Managing Change in Organizations
Transformation at Eli Lilly & Co.
Mid-Course Exam Learning Objectives
1. Explore the stages that a company must go through during a major transformation, using the example of a company making it through a major crisis by drawing on its sources of competitive and corporate advantage.
2. Identify and analyze the traits that a CEO or other leader must have and the roles they must play in directing such a transformation, both as architects and psychologists.
3. Examine how Lilly’s Business Unit structure allows a closer view of customers and better decision-making.
4. Assess how organizational design – grouping in the organizational structure, linking, and aligning – shapes the actions of individuals.
Eli Lilly & Co., a major U.S. pharmaceutical company, is facing what it calls the “YZ crisis,” in which a handful of its most successful drugs will lose patent protection in the next coming years. Faced with the impending loss of these important revenue streams, CEO John Lechleiter has come up with a plan to reorganize Lilly’s company structure to try to revitalize its R&D process and replace some of the lost drugs. This goes against ‘conventional wisdom’ and much of the advice that Lechleiter has received, which is that Lilly should do an M&A deal, or divest itself of one or more of its businesses, or cut R&D spending to keep costs down.
Lechleiter’s plan involves restructuring the company into five separate “Business Units,” each of which focuses on a separate area of Lilly’s business (such as diabetes medication or
animal health). The hope is that this will give the company a better “line of sight” to customers, allow more flexibility, and create better, more efficient decision-making. At the same time, to keep costs down, Lechleiter must make tough decisions about cuts to employees.
The plan to restructure and double down on R&D meets with a good deal of skepticism from analysts and other outsiders, as well as some internal resistance. In addition to directing the transformation of the company, Lechleiter also must find ways to reassure stakeholders, manage expectations and keep people on board with Lilly’s plans as they weather the YZ crisis.
Each Question is Worth Equal Marks
1. What are the strongest and weakest actions that John Lechleiter and his senior executive team are taking to confront the YZ crisis? How would you have reacted as a senior leadership team member during this period? [5%]
2. What does Lechleiter hope to gain with his organizational realignment? Do you anticipate that it will work as designed? [5%]
3. What messages is Eli Lilly sending to the markets and the Indianapolis community? At what point would you fear they are not working? [5%]
4. The most common explanations of the difficulty of change are human nature and organizational inertia. The “three lenses” perspective adds a third: the unintended consequences of change initiatives, which are inevitable given the complex interdependencies across the three dimensions of the organization (e.g., a design change also changes the political system and challenges the cultural system). Supported by case data, how does the “three lenses” perspective help us understand why organizational change is so difficult for Eli Lilly? [5%]
Your entire Assignment should be no more than ten pages long, formatted with 2.54 cm. (“Normal”) margins on A4-sized paper, “Double” line spaced, paginated, and 11-point Arial, Calibri, or Times New Roman font. You are encouraged to use data displays (e.g., tables) where these can be effective in communicating your arguments succinctly.
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