In the seat of the CEO: You are the CEO of a midsized, publicly traded pharmaceutical maker based in the Midwest. While your firm produces more than 100 different drugs, it has become increasingly dependent on its runaway best-selling product, one of the top cholesterol-reducing drugs in the industry.

The drug, which last year enjoyed a 60 percent market share, is responsible for 80 percent of the company's profits. However, its share has fallen dramatically, as has investor confidence in your firm. The firm's stock price has plummeted approximately 50 percent from its recent highs, and with the stock slide, you have gone from hero to goat. Half a dozen Wall Street analysts have downgraded your stock, and the board is all over you, demanding to know what you intend to do about it.

What's behind the precipitous drop in market share? A supplement manufacturer (a company that was not even on your competitive radar screen) has produced a new supplement that has threatened your hold on the market. The new supplement contains antioxidants, garlic, ginger, and other curative herbs, and it appears to reduce cholesterol in middle-aged men and women without the side effects of drugs. To make matters worse , the retail price of the supplement is less than half the price of your fading star, and it requires no prescription.

Although you had heard talk about the therapeutic effects of herbs in reducing cholesterol, your key researchers advised you not to "concern yourself" with such alternatives. They agreed (as did your key managers) that garlic, supplements, and other such "mumbo jumbo" were nonsense , and would never catch on as viable competitors . The sole dissenting voice in your firm was a junior researcher, but no one took him seriously enough to listen to him, despite his MIT degree.

The judgment of your management team appeared to be correct—until about 6 months ago, that is, when the supplement started to steal market share from your drug. Thanks to a two-page story in a national magazine (as well as Internet chat rooms that talked up the new "medical breakthrough "), the supplement took off. After the competing product reduced your market share by a third, you did some research of your own, and you discovered that, incredibly, there are more than 10,000 web sites devoted to cholesterol and its effect on health (including tips for reducing cholesterol, drug therapy , etc.).

Your new-product pipeline is relatively empty, and there certainly is nothing in it that can replace the lost revenue. Unless you are able to turn things around, you will report the worst financial quarter in the company's history. This will probably mean that the company will have to close plants and lay off thousands of workers. Where did you do wrong? Could this have been prevented? If so, how might it have been? And what do you do now?

What would Andy Grove do?