Welcome back to Funding The Kryptonite, a blog that will take a look at comic book super villains and discuss them from a business perspective.
Today’s blog post will discuss an important business framework called VRIN, which is used by companies to evaluate the strength of their competitive advantages in the marketplace and determine what sort of edge it gives them against their competitors. In this particular example, I am going to draw on a one-off Doctor Strange villain named Nico West and the pharmaceutical company he worked for and how their decision to go up against Strange was founded from a use of this framework.
How We Got Here
Doctor Strange is known as the Sorcerer Supreme, a position that basically means he’s the top dog on Earth with regards to magic. However, he originally was a legitimate medical doctor if somewhat of an arrogant ass about his skills. A brutal car accident left him a broken man, and Dr. Nico West was the attending surgeon who patched Strange back together. While he did a good job, the injuries to Strange were so severe that they left him without the use of his hands at the level of precision needed to operate as a doctor. He left the medical profession in search of a cure for his injuries, where he learned the magical skills needed to start on his path to becoming Sorcerer Supreme. The impetus for this story, in the mini-series The Oath, comes from his assistant Wong being diagnosed with a rare brain tumour that will lead to his death in short order. Strange refuses this possibility and battles a demon for possession of a potion that should cure Wong. Before administering it, Strange has the potion tested for safety and realizes that it is not just a cure for the tumour but a cure for all diseases from the cold to cancer.
Framing The Discussion
The VRIN framework looks at four different elements of a potential advantage (either a resource or a capability) in a company to determine its strength. The four are if it is Valuable, Rare, Inimitable, and Non-substitutable. Let’s break down each one:
Valuable: Two important questions need to be asked here. The first is “Does this add value by neutralizing threats or exploiting opportunities?” and the second is “Does added value remain even if the external environment changes?”. Basically, the questions focus on if the company can either minimize some risks or take advantage of an opening in the market, and if the value has some legs to it.
Rare: The question here is basically a yes/no situation, being “Do many competitors possess this resource or capability?”. If yes, it’s not rare. If so, it is.
Inimitable: “Is this easily copied?” is the issue at hand. Lots of things can get in the way of the resource or capability being copied, including access, understanding of how it was originally done, key human resources, etc…
Non-substitutable: “Is there an equivalent resource or capability that can act as a substitute for the valuable resource or capability?” is on the table for this one. If there is, you’re limited in how far it can take you because you’re not the only game in town.
Drugs For Dollars
With that being said, let’s take a look at the VRIN analysis for the drug companies in a general way and then tackle how this cure-all would impact them.
Valuable: Drugs, especially for rare diseases, are quite valuable because they do exploit opportunities in the marketplace, namely sick people being willing to pay for the illnesses to be cured. It’s also largely resistant to changes in the external environment, save for cures to said diseases.
Non-substitutable: When patents run out, generic versions become substitutes for it. Outside of that, patent laws guarantee that there are no substitutes for the big drugs for the rarer diseases.
Rare: Big Pharma does not have a ton of competitors to it, and the infrastructure needed to do the research and development on these drugs keeps any successful drug pretty rare in terms of number of companies offering it.
Inimitable: There’s a huge amount of time investment, human decision making and scientific knowledge, among other factors, that go into successful drug development. These are extremely costly to imitate and create barriers for other companies to do so.
If a resource or capability has all four elements, it’s a sustainable competitive advantage. You can ride that gravy train for a while and enjoy the edge over others. If you lack the inimitability, that gives you a temporary competitive advantage. You enjoy it for a time, but eventually others catch up. Lacking inimitability and rarity means you’re at par with the competition and neither necessarily holds the edge on another based on that alone.
In this case, Doctor Strange’s cure-all potion would strike right at the basic element of Valuable. By being able to cheaply mass produce an elixir that cures absolutely everything, he would single-handedly destroy everything that Dr. West and his company, Timely Pharmaceuticals, would have worked on hard on. That’s untold jobs and revenues, shattered overnight. Small wonder Dr. West sought to seize and destroy the potion. The good of his firm was at stake!
Closing Comments
Dr. West also had a personal stake in this issue, given that his own magical talents were acquired only after his failure at completely healing Doctor Strange led him down that path. His first, and only, attempt at magical healing caused his patient to basically explode from it. As such, there is also a question of the actual effectiveness/side effects of using a magic potion to solve everything. Without proper FDA testing and trials and such, this dangerous ex-surgeon Doctor Strange could be causing a world of problem! Good thing we have proper doctors like Dr. West making sure that such potentially harmful snake-oil cures don’t crop up!
“I swear to you, I’ve dedicated my life to ending sickness on this planet, but it has to be done by natural means!” –Dr. West (Doctor Strange: The Oath, #5)
Final Rating: Good business!
enjoyed the read!
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