James A. Cusumano

For a significant part of my professional life I was deeply involved in cofounding and leading the growth of Catalytica, Inc. It eventually morphed into two public companies traded on the NASDAQ Stock Exchange, Catalytica Energy Systems, Inc. and Catalytica Pharmaceuticals, Inc. Our pharmaceutical business was by far, the more successful of the two enterprises.

It grew in less than five years from several employees to more than 2,000 and three manufacturing plants with annual sales over $500 million. We became one of the largest companies in North America for the contract-manufacture of major pharmaceuticals. We were so successful that several years later, one of our prime competitors, DSM Pharmaceuticals in Holland, made our shareholders a lucrative offer to purchase our operations.

Sure, we made some mistakes in building this enterprise—fortunately, none was significant enough to have a lasting impact. More important, we learned one way—certainly not the only way—to create a successful business. I would like to share with you, the key aspects of our strategy. Specific details and examples can be found in my book, BALANCE: The Business-Life Connection.[1]

We discovered Eight Principles To Build A Winning Company.

1.    A capable and inspired CEO provides the foundation. Have a skilled CEO who embraces and is committed to Inspired Leadership and has a deep sense of how to create a challenging, far-reaching, yet realistic vision and mission. The CEO creates a Dream. Inspired, committed employees embrace, embellish, and contribute to it. 

2.    Buy-in of this vision and mission from key stakeholders is critical. Customers, employees, investors, suppliers, and the community provide the psyche-energy necessary for success. Employees must be coached to team up with management and create corporate values to which all employees are committed and are practiced in all operations.

3.    Hire the right people for the right positions at the right time. And when you make a mistake—most of us so—and you cannot find a more effective place in the company for that employee, compassionately and quickly ask the employee to leave. It is in the employee’s and the company’s best interest. Ask open-ended questions during job interviews. This will provide you with insightful answers. For example: What are your personal dreams and aspirations? What is the most amazing thing that has happened to you? What was the most challenging thing that happened to you, and how did you deal with it? What special skills can you offer our company and why do you want to work with our team?

4.    Address a growing market. Better yet, create one. Apple didn’t capture part of the cell-phone market. Steve Jobs drove the company to create a new more profitable market—smartphones, and it changed the world. During the decade after its launch, the profit margin on the iPhone was 74 percent. Only recently did it fall to a still-quite-hefty 60 percent.

5.    Focus, focus, focus strictly and passionately on a limited number of the best opportunities. Don’t let flighty thinking put your development process into chaos. A company can become a leader by demonstrating success and leadership in the marketplace as early as possible.

6.    Select at least one near-term product from the broad spectrum of product opportunities and create an early commercial success—even a modest success. You will be surprised at the rapid increase in your credibility and your company’s valuation due to proof-of-concept and/or proof-of-technology.

7.    Have a strategic plan but stay flexible. For maximum effectiveness, the plan should be understood and embraced by all employees at the required level of detail for a specific job. Catalytica Pharmaceutical’s initial strategy was to manufacture only the active ingredients for a final drug and sell them to major pharmaceutical companies, who would then formulate and package the final dosage form of the drug. After two years of successfully following our initial strategy, a quantum-jump opportunity to a fully-integrated pharmaceutical company presented itself to us. After extensive discussion and debate with our management team and our board, we raised nearly $375 million and went for it, full bore. We eventually manufactured more than 50 final packaged drugs for international pharmaceutical companies. For example, Retrovir (AIDS), Zovirax (Herpes), Lanoxin (Cardiovascular) and Wellbutrin (Antidepressant).

8.    Be considerate to all of your stakeholders—customers, employees, investors, suppliers, and the community. The best companies to work for and which have long-term success in the marketplace are usually compassionate and caring towards their stakeholders—not just their shareholders.

Catalytica as well as every successful enterprise I have studied has had a healthy component of each of these eight principles woven throughout their corporate persona.

We live in challenging times. There has never been a greater need and opportunity to create and innovate through the application of these principles. They provide the means to contribute to the creation of a more peaceful, just, and sustainable world for us, our children, grandchildren and beyond.

Everyone wants to be part of a Dream. What’s yours?

Namaste,

Chairman & Owner, Chateau Mcely