How the CIO of a $39 billion pharmaceutical company is quietly changing the tech startup world

Merck CIO Clark GolestaniMerckMerck CIO Clark Golestani

It used to be, the tech world was divided. There were the companies that made the tech products. And there were the companies that bought the tech products. Today, that lined has blurred.

The buzzword for this is the “digital enterprise” or “digital transformation.” IT professionals know it as DevOps, where “development” of tech is mashed together with “operations.”

Build it and deploy it. Move fast. But don’t break things. They still can’t let their corporate servers and networks go down.

While most IT pros are just starting to figure out how to meet these new expectations, Clark Golestani, the long-time CIO of pharmaceutical giant Merck, has already turned the “digital enterprise” into an art form.

“Most people think that to do this stuff you have to increase IT spending,” Golestani tells Business Insider. But that’s not true, he says. “I think we’ve got the model for how to do an IT organisation.”

Go digital or die

Whatever you call it, it requires a radical new way for an IT department to operate. Google’s cloud computing boss, Diane Greene told us in June. “This is new for me. I’ve never been in the enterprise where your customers are your partners. It was always, you had customers and you had partners. But almost every customer of a certain size is a partner. It’s going both ways now.”

Google Diane GreeneGoogleGoogle cloud boss Diane Greene

Salesforce CEO Marc Benioff agrees. “This is a pace of change that I have never seen,” he told analysts asking him about his customers’ digital transformation projects.

And there’s a lot at stake. Cisco’s former CEO John Chambers predicted last year that 40% of all big companies will fail to become digital enterprises and then they will be out of business within 10 years.

Golestani isn’t about to let Merck be one of those failures.

Instead he’s put together a way for how Merck’s 2,000-employee-strong IT organisation works with its over 5,000 third-parties technology suppliers ranging from startups to large companies like Oracle and Microsoft.

  • Golestani and team have become insiders with all the major tech VCs, often giving Merck access to startups and their technology while they are still in stealth mode.
  • IT staffers are encouraged to seek out and find startups to work with in the US and internationally.
  • IT staffers often roll up their sleeves and help the startup write code, fix products and so on, making their jobs more stimulating.
  • Staffers often develop tech in-house, too, and Merck will then turn that into a new startup.
  • If Merck has a need or an idea for tech that doesn’t exist, they will find a technologist and fire up a startup themselves.

In other words, if new tech is being developed for his company or industry, or should be developed, Golestani will know about it first or he’ll make it happen.

Creative relationships with startups

One way Golestani does this is by getting involved with startups in their early days.

“We constantly engage with all the venture capitals out there,” Golestani tells Business Insider. “We are constantly looking at their porfoltio companies, quite often when they are stealth and unannounced.”

Because Merck has access to a huge corporate network of computers, software, servers, it can test a startup’s tech and advise it on “what it would really take to get it to work in the enterprise.”

If he or his people like what they see, “We’ll stay with them and we push the envelop on those technologies and help them scale up.”

Model N founder Zack RinatModel NModel N founder Zack Rinat

One example is a company called Model N.

Merck started working with Model N many years ago when it was small, Golestani says. Model N invented a new category of “revenue management” software.

Working closely with the founder, Zack Rinat, Merck helped make it more useful for the life sciences industry.

Model N went public in 2013.

“That was a very small company. We partnered with that company, pushed them to the edge,”Golestani says.

Another example, is a fast-growing, big data startup called in New York. They mine large caches of publicly available data for insights.

Golestani says that if Merck’s IT folks are stoked enough about a startup, the company will get “very creative” in its business relationship with it.

“We may even invest with them. Or we may do business with them disproportionately to gain equity interests, just like any other business development opportunity,” he says. “There’s nothing better than having a Fortune 50 company as an outspoken anchor client.”

Growing startups without crushing them

His approach is very different than how most large companies treat early-stage startups, he says.

Many of them think that the size of the contract they can sign will “anchor” a small startup, but Golestani says the reverse tends to happen.

“It’s almost like a delicate plant, it needs to be watered and tended to, you’ve got to show it a lot of a love if you want it to grow into a tree someday. The same thing happens with startups,” he says.

If a big company comes in and demands enterprise-level support, or asks for a lot of features and other “ridiculous requirements” that would typically take them years to grow into, “the big guys can also crush these companies very easily, just like a tender young plant,” he says.

In addition to working with VCs, IT folks are encouraged to find startups, too, and then work hands-on with them help them evolve their tech, maybe helping them write code or tinkering with architecture.

“We encourage getting out in the [startup] community, understanding them, and that’s globally, not just in the states. There’s obviously a ton of innovation globally in Europe and more and more innovation in Asia.”

New startups, please stand up

He’s also launching startups.

Steelgate Intelligence SystemsSteelgate Intelligence SystemsSteelgate Intelligence Systems

“We have lots of smart folks and they sometimes create intellectual property that is very valuable. When they do that, the reality is, it’s not our core business. It’s better taken out of the company and allowing others to grow it,” he says.

For example, the team earned a patent for tech that manages the supply chain for vaccines that have to be refrigerated. The tech was licensed out to a startup to build a new supply-chain company around the idea.

And they created some technology for “deep web mining” capable of tracking down drug counterfeiters on the web by following their payment systems. That spawned a startup called Steelgate Intelligent Systems.

More often, though, Merck will simply help cobble together a startup team based on a need it has that no one is addressing. “We find a thought leader and then we’ll work with them to stand up a company. We’ll work through how we can help, contributions we can make, technology or other things,” he says.

“That model occurs more often, where we have ideas, we partner with a technology and we create magic together,” he says.

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