Download Driving Digitization in Life Sciences

All to win? Or all to lose?
Driving digitization in Life Sciences
By Dr. Jan Ising & Kenneth Munie
Accenture Life Sciences
Rethink Reshape Restructure…for better patient outcomes
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All to win? Or all to lose?: Driving digitization in Life Sciences
Driving Digitization in Life Sciences
Digitization ought to be a no-brainer for life sciences. Accenture
research shows that digitization will be fueling almost one-third
of the growth and an estimated 40% of the profitability in the
pharmaceutical market by 2020 (See about the research).
Plenty of mainstream pharmaceutical companies recognize
the power of digitization. They know that it can help turn their
current challenges—expiring patents, aging populations, regulatory
pressure to demonstrate outcomes, and consumer pressure to
control their own healthcare—into exciting new opportunities.
But although many have launched digital initiatives around the
customer experience and enterprise operations, most still wonder
just how digital they should seek to be.
To unlock digitization’s full value potential pharmaceutical
companies will need new, digitally disruptive business models.
Without them, we estimate they could be putting 11 percent of
current profitability at risk. With them, however, any company,
regardless of size, could boost its profitability by as much as
27 percent. And fast movers could generate a profitability boost
of as much as 61 percent. Speed, indeed, is of the essence.
The answer, of course, depends on each organization’s particular
circumstances and specific market situation. Our research clearly
shows, however, that partial digitization measures will only take
you so far.
Digital Strategy Framework­
Digital
Customer
Digital
Business
Strategic Options
Partial Digitization: Realize EBITDA
opportunities through digitization of
existing value chain
1
Digitize Customer
Experience
Disrupt (Sub-)
Market(s)
External Focus
2
Digital
Enterprise
2
New Business Models: Realize EBITDA
opportunities through development of
new revenue streams enabled by a new
value chain
Value Areas
Digital Customer: Apply digital technology
to address customers in a more sophisticated
way to increase revenues and profitability
Digital Enterprise: Decrease costs of the
existing value chain’s primary functions (e.g.
R&D) as well as support functions (e.g. HR)
1
Digitize
Operations
Internal Focus
Source: Accenture Strategy. Copyright © 2015 Accenture. All rights reserved.
Digital Business: Digitize your current
business model or develop new business
models generating profits based on
digital technology
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All to win? Or all to lose?: Driving digitization in Life Sciences
Business as usual is not an option
The life sciences core markets—products and services that address patient
treatment and care—are under increasing threat, and small wonder.
The opportunities for growth are still relatively high in these
markets: we estimate additional volume growth of US$75 billion
(or 10 percent of current market size) by 2020. And competitors—
many of them new entrants, unencumbered by the pharmaceutical
industry’s traditional development processes and timelines—are
pouring in. Witness, for example, the recent forays into healthcare
by technology giants including Google, Apple and Samsung.
However well established your traditional products and services
may be, they won’t stand a chance against the new business
models built around personalized, predictive healthcare that
these digital disruptors are touting. Over the next five years,
$75bn
The opportunities for growth are
high in the industry’s core markets.
we estimate that most of the market growth new business
models drive will be due to cannibalization of current, core markets.
And the consequences for those still saddled with non-digital
models will be dire.
Indeed, retaining the old ways of doing things could be considered
tantamount to telling investors you’re exiting the sector. By 2020,
you could not only be putting current profitability at risk (most of
it lost to cannibalization via new business models). You will also
forego opportunities to improve profitability, because you will have
missed your chance to reduce costs via partial digitization.
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All to win? Or all to lose?: Driving digitization in Life Sciences
Digitize partially—to buy some time
Many companies have resolved not to miss that opportunity.
They’ve responded to the threat to their core markets by digitizing
key parts of their value chains—and the customer experience in
particular—to connect with patients directly and enable them to
manage their own care.
Sanofi, for example, leverages apps and social media to
give diabetes patients more control over an integrated user
experience.1 Novartis, meanwhile, has developed an online
platform that gives younger multiple sclerosis sufferers control
over a comprehensive, personalized, online support program.2
can drive even more value—boosting profitability by as much
as 21 percent, or most of the overall increase of 27 percent
that partial digitization can achieve throughout the entire
value chain including corporate support services, according
to our analysis.
Such partial digitization initiatives will not only help reduce costs.
If speedily implemented, they can also help a company hold
its own. After the launch of Novartis’ “Hey MS” program in the
first quarter of 2013, for example, sales of its Gilenya MS drug,
previously flat, rose by more than 10 percent.3 And digitizing
manufacturing and supply, along with marketing and sales,
Even so, our research also indicates that partial digitization
will only buy you time: so many mainstream players are now
implementing similar initiatives that the advantages they deliver
will soon be commoditized. You can use partial digitization as a
learning curve. But remaining relevant for the longer term will
require additional, more radical measures.
21%
profitability boost by digitizing
manufacturing, supply, marketing
and sales.
Sanofi Diabetes ecosystem consists of multiple sources; product website (e.g. Lantus), Diabetapedia website, blogs, GoMeals app, iBGStar app, Facebook, Twitter.
http://www.gilenya.com
3
http://www.drugs.com/stats/gilenya
1
2
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All to win? Or all to lose?: Driving digitization in Life Sciences
Scale up—to maximize competitive advantage
As we’ve seen, growth and profitability opportunities are greatest
in core markets that address patient treatment and care.
But that could quickly change. Digitization is already driving
new business models that address adjacent markets around
living longer and staying fit and youthful: hence, for example,
the proliferation of technology companies and start-ups offering
wearable digital devices that measure vital functions. It’s also
forging new models that transform digital capabilities, and
data in particular, into offerings for other players.
