Implement digital for growth and profitability
Although many pharma companies recognise the power of digital initiatives and have transformation underway, some are unsure how far to take the process. Jan Ising outlines the benefits of such change.
Pharma companies know that their current challenges – expiring patents, ageing populations and regulatory pressure to demonstrate outcomes – can become exciting new opportunities if they embrace a digital approach. However, many are unsure how broad the scope should be. The answer is not definitive and depends on circumstances and specific market situations. However, experience suggests that partial efforts at digitisation, especially when it comes to optimising cost position, will only take you so far.
Unlocking full value
New, digitally disruptive business models will reap the greatest benefits. Without them, research suggests, they could be putting 11% of current profitability at risk. With them, however, they could grow profitability by as much as 27%. And fast movers could generate a profitability boost of as much as 61%.
Continuing with ‘business as usual’ is not an option. Speed is essential now that competitors are stepping in, many of them unencumbered by the pharma industry’s traditional development processes and timelines – Note the recent forays into the healthcare space by technology giants including Google, Apple and Samsung. The opportunities for growth are relatively significant, estimated at an additional $75 billion, or 10% of current market size, by 2020.
Core markets will be cannibalised
Even established, traditional products and services won’t be immune to the new models built around personalised, predictive healthcare that the digital disruptors are touting. Within the next five years, a significant portion of the market growth that new business models drive will eat into current core markets.
The consequences for the remainder with non-digital models could mean that, by 2020, they could be putting current profitability at risk, most of it lost to cannibalisation. They’ll also forego opportunities to improve profitability, having missed the chance to reduce costs through partial digitisation.
Many companies have digitally updated key parts of their value chains – often around the customer experience in particular – to connect with patients directly and enable them to manage their own care. Sanofi, for instance, leverages apps and social media to give diabetes patients more control over an integrated user experience.1
Such partial initiatives will help reduce costs and can also help a company retain its independence. Moreover, digitising manufacturing and supply operations, along with marketing and sales, can drive even more value. Research suggests that it can boost profitability by as much as 21%, or most of the overall increase of 27% that partial digitisation can achieve throughout the value chain.
Yet partial digitisation only buys a little time. So many mainstream players are now implementing similar initiatives that the advantages they deliver will soon be commonplace. Partial digitisation can be used as a learning curve, but remaining relevant in the longer term will necessitate more radical measures.
Growth and profitability opportunities are greatest in core markets that address patient treatment and care. But that could change quickly as digital technologies are already driving new business models addressing, for example, the adjacent fitness and youth markets. Look at the proliferation of technology companies offering wearable digital devices that measure vital functions. Combining these with the right analytics capabilities to develop new and personalised health solution is the new gold vein in the industry.
Another example is Palantir Disease Response, which is providing public health organisations with the data and advanced analytics needed to identify the sources of disease outbreaks and coordinate tactical responses.
If these new markets take off, companies that restrict their digital initiatives to traditional core areas risk losing out. Secure a leading position by scaling up swiftly.
Only digital all-rounders can hope to become proactive digital leaders. They achieve this by combining partial digitisation with new business models that address new market opportunities. This will not only grow revenues faster – by as much as 35% – but could also improve today’s profitability baseline by as much as 61%.
Only those investing before both existing and new competitors will be able to establish the nucleus for the next generation of industry-dominant business models. But recognise that building a new business model is a process: build, ship to the customer, measure success, and learn from mistakes.
To become a digital all-rounder:
• Provide clear guidance from the top. Digital requires the same attention from top management as any other strategic initiative. Every executive needs to make digital a priority and remove obstacles.
• Address the market as a whole. Seek to create value for the entire health ecosystem, from prevention and care in core markets to offerings for others.
• Look for market growth. Think disruptively. Make a completely new attempt to drive success, even if you don’t yet have the performance metrics to prove its worth.
• Learn, share and partner to create new business opportunities and wider value. Consider Pfizer, for example, which has joined up with the startup, Akili Interactive Labs in a clinical trial to evaluate whether a video game can be used to predict Alzheimer’s disease.
• Foster a digital culture and mindset, and build required skills. Find ways of making life sciences attractive to talent with proven digital skills.
Positioning to win in the outcomes-driven life sciences markets of the future will be challenging. But by thinking creatively about what makes your company unique in the marketplace, attracting the digital talent needed to transform capabilities, and committing to implement digital business models can leverage your assets and give a lasting advantage.
1 Sanofi Diabetes ecosystem consists of multiple sources; product website (e.g. Lantus), Diabetapedia website, blogs, GoMeals app, iBGStar app, Facebook, Twitter.
About the author:
Dr Jan Ising is managing director at Accenture Strategy, with over 10 years of experience in life science and healthcare, focusing on global pharma companies, as well as payer associations. His interest lies in the intersection of new commercial models, digitisation and corporate transformations.
He leads the company’s European Life Sciences team. Prior to this, he was an associate principal at a top strategy consulting firm. He holds MA and PhD degrees in Economics from Witten/Herdecke University in Germany.
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