Novartis e-Commerce Strategy

The strategic approach of Novartis to e-commerce moved from a random approach to a professional centralized basis with the appointment of Matthew Timms as chief web officer in August of 2000. He inherited a conglomeration of Internet based activities, none of which were particularly successful or effective and operated on a wide variety of systems. Senior management was moderately interest in the net, but viewed it as a "necessary evil" that could grow faster than they could afford to pay for it. Mr. Timms first job was to turn the conglomeration of literally dozens of separate operations into something resembling a cohesive organization. At the same time, he had to determine what the long-term goals of the organization he was building might be, and then how to reach the goals.

Mr. Timm's problem was compounded by the necessity of combining the Swiss German love of organization that results in bureaucratic structures with clearly defined rules, responsibilities and procedures with the generally free wheeling approach of Information Technology (IT) specialists. The result was a bureaucracy overlaid with a matrix management structure. A glance at exhibit 6, Parma Organizational Structure 1 September 2000, and then at exhibit 8 e-Business Organization Chart illustrates this graphically.

The underlying problem was the lack of an e-business goal within Novartis. Michael Dubery's comment on the

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distribution, and finally to the patient. In a global company like Novartis, that often has duplicate sources and distribution in many countries, this is a daunting task. Bringing this operation under control offered many opportunities for efficiency and cost reduction. A third area, that is probably not a business model in the conventional sense, is control and communication in the research area, particularly clinical research and trials. Research and clinical trials are a huge expense item, and very time consuming for all drug companies. Any system that could speed the process up and produce better results faster is immensely valuable. It could reduce the costs and move the return on the research investment closer to the investment decision. Any shortening of the time span required to produce revenues increases the net present value of the project. This is very basic finance. Internet communication of results could compress time scales dramatically. Novartis e-Business and the Lucas DRBM The Lucas model is based on the concept that information technology can become a resource that is rare, valuable, inimitable and non-substitutable. Under the Lucas model the firm must develop and enhance resources that provide the

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