Is simply digitizing key parts of the value chain enough for life sciences companies to remain relevant and competitive?
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 percent of the profitability in the pharmaceutical market by 2020. But although many mainstream pharmaceutical companies recognize the power of digitization and 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. Some choose to digitize partially to buy some time. Others choose to scale up their efforts to maximize their digital advantage.
Digitize partially—to buy some time
Many companies have resolved not to miss the broad opportunities offered by digital. 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 to 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. Novartis, meanwhile, has developed an online platform that gives younger multiple sclerosis sufferers control over a comprehensive, personalized, online support program.
Such partial digitization initiatives do not only help reduce costs. If speedily implemented, they can also help a company hold its own. In addition, digitizing manufacturing and supply, along with marketing and sales, can drive even more value—boosting profitability by as much as 21 percent. According to our analysis, that’s most of the overall increase of 27 percent that partial digitization can achieve throughout the entire value chain including corporate support services.
Even so, our research indicates that partial digitization will only buy companies some time. So many mainstream players are now implementing similar initiatives, the advantages they deliver will soon be commoditized. Partial digitization decreases the learning curve, but companies that want to remain relevant in the longer term must take additional, more radical measures.
Scale up—to maximize competitive advantage
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—including 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 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. Palantir Disease Response gives public health organizations the data and advanced analytics they need to identify sources of disease outbreaks and coordinate tactical responses. Explorys provides a big data analytics platform aggregating anonymous information from millions of patients to measure the effectiveness of different treatment approaches and to generate insights into solutions with the potential to improve outcomes.
If the new markets that these business models address really take off, companies that restrict their digital efforts to traditional core markets clearly risk losing out.
To unlock digitization’s full potential value, pharmaceutical companies will need to scale up, and quickly, with 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 is of the essence.