The corporate DNA
Nordisk Gentofte9 was founded by the Nobel Prize winner in physiology, August Krogh. His wife, Marie Krogh, practiced as a doctor and researched in human metabolism. Furthermore, she had diabetes (Type 2) herself, and she consequently had a natural interest in diabetes. In 1922, August and Marie Krogh therefore went to Canada to visit the scientists, who had discovered insulin the year before. Being a Nobel Prize winner in physiology 1921, August Krogh easily persuaded the Canadian scientists to give him a license to manufacture insulin in Denmark. So, if we are looking for the roots of the internal corporate identity (Tripsas, 2009), I think it is fair to identify these as the combined scientific and medical standpoint of the founders (Novo being a break-out from Nordisk). This identity had impact of the framing of the business (Kaplan, 2008) and thus laid the ground for the learning cycles which established and reinforced the dominant logic (Prahalad & Bettis, 1986) of Nordisk as a science-based, pharmaceutical company. The impact of the founders’ scientific and medical standpoint on Nordisk’s identity can be recognized as late as the 1970’s in this quotation from the official corporate history book: “At the beginning of the 1970’s, the situation at Nordisk was critical. The company had almost no exports. The reason for this was that the management, led by Hagedorn, did not want increased marketing of the company’s products. What mattered most, the management felt, was research and the treatment of diabetes”.
Novo had a more engineering oriented starting point: to build up the production, August Krogh had employed his manager from the mechanical workshop at his university laboratory, Harald Pedersen.
Harald’s brother, Thorvald Pedersen, who was a pharmacist, was also hired in. However, due to collaboration problems, the two brothers left Nordisk and founded Novo in 1925. Harald Pedersen was an engineer, and he designed a special metal syringe for injection of the insulin already in 1925.
This Novo Syringe was the first customized insulin device and it was sold until World War 2, where supply problems stopped the production. Thus, if the ‘founding fathers’ of a company have impact on the internal identity of the company, then Novo from the outset would have a more production and engineering oriented approach to doing business, combined with higher emphasis on broad
9 Both Novo Industry and Nordisk Gentofte have changed names several times during their history. For
the sake of readability, I discard this information and shall from here on refer to the two companies as respectively Novo and Nordisk.
85 commercialization: due to Nordisk’s strong position in the home market, Novo was from the
beginning forced to be more international.
Industry dynamics
Both Novo and Nordisk were active in improving the insulin products. The first problem to be solved was “that the effect of the existing insulin products was too short – a serious disadvantage because patients had to inject themselves with insulin several times a day. Therefore, Nordisk and Novo turned their attention to developing a longer-acting type of insulin” (quotation from “Novo Nordisk history”).
Thus, Nordisk launched their long-acting insulin in 1936; Novo followed in 1938.
The next big problem was to get rid of the ‘impurities’ left from the basic animal material, since these substances made all patients form antibodies against insulin, and some patients even became allergic to insulin. After long research, Novo launched highly purified insulin in 1973; Nordisk followed in 1974.
According to an executive informant, the highly purified insulin meant great competitive advantage, which especially Novo used to capture market shares in Europe. The European insulin market had been very fragmented, with 21 European insulin manufacturers in 1972. These rather small companies could not make the technologically difficult leap to highly purified insulin, and hence competition got concentrated on fewer players, with Novo and Nordisk based in Denmark and Hoechst in Germany. Eli Lilly dominated the American markets.
Even though both Nordisk and Novo thus were successful in the competition within the core business, both companies diversified into many other business areas, in accordance with the management trends of their time (e.g. see Ansoff, 1965, on diversification). Nordisk for instance developed growth hormone for treatment of children with growth disturbances in the 1960’s and blood plasma products for treatment of hemophilia in the 1970’s. Novo, on their side, started up production of penicillin in 1947 and began producing industrial enzymes in the 1960's. The enzyme business grew rapidly and forced Novo to become even more international. In the late 1970’s, the enzyme business had become bigger than the insulin business, and the enzyme managers at Novo joked about selling off the insulin business; it didn’t grow so much, anyway.
Diagnostic systems
One more example of diversification from Novo deserves to be described, since it implied some learning for the top management team with relevance for device innovation. Around 1976-77 Novo acquired a small Danish company, which had developed a so-called Cerebrograph – an electronic equipment for measuring the blood circulation in the brain. Hereby Novo established ‘Novo
Diagnostic Systems’ as a business area. However, sales never really took off. An executive informant explains: “This taught me two things: first of all this was a highly specialized field. Secondly, this was an area, where you competed with Siemens, Japanese companies etc., and therefore it was no good that you came with just one product. The other companies competed on modularity: measuring equipment, which ‘talked’ with each other – so it was systemic solutions being sold...the possibility of getting a
86 significant position in the market, as a one-product-company, was small. It was an area where we were not so sharp, and the competition was quite different from insulin: when you develop your diagnostic scanners, the competitors can just take a screwdriver and dismantle it and see how it is made. – [Why did you then acquire this company?] – That was also a wrong decision. But we were looking for opportunities for growth, you know. ...You can say that the reason why we jumped into it was the
aspiration for new opportunities – and then an analysis, which was insufficient, due to lack of expertise”.
Concluding on the period 1923-1980
The early development shaped the corporate DNA in the form of internal identity (Tripsas, 2009).
From the founders, Nordisk inherited an orientation towards science, pharmaceuticals (insulin) and medical (specialist) treatment of diabetes. Novo seems to have inherited a more pragmatic and commercial identity, compared to the extremely science and research grounded Nordisk. These initial identity traits of course affected the management cognition, when top management set direction for the business; the basic identity will always affect the worldview or core beliefs, on which strategic cognition is based.
Both companies were successful with their insulin business; still, they went through an era of diversification in search of growth opportunities, which led them into many other business areas.
Only in one case, a new business area took over from the original insulin business: the enzyme business of Novo in the 1970’s and 1980’s became bigger than the insulin business and in fact drove the internationalization of the company further.
At Novo, the experiences from Novo Diagnostic Systems shaped the cognition at corporate
management level about the importance of deepening the competencies within the selected business areas and about developing a full portfolio of complementary products within each area. This learning seems very important for the later entrance to medical devices as part of the product
offering within diabetes, since it defined a rationale for complementing the basic insulin offering with medical device products.
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