Novo Nordisk Case Study

The pharmaceutical company is going from a diabetes treatment company to a diabetes prevention company.

The pharmaceutical company is going from a diabetes treatment company to a diabetes prevention company, rethinking its very offering to society.

Novo Nordisk isn’t like most big-pharma companies. Despite being the world’s largest producer of insulin,1 it is actively seeking to address the root causes of diabetes – not just treat the symptoms.

It’s a mammoth challenge: diabetes is a bigger killer than HIV, tuberculosis and malaria combined.2 Around 2 billion people are believed to be at risk of developing it.3 Without significant action, the population living with the disease could grow by 50% to 642 million people over the next 25 years, taking public health expenditure on the condition to US$802 billion per year by 2040, according to the International Diabetes Federation.4

In response to these alarming figures, Novo Nordisk is campaigning to build capacity and awareness in countries where the disease is poorly treated.5 It is particularly focused on tackling the rise of diabetes in cities, where two-thirds of today’s sufferers live.6

The mission exemplifies a commitment to sustainability rooted in Novo Nordisk’s corporate design. When two Danish insulin producers – Nordisk Insulinlaboratorium and Novo Terapeutisk Laboratorium – merged in 1989,7 they created a foundation that owns 25% of the stock but controls 75% of the votes.8 The foundation obliges the company to maximise value in the long-term,9 and the impacts of this ownership structure (not uncommon among Danish companies) are visible in the culture today.

In 2004, the company solidified this approach, integrating sustainability into its by-laws.10 Rather than sitting back and hoping future CEOs understand its values, the company has sought to codify them. As Susanne Stormer, Global Director, Corporate Sustainability puts it, “Novo Nordisk seeks to have a strategy to be a sustainable business, not just a sustainability strategy.”11

This strategy met its first big test in September 2016, when CEO Lars Sørensen – named the world’s best-performing CEO by Harvard Business Review in 2015 – announced he was stepping down after 16 years on the job.12 His departure comes as the company faces increasing pressure in the US pharma market, and the new boss’s challenge will be navigating this complex landscape while remaining true to company values.

Novo Nordisk will keep trying to exercise a positive influence on the sector, says Stormer, including by rethinking traditionally zero-sum partnerships with medical management companies.13 Not every decision will be a three-way win for the company’s triple bottom line, she acknowledges, but the company is convinced that evaluating performance this way ultimately gets better results.

References

1 Sørensen, L. R. (2015) “Fighting diabetes in the 21st century”. Harvard Business Review, 29 December. https://hbr.org/2015/12/fightingdiabetes-in-the-21st-century.

2 Ibid.

3 Ibid.

4 Ibid.

5 Ignatius, A., McGinn, D. (2015) “Novo Nordisk CEO Lars Sørensen on What Propelled Him to the Top”. Harvard Business Review, November Issue. https://hbr.org/2015/11/novo-nordisk-ceo-on-what-propelled-him-to-the-top.

6 Ward, A. (2015) “Rapid rise in diabetes linked to spread of urbanization”. The Financial Times, 14 November. https://www.ft.com/content/a90e6904-89f1-11e5-90de-f44762bf9896.

7 Novo Nordisk. “Changing the world of diabetes for 90 years”. http://www.novonordisk.com/about-novo-nordisk/novo-nordisk-history.html.

8 From private company interview

9 Ignatius, A., McGinn, D. (2015) “Novo Nordisk CEO Lars Sørensen on What Propelled Him to the Top”. Harvard Business Review, November Issue. https://hbr.org/2015/11/novo-nordisk-ceo-on-what-propelled-him-to-the-top.

10 Novo Nordisk. “Triple Bottom Line”. http://www.novonordisk.com/sustainability/Focus/Our-Sustainability-Approach/Triple-Bottom-Line.html.

11 From private company interview

12 Megaw, N. (2016) “Lars Fruergaard Jorgensen a model for ‘Novo Nordisk Way’”. The Financial Times, 2 September. https://www.ft.com/content/89e3b8cc-7109-11e6-a0c9-1365ce54b926.

13 From private company interview