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May 19, 2016
Innovation at the convergence of healthcare & technology
By: Arda Ural

Takeaways from a panel session at the eyeforpharma conference in Philadelphia on new business models for pharma and biotech companies.

I had the unique opportunity to present research content and moderate a panel about “Innovation at the Convergence of Healthcare and Technology” at the eyeforpharma conference in Philadelphia on May 2, 2016 in front of a very engaged audience of over 100 industry professionals.

Our panel included three experts with hands-on experience leveraging healthcare technology and digital innovation within their company:

  • Chris Kakkanatt Director, Team Leader Pfizer

  • Milind Kamkolkar Global Head, Next Gen Analytics, Novartis

  • Chapman Richardson Global Head, Next Gen Digital, Novartis

While the discussion covered a broad range of topics in the innovation space, attendees were most interested in effectively managing innovation and its impact on the operating models of pharmaceutical and established biotech companies.

The below graphic illustrates how the industry typically manages healthcare technology innovation across multiple dimensions.

There are fundamentally four configurations in which pharma and established biotech companies invest and manage innovation:

  1. Brand Team level which has the incentives of high impact operational investment of de-risked solutions for shorter team outcomes,

  2. Business Unit (BU) level at which several brands are tapping into the same umbrella therapeutic area focused-entity,

  3. Center of Excellence (CoE) which is built to scan, identify and apply external technology opportunities to scale up at the above-brand level; and

  4. Corporate Venture Investment Funds whose operations may be linked to a therapeutic area or brand, or simply operate with a test-and-learn approach while still seeking a positive return on investment from the allocated venture capital within a few years.

All four investment modalities have differences in the size of their directed investment - whether they simply buy the services or take an equity position in the technology provider, the innovation governance process, investment time horizon and degree of risk aversion as represented in the graphic.

According to an audience poll during the session, most respondents make investments predominantly at the “Brand Team” level, followed by “Center of Excellence” as a distant second. There were a handful of votes for Corporate Venture Arms, with Business Unit ranked last. The polling results indicate that pharma companies favor a rather short-term investment pattern and relatively risk-averse behavior with limited ability to scale up.

The panel then discussed the implications of this behavior and specifically the inability to scale up in order to create a competitive advantage. Although the Brand Teams would expect a quick return on investment within the fiscal year and are adverse to technology risk, this pattern would not make it conducive for the pharma or biotech to internalize innovation as a sustainable capability at scale.

Additionally, the specific externally provided innovation service or product would be accessible to all willing competitors making it less differentiating in the market.

The panel also emphasized the importance of linking innovation to a specific measurable business outcome supported by a business case in order to become a sustainable competitive advantage.

Even after the panel answered a long list of questions from the audience, the discussion continued into the break, indicating that healthcare technology enabled innovation will remain a hot topic for the foreseeable future.

The key takeaway from the session is that pharma still needs more time for experimentation in order to leverage digital technology to create a sustainable competitive advantage by attaching the external technological capability to a business problem, test and learn and scale up to deliver longer-term patient focused outcomes.

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