The Life Sciences and wider healthcare ecosystem is experiencing unparalleled market and business disruption. The blistering pace of technology innovation, emergence of new competition, and shifts in the regulatory and political landscape—as well as frequent and large-scale M&As—have challenged traditional market assumptions and strategies. Companies must become more resilient in response.
Consider just one of the disruptors: the changing role of technology. Technology is becoming increasingly embedded in the pharmaceutical value chain, with artificial intelligence influencing drug discovery, blockchain technology disrupting traditional supply chains, and real-world data influencing new commercial models. An Accenture report notes that automation alone can deliver up to 20 percent increases in work efficiency, and up to 40 percent increases in accuracy.1
Competitive change is another part of the overall challenge. Tech companies see significant value in healthcare, as evidenced by where they are placing their bets: The top-10 tech companies have increased their investments in health startups about 100 percent per year since 2014, with an estimated $4 billion in digital health investments in 2017.2
In the face of these large-scale shifts, developing a resilient business is increasingly important for Life Sciences companies, because it allows them to better position themselves to respond to, and recover from, disruptive events. For an organization to develop the necessary resilience, it should take a proactive, three-pronged approach centered on understanding how future revenue will be affected; translating the shifts to inform investment and operational decisions; and proactively shaping the market to influence the direction of future change. This approach can lead to an agile strategy focused on understanding the magnitude of disruption, and translating events and circumstances into required actions.
- Understand: Continuously analyzing competitive actions and landscape shifts is the new normal for Life Sciences organizations, but it is only part of the battle. Examining how that disruption will affect future business is equally important. Accenture research has found that 54 percent of large companies optimistically expect that new businesses will generate more than one-half of their revenues three years from now.3 Positioning for success in this environment means embracing the fact that your business will look significantly different in the next few years and understanding how that change will be driven by the rapidly changing landscape.
- Translate: Developing resilience also requires Life Sciences organizations to translate the effects of the shifting landscapes into a perspective on where they should focus their investments, as investment decisions will differ by the nature of the disruption. For example, existing Life Sciences stakeholders need to translate the many moves of tech players in healthcare to make decisions on how to respond and where to place their own bets. Does the growing presence of tech giants in healthcare mean that Life Sciences players should invest more in their core businesses or focus on growing and scaling new businesses? The right answer depends on how companies translate competitive trends into action. Resilient Life Sciences organizations will be the ones that embrace marketplace and competitive change, and translate shifts into a coherent perspective on how to effectively deploy their capital.
- Shape: Even organizations that understand the implications of market events can be caught flat-footed if they do not actively shape the direction of the shifting landscape in their favor. Life Sciences companies should go beyond strategic planning and market research to proactively shape the market by forming partnerships with other key players and influencing regulation. A prime example for pharmaceutical companies is the ability to maintain formulary access. Most pharma companies understand that shifting market dynamics can put increasing pressure on high-cost therapies, yet many are unable to shape how the changes will affect their own business. They can then be hit with significant drops in share price when specific drugs are removed from formulary, with average share declines of 7 to 10 percent.4 To truly shape the market, Life Sciences companies should move beyond market assessments and position themselves to be drivers, rather than reactors, to change.
In the face of a growing number of disruptive competitive events facing the Life Sciences industry, resilience is an increasingly important capability for organizations to develop. A strategy that is centered on understanding how changes impact future business, translating the shifts into investment decisions, and being proactive in driving, rather than reacting to, change will help leading Life Sciences companies develop the resilience necessary to thrive in the face of a shifting competitive landscape.
1 Accenture, “Use AI to raise the life sciences commercial IQ,” August 2018
2 CBInsights, “Where Is big tech placing its bets in healthcare?,” September 2018
3 Accenture, “Make your wise pivot to the new,” Accenture 2018
4 Accenture Strategy analysis