business model innovation in the pharma industry: managerial challenges
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BUSINESS MODEL INNOVATION IN THE PHARMA INDUSTRY: MANAGERIAL CHALLENGES The CBS Competitiveness Day 2014 @ Copenhagen Business SchoolTRANSCRIPT
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BUSINESS MODEL INNOVATION IN THE PHARMA INDUSTRY: MANAGERIAL CHALLENGES
Nicolai J FossSMG – CBS
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The basic value propositon (”What?”).
The market-segment (”Who?”).
The structure of the value chain that realizes the relevant value proposition (”How?”).
Value appropriation mechanisms (”How much”?).
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A business model innovation is a change of [value propositions, market segments, value
chain elements, value appropriation mechanisms] that is new to the industry.
Modular (the Kindle businesss model) vs systemic (Lego’s turnaround).
Radical (Kindle) vs incremental (Lego).
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BMIs are prompted by drivers that are internal and external to the industry.
BMIs are embedded in organizational / administrative structures … that may have to
change.
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BMI DRIVERS IN THE PHARMA INDUSTRY
The ”payment challenge”, i.e., increased demands that companies demonstrate therapeutic/cost advantages of their products.
Slide 5
More stringent regulatory environment (approval success rates have been going down since the early 1990s).
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BMI DRIVERS – CONT’D
The ”patent cliff”, i.e., the loss of patent protection on many blockbusters.
Many of the ”new” technologies (high-throughput screening, combinatorial chemistry, pharmacogenomics, proteomics, metabolomics .. ) may not (yet) have lived up to promises.
Slide 6
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BMI DRIVERS – CONT’D
New potential/actual entrants with strong downstream asset bases, e.g., Nestlé, Google, Apple, Walmart …
End users increasingly active and critical.
Slide 7
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BUSINESS MODEL INNOVATION / CHANGE
Blurring boundaries: Increased use of contract research
organizations and other service providers. Former ”core areas” increasingly
outsourced Discovery chemistry, manufacturing, data
management . Or, pooled with other pharma players in JVs
(e.g., Johnson & Johnson, Lilly, Merck, Novartis, and Pfizer setting up Enlight Biosciences).
Patient-centricity / ”servitization”.
Slide 8
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MANAGERIAL CHALLENGES OF BMIThe soft underbelly of the BM/BMI literature.
BMI: a major organizational change process.
So far, questions rather than answers.
Major HECTOR research theme.
Slide 9
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Some human capital will be relatively less important.
Hiring and training new human capital, e.g. employees specialized in market-access;
increased need for hybrid profiles, i.e., both a science and business background.
Power and legitimacy issues.
HUMAN RESOURCES CHALLENGES
Slide 10
Need for new KPIs, metrics, and rewards (e.g., patient satisfaction, # of patients enrolled in service programs, benchmarking of external partners, etc.).
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Challenges from handling new partners, e.g., service providers and producers of ”devices” (e.g., Leo and Klox Techn.).
Small-numbers situations. IPR issues. Do the right competencies exist
for managing longer-term partnerships?
FIRM BOUNDARIES
Slide 11
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How should organizational structure adjust to accomodate new business models? E.g., self-managing teams with their
own budgets and missions that are outside the existing structures vs coordination within existing structures.
UCB: Cross-functional teams with specific patient missions.
Or, self-sufficient units as with Chorus and Eli Lilly.
INTERNAL ORGANIZATION
Slide 12
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Culture and identity changes? ”Research-driven” → ”patient centrity-driven.” Requires very different TMT communication
BMIs come in different forms. Some involve massive changes in several
interlocking parts of the business model, others involve changing a single component.
Leadership role depends on the nature of change.
LEADERSHIP CHALLENGES
Slide 13