The pharmaceutical industry’s fundamental problems by now are so well known that even many consultancies have detailed them in creative sales promotions and reports. Neither the industry’s executives nor these rhetorical contributors, however, have devised consensus or plausible solutions to pharma’s difficulties.
Pharma remains, in large measure, somewhat unable to deliver precisely what the world’s healthcare systems need from it, which, stated in the simplest terms, are therapies to materially advance the standards of care. At the same time, the public and private systems that pay pharma’s bill have grown increasingly unwilling to shell out for the molecular offerings that have long been an integral part of the drug makers’ business culture.
If pharma is to remain a worthwhile business partner in the delivery of worldwide healthcare, the necessary action step requires that the industry do something to generate a value proposition that is the by-product of innovation, optional solutions, and measurable outcomes.
One of the underlying challenges in creating this value proposition is the elusive search for the right business model. The industry’s business environment is changing rapidly with heavy structural shifts. The developed world markets―particularly the most lucrative, the U.S.―are increasingly challenging but not the growth areas they used to be. However, most of these companies’ business models are built for those markets. So, this leaves them with questions on how to structure their innovation, marketing and sales, manufacturing, and portfolios accordingly.
The industry consistently points to a future with new growth in the emerging markets. But that does not mean that its current business model is ideally suited to take most advantage of emerging market opportunities. Some of the most interesting model shifts, from product divisions and portfolios to R&D structure, are starting to appear for emerging markets. Some companies see different kinds of model needs for this vast array of new markets.
The dust has not completely cleared from the transition. So far, what we can see is that there are divergent views on the future business model while decisions continue to be in significant flux to find what might work best in a new future environment.
For now, one of the most critical challenges is breaking down old ways of working that can act as barriers to success. These companies need to work faster with downfield vision. They need to be connected in different ways and empowered. This is where fresh approaches to the business model could be of value and instill a sense that the status quo is not the right answer anymore.
Even more important is that the pharmaceutical industry must find the right kind of leadership in some of these companies for the new environment. It will require a leader with management process and management people skills like few other industries. The intersection of disciplines and people types in this industry is an interdisciplinary puzzle: from scientists, to marketers, to chemical manufacturers, to political experts, to medical doctors, to the unique expectation of what healthcare is for each customer. It requires a leader with extraordinary process and emotional intelligence acumen. This takes a flexibility and profound curiosity to see the way that the business will be not what the business has been. They should be willing to look at everything, to say that the status quo isn’t comfortable anymore, but also be able to instill the vision and strategy and reputation of the company to everyone, inside and outside the organization.
This balance of skill sets has been hard to find. The industry has been enormously successful, but the culture of companies has become static. Leaders are comfortable in these existing cultures and are promoted within it. Thus, the cultures have not been particularly well suited to breed and nurture leaders that are poised to challenge the status quo for the future. With few leaders currently available to mentor and identify such a rare mix of leadership skills in this industry, the road map has not always been clear to select that right person in the new generation of leaders.
To be sure, pharmaceutical companies are very sophisticated business operations. They could clearly muster the resources and energy to make appropriate moves to shift if it became apparent that an alternate emerging business model was proving to be more in line with the future trends. The biggest challenge ahead will be identifying and developing future leaders with a profound level of transformation and adaptation leadership skills who could link change and flexibility tangibly to their mission and role with customers, society, and shareholders throughout the global landscape.