19 May assignment limit to 250 words or less
How do you follow a legacy CEO? This is the hardest thing you could possibly encounter. Dan [Vasella] shaped the company, the portfolio, and the future of the company.
— Joe Jimenez, CEO
As the 2,688 attendees at the February 22, 2013 Novartis annual general meeting (AGM) filed out of the large assembly hall, 53-year-old Novartis CEO Joe Jimenez realized that the retirement of Daniel Vasella, MD as chair of the Novartis board meant the ball was entirely in his court. Since its formation 17 years earlier with the merger of Sandoz and Ciba-Geigy in 1996, Novartis had been led by Vasella, either as CEO, board chair or both. At the meeting vice chair Ulrich Lehner was elected interim chair to serve until August, 2013, when Joerg Reinhardt, former chief operating officer of Novartis and currently head of Bayer Healthcare, would return as chair of the Novartis board.
Vasella was elected honorary chair at the meeting, but would only attend board meetings as a guest and coach senior company executives without any other involvement. “I left the company with a good successor, a rich pipeline, a solid financial footing and a good top team,” Vasella said after the meeting. From its Basel, Switzerland headquarters Novartis leadership orchestrated 127,000 employees of 153 nationalities in 140 countries. With $56.7 billion in 2012 revenues and $9.6 billion in net income, Novartis ranked as one of the world’s largest and most profitable companies. (See Exhibits 1 for basic financials, 2 for milestones, and 3 for divestments and acquisitions.)
Jimenez, who succeeded Vasella as CEO in 2010, recognized that rapid changes in the global health care environment would create severe challenges for Novartis in the years ahead. “My greatest worry is taking a company that has been successful for a decade and a half and positioning it in today’s external environment,” he said. Among those challenges were changes in national health care systems, like the Affordable Care Act in the US, putting downward pressure on prices and changing the way companies got paid for their products from prices per pill to paying for patient outcomes, which no one had figured out how to measure precisely.
Jimenez was clear about his mandate as CEO: “My mission is turning us from a pharmaceutical company into a global healthcare company.” The pharmaceutical business provided 57% of sales and 66% of operating income, and dominated the culture. A survey of global executives conducted by
Professors William W. George and Krishna G. Palepu and Executive Director Carin-Isabel Knoop (Case Research & Writing Group) prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. Professor George served on the board of Novartis from February 1999 through February 2009, and also led Novartis leadership seminars in 2010-11. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2013, 2014 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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