Digital disruptors are setting the pace in both of these
burgeoning spaces. Proteus, for example, develops “digital
medicines”, sensor-equipped pills that give physicians insight
into patients’ daily health habits.4 Palantir Disease Response
gives public health organizations the data and advanced
analytics they need to identify sources of disease outbreaks
and coordinate tactical responses.5
http://proteus.com
http://palantir.com
6
Accenture Predictive Health Intelligence, 2014
4
5
While Explorys provides a Big Data analytics platform aggregating
anonymous information from millions of patients to measure
the effectiveness of different treatment approaches and generate
insights into solutions with the potential to improve outcomes.6
If the new markets that these business models address really take
off, companies that restrict their digital initiatives to traditional
core markets clearly risk losing out. To secure a leading position
for the future you need to scale up—and swiftly.
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All to win? Or all to lose?: Driving digitization in Life Sciences
Becoming a digital all-rounder
Our analysis shows that only digital all-rounders can hope to become
proactive digital leaders. They achieve this by combining partial digitization
with building new business models that address new markets.
Our research indicates they will not only grow revenues faster (by as much as 35 percent). As we’ve seen,
they could also improve today’s profitability baseline by as much as 61 percent. It’s critical to move quickly.
Only those players investing before both existing and new competitors will be able to establish the nucleus
for the next generation of industry-dominant business models.
But it’s also important to recognize that successful digitization doesn’t hinge on getting it right first time.
Building a new business model is a process: build, ship to the customer, measure success, and learn from
mistakes. Pharmaceutical players need to regain their confidence in that process, and drive their digital
initiatives to the next level.
Top 25 pharmaceutical company digitization impact
EBITDA impact, 2015-20 in millions of USD
Revenues
EBITDA change
EBITDA change
-11%
EBITDA
EBITDA change
+27%
+61%
13,500
10,000
9,500
8,900
3,400
Baseline Top 25
pharmaceutical
company*
4,370
3,025
Businessas-usual
Partial
Digitization
*Representative of Top 25 with annual revenues of $10B.
5,490
Digital
All-rounder
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All to win? Or all to lose?: Driving digitization in Life Sciences
The following considerations will help to become a digital all-rounder:
Provide clear guidance from the top.
Digital is here to stay. It needs the same top management attention as any other
strategic initiative. Installing a Chief Digital Officer is not sufficient. Every executive
needs to make digital a priority and act as an obstacle solver.
Address the market as a whole.
Seek to create value for the entire health ecosystem—from prevention and
care in core markets, to offerings for others. Consider, for example, how Merck’s
spin-off Vree Health helps healthcare organizations meet patient engagement,
accountable-care and care coordination goals.7
Look for market growth.
If you target the right markets, profitability will be your reward. But think disruptively.
Make a completely new attempt to drive success, even if you don’t yet have the
performance metrics to prove its worth.
Learn, share and partner to create new business
opportunities.
With the right partner you will develop a wider value orientation. Pfizer, for example,
has hooked up with the startup, Akili Interactive Labs, in a clinical trial to evaluate
whether or not a video game can be used to predict Alzheimer’s disease.8
Foster a digital culture and mind-set and build
required skills.
Sales experience, not digital experience, currently sets the agenda for most
pharmaceutical players. That needs to change. So find ways of making life sciences
attractive to talent with proven digital skills—the kind of talent behind Google, Twitter,
Facebook and Netflix.
Positioning to win in the outcomes-driven life sciences markets of the future
will be challenging. But by thinking creatively about what makes you unique in the
marketplace, attracting the talent to transform your capabilities, and committing
to a clear agenda for change you can leverage your assets for lasting advantage.
The time to start is now.
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8
http://www.vreehealth.com
http://www.brain.akiliinteractive.com
Contact the Authors
About the research
Dr. Jan Ising
[email protected]
Accenture research is based on a representative Top 25
pharmaceutical company as measured by global sales. Our
proxy for profitability was EBITDA (Earnings before Interest,
Taxes, Depreciation and Amortization). We reviewed more
than 20 global pharmaceutical companies in detail, as well
as numerous digitization strategy projects both within and
beyond the pharmaceutical industry. We identified the most
successful new business models by leveraging Accenture’s study
of 10,000 healthcare startups that have emerged over the past
six years. We also identified some 20+ key growth categories for
partial digitization along the entire pharmaceutical value chain.
We used market simulations to estimate both the digital impact
on other industries and learn from them, and the impact of
digitization on pharmaceutical companies by 2020.
Kenneth Munie
[email protected]
Co-authors
Dr. Isabelle Heiber
[email protected]
Dr. Christine Knackfuss
[email protected]
Join the conversation
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About Accenture
About Accenture Life Sciences
Accenture is a leading global professional services company,
providing a broad range of services and solutions in strategy,
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and all business functions—underpinned by the world’s largest
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Accenture drives innovation to improve the way the world works
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Accenture’s Life Sciences group is dedicated to helping
companies rethink, reshape or restructure their businesses to
deliver better patient outcomes and drive shareholder returns.
We provide end-to-end business services as well as individual
strategy, digital, technology and operations projects around the
globe in all strategic and functional areas—with a strong focus
on R&D, Sales & Marketing and the Supply Chain. We have
decades of experience working hand-in-hand with the world’s
most successful companies to improve their performance across
the entire Life Sciences value chain. Accenture’s Life Sciences
group connects more than 13,000 skilled professionals in over
50 countries who are personally committed to helping our
clients achieve their business objectives and deliver better
health outcomes for people around the world.
About Accenture Strategy
Accenture Strategy operates at the intersection of business
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