Shifting the operational model in pharmaceutical sales and marketing: An entrepreneurial approach

Martin Hogan and Christopher Williams

Glengarrie Consulting and Amsterdam Business School

Pharmaceutical sales and marketing: a troubled arena

The problems facing the industry, both from external forces and internal operational challenges are many and manifest. The industry is wrestling with portfolio changes across the board – a distinct shift for most from a GP, primary care led portfolio to specialist, secondary care based, and the rate and pace of these shifts is being felt everywhere.

Some of the questions being asked at country and above country level are:

How do we compete against strongly entrenched players in what is, for us, a new area?

• As we move from primary to secondary care, will the current sales model be effective? To what extent is the current sales model adaptable? Half broken? Completely broken? Can we retrain our best reps to be competitive in this new environment? Should we retrain or should we hire to a completely new profile?

What new model is best suited? KAMs? Reps? KAMs plus reps?

How do we measure success? The traditional data sets are becoming increasingly irrelevant and there seems to be little by way of equivalent data available or on the horizon. Distribution channel measures don’t stack up as the new chain is far more diffuse. What KPIs do I put in place? How do I measure them in a cost effective way? What are the new key growth drivers? Can I put fair and transparent reward structures in place? How well am I competing? How do I know?

A myriad of new questions, and all valid, but at the heart of these insecurities lie a few operational truths that Pharmaco’s need to wrestle with:

• There are far fewer decision makers in specialist care than in primary: Each call on a decision maker is more difficult to acquire and manage yet at the same time, more valuable. As a result of this, the outcome of all of customer interactions is, by the very nature of the changed environment, more binary.

• There is no longer the traditional industry comfort blanket that allowed a mindset of ‘there are plenty of prescribers out there – we cannot win them all’ and ‘ we only need 20% of potential prescribers to support us for us to make our targets’.

To answer these challenges, we have seen most Pharmacos undergo massive structural change and roll out new training programmes. Belief seems high at management level that these changes will equip the organization to take a lead role in their respective competitive space.

Critically, research has shown that in response to change “Execution is a notorious and perennial challenge. …As long as companies continue to attack their execution problems primarily or solely with structural or motivational initiatives, they will continue to fail.” *

 

“Execution is a notorious and perennial challenge. …As long as companies continue to attack their execution problems primarily or solely with structural or motivational initiatives, they will continue to fail.”

 

Measures will be put in place to manage the process of change and interaction. These will typically fall into 2 categories: the EFFECT of activity (Sales, market share, evolution indices, adoption profiles, prescribing propensity etc.) and EFFECTIVENESS measures (Message recall, SOV, promo trackers, rep effectiveness programmes etc.). All of which are necessary and valuable. But, here is the point: EVERYONE is doing this – it is a base cost of doing business.

Overall, there is very little going on that is innovative, that looks for new and more effective operational initiatives, that is, by its nature, purely commercial or even entrepreneurial. In our view, it is an entrepreneurial mindset that will enable operational differentiation.

Shifting to an entrepreneurial mindset

Entrepreneurship is a process of identifying, evaluating and exploiting opportunity. In complex and turbulent industry environments, organizations that are good at identifying, evaluating and exploiting opportunities tend to out-perform the rest. The environment for sales and marketing within the pharmaceutical industry is, as we have seen, in just such flux. Many Pharmacos have been slow to adapt to these changes and challenges.

One solution that has been largely overlooked is for these organizations to shift to a more entrepreneurial culture, a mindset that encourages identifying, evaluating and exploiting untapped opportunity.

Opportunities do exist for addressing the challenges facing pharmaceutical sales and marketing. But, where do these opportunities exist and how can they be evaluated and exploited?

Agents, technologies and knowledge external to the firm may hold the key to answering the questions above.

 

“…it is an entrepreneurial mindset that will enable operational differentiation.”

 

Conversely, the answers may lie internally: a best practice that remains isolated, and has not been diffused effectively.

We see four key capabilities that will encourage a pharmaceutical sales and marketing organization to become more entrepreneurial and thus better positioned to succeed within its troubled environment:

Knowledge sharing: more effective diffusion of knowledge is needed, specifically knowledge surrounding newly identified opportunities. This goes beyond communicating and sharing of knowledge about the existence of opportunities. It also relates to knowledge about the evaluation schemas used by decision-makers when assessing the commercial potential of new ideas, as well as solution-specific knowledge: i.e., how to exploit the opportunity. These types of knowledge tend to become outdated very quickly in fast-moving environments and constantly need to be “refreshed”.

