Alza & Ciba-Geigy: Making relationships work Professor Rebecca Henderson MIT Sloan School of Management Phone: (617) 253-6618, Email: Rhenderson@mit.edu, http://www.mit.edu/people/rhenders/home.html

Managing a Discontinuity Through Acquisition? ALZA/CIBA: Managing a Discontinuity Through Acquisition? ADDS PERFORMANCE Ciba Alza Tight Appropriability (IP, speed to market, lead time) Creative Organization (Technical competence and culture of innovation) EFFORT Complementary Assets (regulatory capability, sales force, distribution, size, knowledge base) Efficient Functional Organization (designed to maximize component innovation)

What are Alza and CG trying to achieve: Entrepreneurial Drive, Freedom from the “old ways” Successful growth unites entrepreneurial insight with effective coordination Alza? Ciba Geigy? Control & Coordination

Comparing “make” vs. “buy” Alza Asset Ciba Great energy Alza Asset Ciba Great control

Different deal structures give one different “starting positions” Entrepreneurial Energy Acquire/ Partner Joint venture/ alliance Internal venture Build inside existing unit Control & Coordination

But must then be managed! Entrepreneurial Energy Acquire/ Partner ? Joint venture/ alliance Internal venture Build inside existing unit Control & Coordination

Did it work?

Did Ciba manage “deep structure”? Leadership Structure & Process Incentives & Politics People, Culture, Mental models 7

Successful relationships tackle every level Leadership and strategy Process & structure Incentives, politics People, culture, mental models

Did it work?

Good luck!