Digital Transformation: What's the Cost of Doing Nothing?

May 23, 2018

Major pharma companies would be remiss to sit back and watch startups and Big Tech transform the landscape around them. Right now, the smartest incumbents are channeling the forces of disruption to their own ends, leading digital transformation in order to avoid ultimately being left behind.

How can these major pharma companies avoid irrelevance in a time of overwhelming change? While there is no “right” answer or “one-size-fits-all” solution, we took a look at what they’re currently doing to help better assess the landscape. First up, J&J.

While this pharma giant’s scale was once considered a liability to innovation, Johnson & Johnson has made aggressive changes to position itself as a leader in the industry’s digital transformation. An Innovation division was founded to break down silos, explore new partnerships, and incubate ideas to positively impact all aspects of human health. The division’s bold moves are now beginning to make headlines. The company joined a revolutionary FDA program to fast-track digital health applications while simultaneously rolling out an omnichannel Health Partner platform that has the potential to set a new gold standard for digitally-enabled, patient-centric care, regardless of condition.

The other household name, Pfizer, has taken a relatively cautious, measured approach, focused less on breakthrough transformation and more on delivering greater value and efficiency within existing business models. Notably, the company has made significant strides in digitizing their global supply chain. Their IBM Watson partnership is uncovering new applications of AI ranging from drug discovery to patient diagnosis. Pairing AI with rich data from wearables and biosensors also helps improve patient outcomes.

Merck, on the other hand, leverages an entrepreneurial spirit to drive its digital transformation strategy. Through the Merck Global Health Innovation Fund, the company has cultivated a strong portfolio of startups that will play a key role in reshaping the digital health landscape. Merck recently announced its fourth “health innovation hub” to be located in Austin, Texas, partnering startups with academia to develop new solutions. Believing that data is “the currency of healthcare,” Merck is focused heavily on merging existing with new data sources to accelerate clinical trials and improve quality of care.  Innovative AI-driven models for drug design are emerging through partnerships with firms like Atomwise and Numerate.

Last up? AbbVie, which spun off from Abbott Laboratories in 2013. The new company restructured to place patient-centricity and innovative thinking at its core. This decision is now paying dividends as AbbVie shows great momentum, being recognized as a medical innovation leader and potential model for how modern pharma companies should operate. Much of their success is attributable to an impressive drug portfolio and robust pipeline. AbbVie shows unique prowess for transforming products into services that enhance the patient experience. Humira, for example, incorporates mHealth apps and IoT to provide ongoing support and resources across the full treatment journey.

Despite the different company approaches, there are a few guiding principles that they should all keep in mind to stay ahead of the game:

Strike a careful balance. To stem the tide of disruption that threatens to steal growth and momentum one brand at a time, pharma giants must commit firmly to innovation across the board. However, it is critical that pharma companies maintain their existing digital efforts until viable new service models emerge.

Keeping this balance can be quite a challenge.  Faced with a choice between optimizing an existing campaign with success a near-certainty versus spending the same funds on exploring potentially transformative yet unproven new service models, the choice for most pharma CMOs is clear.

Investments in SEO/SEM and display ads will remain hugely important as they play a key role in converting unbranded searches about conditions into awareness of the brands designed to address the conditions. Likewise, smart social tactics will remain valuable despite regulatory challenges.

Nonetheless, these types of investments will do little to sway consumers when faced with alternatives that place them in control of their conditions. Pharma companies need to ensure that separate budgets are allocated towards keeping their brands at the forefront of the innovation wave.

Patient-focused digital transformation.  While it’s easy to chase technology advancements as a way to stay current, breakthrough innovation comes from a deep understanding of a patient’s treatment journey.

Today’s typical journey entails navigating a series of disconnected parties – doctors, pharmacies, insurers – each one requiring the patient to adapt, rather than they themselves adapting. Patients can feel like cogs in a complex machine.

In tomorrow’s journey, all of these parties will be unified into a single service, orchestrated around key moments along the patient’s continuum of care to ensure positive outcomes. Mobile apps and web portals will keep treatment on track, while biosensors and AI will provide clinicians with rich data and insights to enable delivery of timely, personalized patient-care decisions.

Invest in operational efficiency. Beyond the patient experience, pharma giants must also identify operational areas where new technologies can help increase competitive advantages. Many have made major investments in AI and blockchain to accelerate clinical trials, aid drug R&D, and optimize supply chains – making it all the more important for other pharma companies to watch the competition and match their efforts to avoid being left behind.

Digital strength is the most important determinant of business health and future growth not being measured or managed by enterprises today. Managing against this measure is essential for all businesses that want to survive.

Not only do we believe these companies should be tracking their Digital Strength, they should also approach digital the same way that digital businesses do: build digital scale and strength before pursuing monetization. All too many traditional corporations make the mistake of applying the same metrics and hurdle rates to digital as they do to their other channels.

Companies need to rethink how they develop business cases for possible digital investments.

To properly account for the disproportionate impact of digital on future revenues and shareholder value, companies need to value digital revenue and digitally-influenced revenue higher than traditional channels.  They need to consider whether a loss of market share is an indication that they are not investing enough in digital. Few business cases include the cost of doing nothing, but they should.

Tony Owens is Director, Experience Strategy & Design, Isobar US.

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