Avoiding the Shiny Penny Syndrome of Digital Transformation

Chris Doerr, Senior Vice President, Global Generic Sourcing, AmerisourceBergen, talks about the importance of companies taking an honest view of their current-state capabilities when embarking on the digital transformation journey.

In this installment of the Harvard Business School Healthcare Alumni Association (HBSHAA) Q&A series, Chris Doerr, Senior Vice President, Global Generic Sourcing, AmerisourceBergen, speaks to Michael Wong about the importance of companies taking an honest view of their current-state capabilities when embarking on the digital transformation journey.

Michael Wong: Despite the World Economic Forum and other organizations pointing out the hype that digital plays like AI have often created across many multinational firms,1 why do you believe so many C-suites continue to chase these shiny new pennies?

Chris Doerr: C-suites need to take a candid picture of their current state to determine if they are crawling, walking or running along their digital transformation journey. There is generally an emphasis on speed with these projects, so it may be hard — but it’s an important realization — to understand if you’re crawling or walking. If you move too fast, you might not be ready to implement the technology you have invested in. The better path is to define the strategic goals which you’re striving to accomplish and then determine the technology offering(s) that will help you get there.

I recently had to consider all of this when taking over as head of our global generic sourcing team. A key imperative for my group is to ensure a quality, sustainable generics ecosystem which provides safe and effective products for patients as well as a sustainable business model for companies which support them. Typically, generics were viewed one dimensionally with a sole focus on cost. But as most people understand, there are other important dimensions including quality, availability, and sustainability to name a few.

Before COVID-19 hit, our generics team in partnership with other internal stakeholders had already started developing a database with a predictive analytics enhancement to help identify and address supply chain resilience challenges in today’s global generic marketplace. In addition to key supply chain data, we leveraged a third-party solution to factor in natural disasters as well as evolving potential market disruptions. As a result of this database, we have diversified our generics formulary offerings to mitigate risk with the goal of enabling sustainable supply for our provider customers. We are seeing some of the highest raw service levels we have seen in years for our formulary, and more impressively, we achieved this during a global pandemic. This validates the hard work and collaboration with our manufacturer partners layered on top of increased supply chain analytics and rigor. This is a lens that is a work in progress — one that we’re consistently building and measuring against the goals we set. Now that we have a foundation, we’ll look to optimize as we drive decisions.

We are also accelerating the deployment of automation solutions. For instance, one key component of our purchasing program is automating tasks like reminders, pricing bids, and shipments of goods.2 While none of these tasks are overly complex, our technology solutions work effectively, and our manufacturer partners appreciate the automation of such tasks since it makes their lives easier. Additionally, the increased efficiencies inherent in these processes allow us to deliver on our commitment to provider customers for supply surety at market competitive prices.

One mid-cap pharma client of the past once mentioned to me that her company embraced a fast-follower culture. They made a strategic decision that their relative size would not enable them to be innovators, since they didn’t have the size and scale to compete with Big Pharma. As you lead a generics business which some might classify as a “me-too-sector,” I guess your division’s business takes a fast-follower approach when it comes to deploying AI solutions?

I would disagree with your “me too” assertion since AmerisourceBergen’s focus on innovation has helped to enable us to successfully grow, and we’re now ranked within the top 10 on the Fortune 500. But how we innovate links back to my earlier point around taking an honest view of current-state capabilities. For my group, we’ve already accumulated a fairly comprehensive set of data points (upstream with the goal of tracing the supply chain from the earliest points, such as API and KSMs to finished goods) and warehoused them. And yet, while we have deployed some solutions to leverage the data, I would consider us to be in the “walking phase,” we’re not “running” just yet. We will be making some decisions around platforms and technology which can provide an array of capabilities to drive additional efficiency, productivity and enhanced decision making within our program. 

Elevating our processes is also important given the sheer volume of work. We manage a formulary with approximately 9,000 NDCs across 230 plus manufacturers. We need to review offers or address supply disruption within our PRxO formulary every single day. While competitive market pricing is very important, we also must consider supply which is often more important than price. What value is achieved in price if there is no supply available for your customers and their patients? With this increased visibility on supply chain resilience and viability, we’re reimaging how we train our team members to accommodate changes in processes and/or interfacing with new tools and tech. This talent piece is extremely important. Talent management should be the cornerstone of any digital transformation strategy.

My team comprises approximately 100 colleagues who work across global geographies and various functions. To help with their continued development in a changing workforce, we’re providing the team access to new tools and training on how to use them. We’re also investing in new experiences by encouraging the team to grow cross functionally and move across departments both in and outside the US. In turn, they’re gaining new skill sets and more importantly AmerisourceBergen is developing a pipeline of leaders who will have not only the digital tools of the future but also greater exposure to AmerisourceBergen’s vast organization.

Chris Doerr is Senior Vice President of Global Generic Sourcing at AmerisourceBergen. Prior to his current role, Chris served in a variety of leadership roles at Teva Pharmaceuticals and Cephalon. Mr. Doerr received his B.S. in Finance from Albright College and his MBA from The Erivan K. Haub School of Business at Saint Joseph's University.

Michael Wong is an Emeritus Board Member of the Harvard Business School Healthcare Alumni Association. Mike served as an Adjunct Professor at The Erivan K. Haub School of Business at Saint Joseph's University.

Notes

1. Heinz, Notger, The term AI overpromises. Let's make machine learning work better for humans instead, The World Economic Forum, September 3, 2021.

2. https://www.amerisourcebergen.com/-/media/assets/amerisourcebergen/pdf/prxo-generics-sales-aid-pharmacies.pdf?la=en&hash=478EC963BAF7D77E6A4C3105B691C888D161EC8A