The bigger the company, the thicker the sclerosis, the more they need to suck out the fat, writes Bill Drummy.
Consider this: In 2011, IMS projects US Rx market growth to be 2.7 percent. The top 10 pharma companies account for 50 percent of the entire market’s revenue, but will deliver only 10 percent of the growth. In fact, the growth rate of the top 10 is estimated at 0.9 percent.
And it’s even worse than that: Take out the non-organic growth, i.e., the ‘growth’ padded on purely by gobbling up acquisitions, and growth among the top 10 companies is, in fact, negative.
So Pfizer, Merck, GSK … the largest companies keep getting fatter. And slower. And more dysfunctional. And people inside these companies know this. But very few are willing to say it out loud.
If the industry is going to prosper, C-suiters need to do two things: liposuction down their companies to their essential, vital cores; and change the reward system to truly—finally!—value innovation inside and beyond the labs.
There are only a few things a pharma company needs to be good at: 1) developing products and services of true, differentiating value for patients, doctors, and payers; and 2) figuring out how to market and service those products and services powerfully, ethically and efficiently. That’s it.
The ability to deal with information with great speed and agility (what I call ‘knowlagility’) is a critical source of competitive advantage in myriad ways: it provides deep customer insights, it enables more efficient delivery of high value across the healthcare delivery continuum, and, critically, it empowers companies to make credible arguments about the true economic impact of their therapies to the healthcare system.
Yet little of this capability—which is extraordinary in its importance now, and even more extraordinary in the rate its importance will increase—has been built into pharma IT as it is currently configured. The layers in a super-pharma organization actually cover the company in folds of bloat, threatening the vital organs.
Let the Sucking Begin
That’s why it’s essential to cut out any non-essential IT process. Stop obsessing about the trivial—that means please stop talking about social media! Instead implement programs that deliver the ability to see farther and move faster.
The idea is to get smaller, yes. Spin off those divisions that aren’t crucial, sure. But more than that, cleave the processes that are more about ‘control’ than value.
A ridiculous example: We have clients who can’t run basic software or access popular websites. Why? Either because IT plays the ‘security’ card and so access to—and insight about—much of the world gets cut off. Or else Finance cries ‘efficiency’ and suggests that if only we could get people off Facebook, then we’d be more profitable.
If you are a CEO and hear these things from your managers, you can do more for your profitability by firing them.
In the Speed of Change era, IT has one of the most important jobs in the entire organization. But it’s not about control; it’s about the discovery and release of value. Sure, you have to do the basics of control: secure your (cloud-based, I hope) networks and endure the Sarbanes-Oxley torture, etc. Just understand that this is a distraction from the real work.
The real work then is in applying knowlagility to unlock potential; by uncovering patterns in the data about your customers, and patterns in the data about potential products and services. In a post-blockbuster world, the winners will be those companies (of whatever size) that are better at identifying the highest-value opportunities and delivering them to customers with greatest possible speed and satisfaction.
Smaller companies, or large companies with ‘federated’ structures (e.g. Johnson & Johnson), stand a better chance of combining the advantages of size and agility. But whatever the size or structure, the organizing principle remains the same: In a Speed of Change world, victory belongs to the swift.
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Bill Drummy is the CEO of Heartbeat Ideas. He can be reached at email@example.com