Pharmaceutical companies facing the challenge of business model transformation

WHAT

FUTURE OF HEALTH VISION / VALUE PROPOSITIONS / HEALTHCARE ECOSYSTEM ACTIVATION

This business transformation can be defined as the ability of an organization to continuously renew its business model platform to drive short- and long-term performance [1].

For pharmaceutical industry leaders, transforming the business is the most critical and complex challenge in the upcoming decade. To reconstruct/remodel into a high performing organization and sustainable one, leaders must renew and diversify their business model portfolio beyond drugs by building differentiating capabilities to achieve growth, outperform and stay ahead.

In this new playing field, players can’t do business alone. They must rebuild, invent, create and partner-up to deliver value. This strong change of paradigms must be supported by a clear transformation understanding.

The journey to build multidimensional business models aiming to develop valuable healthcare outcomes is currently mostly represented by dispatched efforts, sometimes clumsy. Traditional and limited business models are not equipped with the assets to adapt when facing the forces of disruption in the healthcare ecosystem (i.e. Technology, Finance, Competition, Market). Healthcare providers, from drug-, product- to service-providers, are constantly challenged to reshape their operating and business models.

However, in the current efforts to reshape, we noticed that exponential improvement is generated by 3 major drivers/building blocks: Data, Platforms and Services.

D (data)

From data collection to insights generation, data can provide strong value creation and outcomes in the final aim of improving the patient care journey, treatment and pathway. These outcomes are supported by the latest technologies using data collection, storage and insights generation through appropriately designed algorithms and indicators (i.e. AI, data mining, data lakes, etc.). These sought-after healthcare insights are already providing physicians, patients, regulators and industries with better decision-making tools progressively redistributing power across all stakeholders.

P (platforms)

Digitally enabled business models have radically made their mark in other industries but are still shy in healthcare. All stakeholders involved (industries, insurers, payers, or others) seem reluctant to embrace the disruptive change waiting to happen. Healthcare platforms are slowly starting to show the potential they can bring to improve patient care, prevention, diagnosis, treatment and aftercare. Medical technology companies must act quickly to integrate digital platforms before external technology players will dominate the healthcare digital space. Platforms have the potential to significantly increase services productivity, therefore reducing costs down the line. For example, they can help implement value and outcome-based reimbursement models as a first stage to the financial challenge in healthcare.

S (services)

With so many services being deployed every day, it can be tricky to choose the most suitable and appropriate solution. Technology is at the core of the future healthcare business model and it will support a rapid and flexible launch of services. To build the next generation multidimensional business model, services must be anchored in the customer and patient journey. In the best companies, teams (of patients, doctors, nurses, etc.) work every day alongside developers to design the tools and technology needed to improve efficiency and create therefore sustainable value. Once launched, service monitoring and iteration based on performance and customer feedback are crucial to success.

The BearingPoint Institute has conducted a survey on current business models, showing a trend of model diversification aiming for higher returns[2].

Combining business models as a route to business growth

To manage efficiently their business models portfolio(s), Pharmaceutical compagnies must transform the following two scopes to create new strategic alternatives:

  • Exploitation of current business models with the ability to transform components (one or multiple) such as type of customers, channels, customers relationships, resources, activities, partnership, etc. to outperform on the short- and mid-term.
  • Exploration of new business models with the ability to generate disruption across traditional boundaries. For established organizations, a business model renewal must be supported by the transformation of current operating models with the objective to redeploy: Utilizing existing capabilities, and, externally acquiring or/and leveraging the ecosystem to establish strategic partnerships.

When transforming an organization, innovative business models can renew mid- and long-term performance. The design of a new business model does not require the mobilization of numerous assets and investments. Key drivers can lay the correct foundations:  customer data/insights, the utilization of partner ecosystems for co-innovation, etc. Such drivers can potentiate by creating "network effects" at a large scale.

Leadership teams of pharmaceutical compagnies must orchestrated an end-to-end transformation journey to succeed in the instable environment. To address this challenge and ensure the exploration and exploitation continuum, pharmaceutical companies should:

  1. Reshape the organization strategic intent
  2. Engage the organization members and leverage competences
  3. Build or leverage 3 main capabilities:
  • Discovery capability to generate strategic insights, encompassing the global ecosystem from the traditional scope to new business opportunities. It is critical for an organization to capitalize on accelerating change by assessing its’ growth potential and identifying opportunities while evaluating partners for collaboration
  • Incubation capability to turn ideas into experimentation to apply initiatives and accelerate the iterative learning curve from pilots to business initiative accelerations.
  • Acceleration capability to leverage business size to maximize the fit with market.

While focus may be diluted on improving an organization’s quality, service, skills and culture; leaders of pharmaceutical companies must not forget that improving performance is the main objective. Transformational efforts based on specific frameworks can only be effective if stakeholders adhere to the principles. For example, leaders must identify and monitor how culture changes can increase performance by leading to faster decision-making or by enhancing creativity allowing for new revenue streams. A winning transformation effort goes hand in hand with a winning strategy, a viable organizational structure and a “continuously-improving” vision.

We hope this can help you create a better plan for transforming your organization. If you’re looking to accelerate your business transformation and innovation by an end-to-end integration, leveraging your current assets and exploring new ones, don't hesitate to reach out!

Link to first article of the serie: here.

Authors:

  1. Stéphanie Jaalouk, Consultant, Life Sciences
  2. Louis Santos, Manager, Life Sciences

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