To succeed in the long-term, pharmaceutical companies must navigate in an evolving ecosystem leading to new opportunities. The industry faces disruption from various sources creating a challenging business environment.

Amongst others, the industry is experiencing disruption in 4 key areas: Market, Finance, Competition and Technology. In a world where countries healthcare systems are under pressure as a result of an ageing population and where increasingly more people are living with long term chronic conditions, companies are needing to adapt and innovate as they operate in markets where they now face greater price scrutiny from payers and where cost containment initiatives are actively promoted.

The industry is witnessing a shift in the competitive landscape as new players such as tech giant’s Amazon and Google are entering the market and beginning to challenge the traditional big pharma business model as well as smaller start-ups who are looking for a slice of the pie. Sitting above these evolving trends is a digital revolution where advances in new technologies such as VR, AI, IoT, blockchain, 3D-printing, etc. are offering new business options for stakeholders and are also enabling pharma to provide patients with continuous connected care throughout the patient life cycle.  

In this first article of a three-part series we seek to understand exactly why Pharma need to start effectively innovating their current business model. We explore why it is necessary to construct an innovation lab that is built on a solid framework and why embedding one within a company, if done properly, can reshape a business and enable pharma to adapt to current trends and maintain a perpetual winning transformation.

Why does pharma need to think about innovation labs?

To address these challenges and to retain a competitive advantage over their new and existing competitors, Pharma must diversify their innovation capabilities and tools to progress from classical R&D and transform their entire business model and generate new ones. Such innovation tools can take various forms such as platform innovation (open or not), incubators, partnerships, start-up promotion, innovation spaces and hackathons etc. These innovation tools are deployed from an event to a structural approach and from an isolated to a coherent approach of each innovation tool.

These initiatives can be in place to support a plethora of corporate functions and objectives ranging from corporate communication, to market access strategy and investment support research to ensure relationships with local payers, to transforming company culture from within and developing new ways of thinking, working and performing internally and externally.

Figure 1 : Diversity of innovation capabilities

An innovation lab can serve multiple functions and satisfy all the above corporate challenges and needs for innovation if appropriately constructed. Executives and industry leads are realising that they need to innovate and do things differently in order to remain competitive and succeed in the evolving pharma landscape. Out of the box thinking and ideation enabled by a structured innovation lab can enhance and build upon the capabilities already possessed by an organisation to deliver upon the need to transform current business models and influence short- and long-term business performance.

A number of big pharma names have already dipped their toe into this space. For example, the Biome network of Novartis, a digital innovation powered by the company, has the ambition of empowering and engendering health tech companies and people passionate about disrupting healthcare through the use of data and digital technologies. It connects with external innovators in multiple ways, including issuing challenges through an initiative called the HealthX World Series which proactively scouts for technology, and taps a large network for referrals [1].

Sanofi have also created their own physical innovation lab on its campus in Gentilly with the ambition of advancing its e-Health work in France. The lab aims to connect Sanofi employees with representatives from a wide variety of other companies and stakeholders, including start-ups, schools, incubators and large companies within the eHealth ecosystem. Since December 2017, 10 digital solutions, based on different digital technologies, are in development at this incubator (a conversational agent, algorithmic platform, diagnostic assistance solution, etc.) and the lab claims to provide a scalable offer of services and training to accelerate their ambitions in e-health [2].

Alternatively, companies such as Servier in the form of WeHealth and Urgo tech from Urgo have created dedicated business units within the company to propel innovation within their companies.

Innovation lab expectations are high and the requirements and effort to design, launch and sustain an innovation lab are quite challenging. It is reported that as many as 90% of innovation labs [3] close after just a few years due to a lack of impact. Often innovation labs fail because the lab doesn’t have a strong alignment to serve company ambition, or because the correct level of governance, management, team or resources are not properly assigned. In essence, innovation labs are destined to fail if the appropriate strategic framework is not in place and the ambition, mandate & strategic objectives of the lab are not clearly defined.

To survive and thrive in the future, innovations labs will need to deliver sustainable value for a company, for which this is a critical challenge for most labs. Outcomes driven innovation, as a minimum, requires a pragmatic and practical approach to stakeholder management and expectation setting, and also the ability to build strong relationships and deliver results to move the business forward.

In our second article, we explore what an innovation lab is, its ambition, its objectives and the core activities performed by the lab to reach the desired outcomes.



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