach. They saw a very different vision, in which some of the potentially conflicting elements of the organization could still be connected. The iPS technology platform offered significant benefits to both narratives.

Rather than completely split the company, the executive team merged all operations, and made the therapeutics research subordinate to the tools and manufacturing efforts. Here is what that looked like:

The narrative shifted from two business models to one. Rather than a tools business and a therapeutics business, Cellular Dynamics became a platform technology company. The overall narrative shifted to commercializing iPS to advance cell-based medicine. This can be seen in the “About Us” page of the company’s website.

Brilliant example: Cellular Dynamics business model narrative

Cellular Dynamics International (CDI), a FUJIFILM company, is a leading developer and manufacturer of human cells used in drug discovery, toxicity testing, stem cell banking, and cell therapy development. The Company partners with innovators from around the world to combine biologically relevant human cells with the newest technologies to drive advancements in medicine and healthier living. CDI’s technology offers the potential to create induced pluripotent stem cells (iPSCs) from anyone, starting with a standard blood draw, and followed by the powerful capability to develop into virtually any cell type in the human body.

source: https://cellulardynamics.com/about-us/

The Wall Street Journal named Cellular Dynamics the most innovative company in the world in 2011. The company raised $30 million in private financing, was floated on a public stock market in 2013, and was ultimately acquired by Fuji for $270 million in 2015.

Many things have to go well for a biotechnology company to succeed. Getting the business model right is essential, but of course there is much more to be done. The success of CDI depended on the hard work and insight of many people: executives, manager, scientists, technicians, service providers, investors and others. But getting the business model right, including the narrative, ensured that the company could raise money and drive commercialization activities forward.