Companies Desire To Grow Exponentially Yet Plan Incrementally

Management thinkers have long advocated aggressive planning and execution of exponential growth-driving strategy as a preferred path for market leaders and challengers during the relatively “slow” time of global recession. While the impact of recession is not as strongly visible in pharmaceuticals and healthcare as it is in other sectors, there has been a conspicuous absence of innovative growth-driving plans, apart from the few-and-far-between consolidation attempts of Big Pharma picking up the odd biological or biopharmaceutical company.

Crisis Gone to Waste
Pharma marketing honchos [at least in India] do not seem to have done enough to make the most of the opportunity and, in the words of Rahm Emanuel, “let the crisis go to waste”! Knee-jerk reactions have resulted in so-called cost containment which may have moved precious resources away from gainful deployment. While an eye on profitability is expected, I am not too sure that investors would prefer to ignore revenue stagnation and a resultant abdication of leadership status at the cost of increasing profits by a few percentage points. Even if investors don’t mind, I am sure employees would! Who likes to work in a company that is seen as passive and lazy? Wouldn’t focused investment on improving capability at an opportune moment like this make sense? To be fair, manpower hiring to increase penetration and reach may still be an expensive proposition but areas such as adopting latest technology may be not so expensive. A lack of business demand is likely to have driven down bargaining power of technology providers amongst other vendors. Just as retail investors are advised to buy when the financial markets are down, wouldn’t companies be well-advised to upgrade capability when choices and options are likely to abound? Upgrading technology in areas such as state-of-art business intelligence [gathering precious consumer insights, reducing consumer transaction costs etc.] and analytical tools, cutting edge capability in R&D, and in distribution & logistics packages can easily shave off substantial dollars, time and effort. It can also make companies leaner, flexible and more geared to take on leadership status in lucrative markets. To create long-lasting advantage, produce dramatic shifts in competitive position and cross new performance thresholds, companies must cultivate a management approach that will encourage a continuous flow of innovation, a recognized cornerstone of all high-performance businesses.

Incremental Planning Exponential Expectations
Also, doesn’t a large player in the healthcare delivery space have any responsibility to deliver better and more relevant products and services to their customers? Today’s preoccupation with cost shifting and cost reduction undermines clinicians and patients – the very reason for pharma’s existence! Instead, shouldn’t we focus on improving health and health care value for patients? Shouldn’t we focus on strategy that is market based but clinician [customer] led?. Michael E. Porter and Elizabeth Olmsted Teisberg wrote in an article published in the Journal of American Medical Association [JAMA] that improving the value of health care is something only medical professionals can do and so clinician leadership is essential. Can companies that lead or aspire to lead, not help clinicians to lead change and return the practice of medicine to its appropriate focus: enabling health and effective care?

Improving health and health care value is the only real solution. But what have pharma marketers done to help realize this? Although individual company strategies differ, they have at least so much in common: each marketer examines today’s market dynamic and thinks of incremental change, that can effectively rein in high operating costs that are frowned upon by senior management. This approach will fail because it starts with a flawed premise. The purpose of marketing, is not only to minimize costs but to deliver better value to customers, albeit in a cost efficient manner. I asked senior colleagues and friends about how different thoughts and ideas were compared to the 70s [when they began their careers], and they couldn’t tell the difference! This means that the marketing model is virtually the same over 4 decades!! Marketing and brand plan discussions over years have remained the same – feeble attempts at “innovation”, yet principally the same! Every CMO makes it mandatory to reiterate that cost containment will not happen at the cost of business, but rarely have I seen a path-breaking idea see the light of day. While CMOs talk of exponential growth, it seems like they believe in incremental planning!

Competition Spearheads Innovation
In the JAMA article, Porter & Teisberg also write that competition spearheads innovation. The Indian pharma industry is as fragmented as it gets. ~25,000 companies fight for share in a ~Rs. 36,000 crores [$7.2 bn] market. Hence there is no dearth of competition here. Then why doesn’t competition spearhead innovation? The problem is that competition is dysfunctional since competitors “work at cross purposes with each other and with the needs of the ultimate customer: the patient.” This creates a “zero sum game” which means that one player gains at the cost of another. Sales reps are trained not to lead but to [grab] share.

Leadership or challenger strategy looks to break away from the mundane and create opportunities for newer markets and therefore, exponential growth. How many marketers have looked to co-create value with other stakeholders along the value chain? Hospitals, for instance. Large scale consolidation amongst hospitals have led to a far greater integration of service offerings than within pharmacos. Not many have leveraged the opportunity to work with integrated entities to create new vistas for growth. Diversification for growth is proven, yet companies perceive it as a separation from core strategy. Why not look to partner vertically integrated players [such as Apollo hospitals] to drive exponential growth?

Insights That Matter
Market developments such as the deal announced by Microsoft with their one time competitor, Yahoo Inc., to reduce impact of a bigger thorn-in-the-flesh, Google Inc. provide insights that matter. Why haven’t leading pharmacos thought of something like that? Could this not be a wonderful way to create market developing projects between 2-3 leading/like-minded players in the Cardiovascular (CVS) segment [the fastest growing segment of the Indian pharma market], for instance? Such initiatives can become more cost-efficient in the background of the global meltdown. When payer [govt./employer/insurance co.] spending on healthcare is likely to reduce, at worst, or stay the same, at best, the burden of spending out-of-pocket is felt highest amongst consumers in such chronic therapy areas. New products and services such as managed care programs [disease management programs] can help to create awareness on economic benefits of keeping healthy. Health economics research has shown that simple lifestyle changes such as giving up smoking helps save huge sums of money. [Smokers spend Rs. 28,800 ($576) on cigarettes every year if they smoke 20 sticks a day @ Rs. 4/ 10 cents per stick – numbers increase exponentially if you include alternate tobacco users]. Beside the opportunity to provide innovative solutions to health issues, partnerships between companies and healthcare providers can help to create huge gains by better integrating and coordinating all activities required to serve customers. Better integration of treatment with prevention, rehabilitation, and disease management will create ways to improve the overall outcomes and reduce costs. Such programs when negotiated well can provide pharma companies preferred supplier status with hospitals leading to exponential growth! The huge intangible gains to corporate brand equity through well placed PR and patient word-of-mouth publicity is an upside.

No business survives over the long term if it can’t reinvent itself. But, human nature being what it is, change is often resisted. Thus, for market leaders, leading change is both absolutely essential although it is incredibly difficult. Planning for exponential growth is a good starting step. Companies cannot desire exponential growth and plan incrementally!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s