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CEO Dialogue Series

Why Novo Nordisk’s CEO has learned to trust his gut feeling 

21 May 2024 in CEO Dialogue SeriesPodcast availablePodcast available

Lars Fruergaard Jørgensen, CEO of the company which makes game changing obesity drugs Ozempic and Wegovy, explains how its culture and long-view underpin its recent turnaround. ...

Lars Fruergaard Jørgensen, CEO of the company which makes game changing obesity drugs Ozempic and Wegovy, explains how its culture and long-view underpin its recent turnaround.

In a few short years, Novo Nordisk has become Europe’s most valuable company worth more than 500 billion euros. The 100-year-old Danish drugmaker’s sales grew 30% in 2023 alone and its headcount has swelled by 20% in two years to more than 64,000 employees.

The reason for this breakneck expansion? Two blockbuster drugs, Ozempic for type 2 diabetes and Wegovy for weight loss, that have experienced runaway demand and solidified the organization’s purpose to “defeat serious chronic diseases.”

Yet when Lars Fruergaard Jørgensen ascended to the CEO role in 2017, the picture wasn’t quite as rosy. With its insulin drugs under steep price pressure in the US, the company’s biggest market, Novo Nordisk had issued multiple profit warnings the prior year and its share price had plummeted 40%.

Jørgensen, an unassuming Dane who joined Novo Nordisk in 1991 as an economist in the healthcare and planning department, credits the company’s foundation, which has 77% of the voting rights, and strong values system, for helping it ride out the turbulence. His humble, yet determined, “stewardship” approach to leadership has also proven pivotal.

“My and my team’s biggest responsibility is to make sure that we are now making the investments that 10-20 years from now will make the next team very successful,” he explained.

With forecasts predicting that obesity will affect an estimated 1 billion people by 2030 – and 1.9 billion by 2035 (1.53 billion adults and 380 million children) – Novo Nordisk’s expansion potential is almost unlimited. It currently serves more than 40 million patients living with chronic diseases – adding five million patients in the last year alone. Jørgensen now faces the challenge of ensuring the company can satisfy growing demand – and cope with its rapid expansion – without compromising the culture and values system that form the backbone of its success.

“I believe the Novo Nordisk Way is part of our competitive edge. It is what makes people want to work here, what sets researchers free and what makes innovation thrive,” he said. “If we then, in the growth phase, onboard so many new people that the consistency, the core of having the values lift is not strong, then we have destroyed the company for the future.”

The company started trials for obesity as far back as 2001 when there was no real market for weight-loss drugs and historic safety issues.

Playing the long game

The company traces its roots back to 1923 when a Danish Nobel laureate gained permission from the Canadian scientists who discovered insulin to produce the medicine in Scandinavia. In 1989 Nordisk Insulin laboratorium merged with local rival Novo Terapeutisk Laboratorium and grew to become the world’s largest maker of insulin drugs.

Since its early days, Novo Nordisk has operated as part of a foundation structure with the founders agreeing that the profits from the sale of insulin would be used for scientific and humanitarian purposes.

This long-term perspective has not only protected Novo Nordisk from unsolicited takeovers over the years but has also afforded it breathing space to focus on the science in an industry where development cycles typically last between 10-15 years.

The company started trials for obesity as far back as 2001 when there was no real market for weight-loss drugs and historic safety issues. Yet, there was also recognition of the potential benefits in preventing conditions like type two diabetes, which was a significant market for the company, says Jørgensen.

Guided by its values system ‘The Novo Nordisk Way’ – a set of principles that includes a focus on quality and ethics – the company’s then CEO Lars Rebien Sørensen decided the company had a duty towards patients to study these medicines for weight loss, even though it wasn’t a straightforward choice because they were worried about damaging their diabetes business.

That decision paid off. Novo Nordisk’s turbocharged growth today is down to semaglutide, a medical version of the natural hormone GLP-1 which helps the body regulate blood sugar levels and suppresses appetite. First approved as a diabetes drug in 2017, the breakthrough came in 2021 with approval for the weight-loss indication based on a clinical trial showing an average weight loss of 15%. Boosted by celebrity endorsements and a real need among people living with obesity, demand for Wegovy has soared. Evidence that the drug could also help prevent heart attacks has given Novo Nordisk further tailwinds.

As excited as he is by the business opportunity, Jørgensen is just as energized by the potential impact of the medicine on chronic disease. “From a health point of view, obesity is a gateway to a number of other diseases, so if we can prevent those that’s a very meaningful thing to do,” he says.