Horizontal relations: flatter structures, and a de-layering of authority, will support entrepreneurship within the organization. Horizontal structures encourage direct interfacing between peer groups, and a reduction in reliance on overloaded managers to filter knowledge. Empowering FLSMs and customer facing personnel to experiment with new ideas, to try things out – albeit within defined parameters – is vital to instilling an entrepreneurial culture. The learning that is gained through experimentation and “piloting” of new ideas is a critical first step in evaluation and deciding whether to commit resources to large scale exploitation.

Building and replenishing networks: building networks both internally and externally is also crucial to effective opportunity identification, evaluation and exploitation. External networks include key opinion leaders, patient groups, insurance companies and reimbursement agencies. Internal networks include those in R&amp,D, operations, procurement, HR and finance. The sources of new opportunities are difficult to predict but without strong network ties, pharmaceutical sales and marketing organizations will remain blinkered.

Speed of response: there is little point in sharing knowledge of opportunity, of instilling horizontal structure, and of building internal and external networks, if the organization is then unable to respond quickly enough. Having a formalized process for coordinating entrepreneurial initiatives and capturing emerging knowledge of entrepreneurial opportunities is vital. Part of this must include conducting frequent evaluation – within involvement of senior management – and developing procedures for capturing and appraising knowledge of entrepreneurial activity.

Figure1

Figure 1 – The choice facing pharmaceutical sales and marketing

What does a shift to an entrepreneurial mindset mean in practice?

We strongly believe an entrepreneurial mindset in pharmaceutical sales and marketing is operationally feasible. To some extent we do see it, albeit in small numbers, and in some isolated parts of the organizations that we are familiar with.

First and foremost, the shift to entrepreneurial logic requires leadership. Entrepreneurial leaders can provide the conditions for effective knowledge sharing, decentralization, network development and speed of response. Good leaders will legitimize these capabilities and embed them within the organization.

Secondly, becoming more entrepreneurial does not mean the organization should dispense with all of its recent changes, established infrastructure and systems…at least not immediately. These investments are likely to be good sources of learning and opportunity.

 

“We strongly believe an entrepreneurial mindset in pharmaceutical sales and marketing is operationally feasible.”

 

Thirdly, incentives can be put in place to encourage the sales force to engage in building entrepreneurial capabilities. Some ‘lead change agents’ are likely to emerge, others will retain the traditional mindset. Organizations that are serious about instilling entrepreneurship will reward those who contribute to identifying, evaluating and exploiting new opportunities.

Finally, there are tried and tested operational methodologies that can be easily put in place and implemented- the gains are immediate in terms of buy in at all levels and ease of management, with commercial gains not far behind.

Importantly, those organisations that put these heterarchical communication strategies in place have shown greater increase in commercial and motivational metrics than their competitors, making this area a critical part of any sales and marketing strategy.

References:

*Gary l. Neilson, Karla l. Martin, and Elizabeth Powers – Harvard Business Review, June 2008, The Secrets to Successful Strategy Execution.

About the authors:

Christopher Williams Ph. D. is Assistant Professor of Strategy in the Strategy and Marketing Section at Amsterdam Business School where he teaches in the areas of Strategic Management and International Business. His research interests include: entrepreneurship in international firms, knowledge creation and transfer in international firms, and offshore outsourcing of knowledge-intensive work. His work is regularly presented at international conferences and published in academic journals such as Research Policy, Journal of World Business, International Business Review, R&amp,D Management, Journal of International Management and Journal of Interdisciplinary Economics.

Martin Hogan, MComm is Managing Director, Glengarrie Consulting. Martin has over 25 years of experience in the pharmaceutical industry. He held country management and above country management positions in the industry before moving into the service sector, where he has been for a decade, delivering strategic and operationally based projects for many companies in over 25 countries across the globe. He has extensive experience in multiple brand launches and has worked intensively on all different phases of brand life-cycles. He has vast experience in strategy development and implementation, portfolio development and management, brand performance management, KPI development programmes SFE implementation and promotional strategies. Martin holds degrees in law, business administration and a Masters Degree in Marketing.

For enquires in relation to this article, please contact Martin by email at martin@glengarrie.com or by telephone on +44 1491 629689.

© Martin Hogan and Christopher Williams