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Optimally designed SSO program can allow companies to deliver therapies to patients faster and at a more affordable cost.
Pharmaceutical leaders are at the center of extraordinary changes, with COVID-19 forcing them to re-evaluate their strategic roadmap and plans to remain competitive within the rapidly transforming industry. Expectations from patients, regulators, and the general public have increased significantly, due to the rapid development of the COVID vaccines. There is now a broader belief within the industry that it can be more agile than before in developing and delivering much-needed medicines safer and faster.
As industry leaders prepare their organizations for improved competitive positioning in the post-pandemic era, they are faced with several old and new challenges:1
Targeted and coordinated efforts to overcome these challenges can provide significant opportunities and allow the industry to transition to the next decade of growth. Leaders within the industry have started to channel their focus on some strategic priorities to convert these opportunities into competitive benefits as described below:
Many large pharma companies are trying to utilize the momentum in R&D across oncology, gene therapy, cell therapy or gene-modified gene therapy, DNA/RNA therapeutics, and monoclonal/conjugated monoclonal antibodies.2 Toward generating capital for these investments, industry has seen an increase in spinoffs (in addition to M&A) of units that are growing slower or have become less strategic for the company’s future growth plans.3 Some examples are Merck’s plan to spin off its women’s health, biosimilars, and legacy products business, and Novartis’ strategy to split from Alcon and consideration of separation from its consumer unit, Sandoz.
Rapidly evolving digital technologies across AI/ML and natural language processing (NLP) and cloud-based platforms are allowing fundamental transformation of core functions within pharma (e.g., digital clinical and digital commercial). These advancements are providing data visibility and predictive analytics/insights for real-time decision-making for improved operational performance and customer satisfaction (e.g., virtual/decentralized clinical trials that allow more effective end-to-end patient management for improved patient recruitment, retention, and overall satisfaction).
New and evolving collaborative models that are rapidly growing between pharmaceutical companies, regulators, patients, and providers such as the recent ones that allowed the industry to develop and deliver the COVID vaccines within unprecedented timelines.4 Collaborations between pharma and big technology companies can also be a source of growth and innovation for pharma. A recent example is the collaboration to leverage quantum computing to accelerate R&D between Boehringer Ingelheim and Google.5
Being at an influx point and undergoing broad-based transformation, it seems timely for the industry to leverage some of the key observations from Michael Porter’s landmark paper on competitive advantage6 and Jay Barney’s Firm Resources and Sustained Competitive Advantage.7 The relevance of these observations to the industry’s current priorities and efforts can be summarized along three key factors:
Companies have outsourced business process management/services and technology primarily as a cost-saving strategy over the past decade.9 But industries have realized that ownership of all capabilities alone is not critical; the ability to control and leverage the most use of its critical capabilities, whether they own the capability or are owned by their partners, is equally important.10
Increasingly, organizations have been leveraging their partners for operational improvements, such as automation and migration to cloud. The trend is further shifting as they plan to accelerate transformation projects and anticipate relying on service providers more heavily in the future. This approach is complementary to their strategy of building their internal capabilities across people, process, and technology for driving strategic innovation and transformation programs.
Sourcing and outsourcing can provide significant contributions to a pharmaceutical company’s competitive growth objectives, provided they are considered strategic and designed, and implemented from this perspective.
Based on some of the best practices from our own experiences in the design and implementation of SSO programs for many life sciences clients, we have outlined a stepwise approach and key activities to realize the sustained benefits of SSO:
Finally, in a true SSO scenario, both the organization and its providers can incorporate some of their key partnership objectives into the performance goals of their core program teams to ensure that SSO programs and partnerships deliver sustained competitive advantages and benefits to both organizations (see Figure 8 below).
In conclusion, we are in an exciting stage of transformation across the pharmaceutical value chain, with tangible options for leaders to improve their competitive positioning and to deliver on many of their stated strategic objectives in enhancing patient health. As they lead their organizations through the transformation journey, they can leverage the expertise and the willingness of their sourcing and outsourcing partners in sharing the risks and rewards as well. An optimally designed and strategically driven SSO program can make meaningful contributions to the industry’s growth objectives and allow companies to continue their focus on delivering safer and highly effective medicines to patients faster and at an affordable cost.
Krishnan Rajagopalan, PhD, is president of Life Sciences – Sourcing Advisory and Consultancy Services