Speak up
“There's a speak up culture. And if it's found that even senior leaders are not doing the right thing, then you cannot stay in the company despite very strong business performance.”

A culture of innovation

Jørgensen, who worked in different roles across the Netherlands, the US, and Japan, and Denmark before ascending to CEO, says Novo Nordisk’s ability to keep innovating is down to its culture where “the power distance is low” and scientists feel empowered to share ideas.

“From time to time I have researchers knocking on my door to share their passion and tell me what they believe in, and that helps me build a perspective on what we should be doing,” he says.

While business considerations are important, Jørgensen cautions against overly directing scientific research which can lead to missed opportunities. “We should talk about where we play and how we want to win, but then you have to let the science speak its own language and look at the data and be driven by that.”

A key tenet of its success is Novo Nordisk’s values systems which guides decision-making across the organization – from who to hire and promote, to which projects to progress and cancel, explains Jørgensen.

“The same goes for people,” he adds. “There’s a speak up culture. And if it’s found that even senior leaders are not doing the right thing, then you cannot stay in the company despite very strong business performance.”

One ethical challenge Novo Nordisk faces is rising public pressure about the cost of weight loss treatments and whether cash-strapped healthcare systems can afford them – especially with the market for weight loss drugs forecast to reach $100 billion by the end of the decade.

Jørgensen’s task is to convince healthcare payors that spending money today may save them money in the long run, since preventing obesity can lead to a lower incidence of chronic diseases like diabetes, cardiovascular disease, and hospitalization.

“We believe in investing in schooling of our children because there’s a return on that. But in the healthcare sector, there’s no dynamic effect of spending money,” he says. His proposal? New risk-sharing payment models, whereby drugmakers forego some of the upfront cost to be paid later based on patient outcomes.

I trust my gut much more today than I did back then. And that’s handy as a CEO because there’s a lot of ambiguity. You don’t have all the facts, yet you are the one that has to make a decision.

Trusting the gut

The 57-year-old Jørgensen took over the CEO baton from Lars Rebien Sørensen and before him Mads Øvlisen, two legendary leaders of the company, and admits it took him some time to find his own way.

“I think the first year or so I tried to make some changes, but I don’t think I succeeded in actually doing it forcefully enough,” he says. “But as time went by and I felt I was more established as a leader, I think the team also learned that when I have reflected on certain strategic things that we need to do, I’m actually quite determined to make it happen.”

Those choices include doubling down on the leadership traits and capabilities needed to help the organization keep up with its sudden growth. “We have invested a lot in getting to know each other in the leadership team. What are my self-limiting beliefs? How do I show up as a leader when under pressure?” he says. “When you get to know your colleagues in team in a way where on a bad day there is your certain behavior and you understand why they do that, then you can become a really, really strong team where you compensate each other.”

Jørgensen has also become a lot more comfortable following his instincts.

“I’m a sensor. I have an intuition for what works and what doesn’t work,” he says. “I still look at facts, and listen to my team, but I am very much driven by my gut feeling. I trust my gut much more today than I did back then. And that’s handy as a CEO because there’s a lot of ambiguity. You don’t have all the facts, yet you are the one that has to make a decision.”

Despite being named FT Person of the Year in 2023 for conducting Novo Nordisk’s transformation, Jørgensen remains self-effacing, putting his success down to his ability to listen to subject matter experts and trust his instincts.

“I think I’m lucky. I joined a company that has been successful. I joined a company with some values that are close to my values. I’m born with big ears and a big nose. I’m good at sensing and smelling what goes on around,” he jokes.

Watch the full CEO Dialogue to hear more from Lars Fruergaard Jørgensen on how the company succeeded in going global in the early 2000s, how he decides on where to invest in new opportunities while staying focused on core competencies and technologies, and how Novo Nordisk is nurturing its unique high performance, caring culture.

Watch the full CEO Dialogue to hear more from Lars Fruergaard Jørgensen on how the company succeeded in going global in the early 2000s, how he decides on where to invest in new opportunities while staying focused on core competencies and technologies, and how Novo Nordisk is nurturing its unique high performance, caring culture.

Expert

Jean-François Manzoni

Jean-François Manzoni

IMD President

Jean-François Manzoni is the President of IMD, where he also serves as the Nestlé Professor. His research, teaching, and consulting activities are focused on leadership, the development of high-performance organizations and corporate governance.

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