The buzz of digitalisation is pervasive, and digital transformation is having a profound impact on organisations across sectors and geographies. Some industries have been quick to embrace the potential digitalisation offers. But for companies in more conservative sectors such as pharmaceuticals, the stringent demands of regulation mean there is still much work to be done.
During the COVID-19 pandemic, many life sciences and medtech companies made significant investments in the multichannel engagement capabilities of their sales force. This made sense in an environment where it was suddenly much harder to arrange physical meetings with a healthcare professional. But L.E.K. Consulting’s recent work with pharmaceutical clients globally shows there is significant potential to be found by looking beyond multichannel offers. Return on investment in excess of a 20% EBITDA uplift can be achieved through digital transformation in other parts of the value chain, including production planning, inventory management, operational efficiency, and customer management and engagement.
In this article, we focus on digitalisation in its broadest sense — not only on leveraging exciting new technologies such as robotic process automation, intelligent automation, natural language processing and artificial intelligence (AI), but also on developing new ways of working. From creating new ideas to building solutions with design thinking and implementing strategies with agility, digitalisation has much to offer the pharmaceutical sector.
Operators in the pharmaceutical market cannot choose to ignore digitalisation. Yet when we surveyed 65 biopharmaceutical companies around the globe as part of our recent digital excellence benchmarking survey, approximately half the respondents admitted to having no real digital strategy (see Figure 1). Encouragingly, 60%-75% of companies were confident that in the midterm they would have advanced digital capabilities in place across multiple areas. These areas included customer experience and go-to-market and data insights (real-world evidence), as well as more general topics such as leadership, organisation and governance. With as few as 20%-30% of companies today actively engaged in digital transformation in these areas, much work needs to be done over the next few years to make this a reality.
A glance at the global pharmaceutical industry digitalisation picture shows Europe at a level comparable to that of the US and Latin America but lagging Asia-Pacific. However, ambitions for the future are similar across geographies.
Where differences can be seen is in identifying what has been prioritised over the past three to five years. European and US biopharma companies have placed a huge emphasis on drug discovery and clinical development, with distribution and portfolio/corporate strategy being the lowest investment priorities for biopharma in these regions. Conversely, in Latin America, companies have prioritised downstream processes, i.e. supply chain and commercialisation, likely due to their focus on the generics market. Looking to the future, European companies also indicated a likely increase in investment in downstream processes, as well as continued investment in the early stages of the value chain (see Figure 2). By geography, the level of confidence also varies, with European companies feeling far less confident in their ability to develop a digital strategy than those in other regions.
While drug discovery remains a top priority for companies of all sizes, the level of digitalisation also typically varies by company revenue and investment ability as well as geography.
Large companies have gone a long way towards using digitalisation to improve their business and are often very digitally savvy. Many offer numerous examples of initiatives across the full value chain, often guided by full organisational capabilities including a chief digital officer and a large digital transformation team. In distribution, multinationals are piloting AI-/Internet of Things-based tools to enable end-to-end operational efficiency. They also frequently explore integrated supply chain management solutions and advanced analytics and AI to further improve efficiencies.
Striving for digital excellence is a key concern for all companies surveyed, although strategy and focus do vary. Developing and implementing an optimal digital strategy is a priority; the points outlined in Figure 3 are a useful guide for companies taking their first steps and can help them ensure nothing falls through the cracks.
Digitalisation is not an automatic process, and while some companies may experience a swifter transition, others will face a greater number of challenges. This is why starting the digitalisation process with top management, ensuring the rest of the company follows and having an adequate amount of funding in place to help smooth the path are all key. However, buy-in and funding alone are not enough.
One of the key principles in any digital strategy and transformation programme is to create a robust benefits framework that prioritises those areas that have the most quantifiable (and non-quantifiable) impact. Too many digital transformation programmes focus on too many things at the same time, rather than following the 80/20 rule. This invariably leads to overloaded management executives and staff, as well as late delivery of projects, often with poor results.
To ensure that implementation is correctly undertaken and to determine whether the process is successful, robust metrics are called for. Designing ways to measure benefits and identify improvements, building them into the transformation programme, continually monitoring progress, and being ready to redesign and adapt the strategy if needed are powerful ways to keep the transformation on track. The implementation process should be step by step, as it is vital there is an adequate level of integration between the company, its know-how and culture, and the new system. Externalising tools and technology is of no use if internal resources, both technical and human, cannot keep up.
Digitalisation and change are great opportunities for pharmaceutical companies, but every opportunity carries an inherent risk. The ability to calculate and understand this risk is essential if later rewards are to be reaped. Companies will only benefit from digitalisation when it is correctly planned, implemented and measured. Done correctly, digitalisation can deliver a substantial return on investment.
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