Accenture Life Sciences
Rethink Reshape Restructure…for better patient outcomes
Driving digitization in Life Sciences
1 2
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.
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.
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.
Digital Strategy Framework
Source: Accenture Strategy. Copyright © 2015 Accenture. All rights reserved.
Strategic Options
Partial Digitization: Realize EBITDA
opportunities through digitization of existing value chain
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)
Digital Business: Digitize your current
business model or develop new business models generating profits based on digital technology
2
Digital Business Digital Customer Digitize CustomerExperience Disrupt (Sub-)Market(s)
Digitize Operations Internal Focus External Focus
1
Digital EnterpriseBusiness 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,
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.
The opportunities for growth are
high in the industry’s core markets.
profitability boost by digitizing
manufacturing, supply, marketing
and sales.
21%
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 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,
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.
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.
1 Sanofi Diabetes ecosystem consists of multiple sources; product website (e.g. Lantus), Diabetapedia website, blogs, GoMeals app, iBGStar app, Facebook, Twitter. 2 http://www.gilenya.com
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
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.
4 http://proteus.com 5 http://palantir.com
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.
*Representative of Top 25 with annual revenues of $10B.
Top 25 pharmaceutical company digitization impact
EBITDA impact, 2015-20 in millions of USD
Baseline Top 25
pharmaceutical
company*
-11%
+27%
+61%
Business-as-usual
EBITDA change EBITDA change EBITDA changePartial
Digitization
Digital
All-rounder
10,000
3,400
8,900
3,025
9,500
4,370
13,500
5,490
Revenues
EBITDA
7 http://www.vreehealth.com 8 http://www.brain.akiliinteractive.com
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.
Copyright © 2015 Accenture All rights reserved.
Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
The views and opinions expressed in this document are meant to stimulate thought and discussion. As each business has unique requirements and objectives, these ideas should not be viewed as professional advice with respect to your business.
This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.
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.
About Accenture
Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 358,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.
About Accenture Strategy
Accenture Strategy operates at the intersection of business and technology. We bring together our capabilities in business, technology, operations and function strategy to help our clients envision and execute industry-specific strategies that support enterprise-wide transformation. Our focus on issues related to digital disruption, competitiveness, global operating models, talent and leadership helps drive both efficiencies and growth. For more information, follow @AccentureStrat or visit www.accenture.com/strategy
About Accenture Life Sciences
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.
Accenture Life Sciences Blog
Accenture experts share insights and opinions on opportunities and challenges in the pharmaceutical and medical technology industry. www.accenture.com/digitizelifesciences
