Roche Holding AG

Roche invests $15+ billion annually in R&D - approximately 30% of revenue, among the highest in any industry. The Swiss pharmaceutical giant maintains a pipeline of 100+ drug candidates at various development stages, embodying a controlled high-mutation rate strategy where 90%+ of experiments fail but successful drugs generate massive returns. This is stress-induced investment: when facing competitive threats like patent expirations, R&D investment increases rather than decreases.

But Roche also demonstrates modularity in knowledge-intensive organizations. The company organizes primarily around therapeutic areas (oncology, immunology, neuroscience) rather than development stages, allowing deep disease expertise to accumulate. This modular structure enables selective integration where it creates value - like companion diagnostics connecting therapeutics and diagnostics. The Herceptin/HER2 testing combination exemplifies how integrated solutions (tests identifying patients likely to benefit from specific drugs) can exceed the value of modular separation.

Roche also uses acquisition as horizontal gene transfer - rapidly acquiring complex capabilities through M&A (Genentech for $47B in 2009, Foundation Medicine for $2.4B in 2018) that would take decades to develop internally. The lesson: high mutation rates work when you can afford massive failure rates and when occasional successes generate asymmetric returns. Pharma's economics - billion-dollar drugs from million-dollar experiments - make this viable.