Bourne Partners Executive Summit
This summit hosts approximately 200 leaders in the life sciences in Charlotte, NC. It was quite interesting, as it brought together a wide variety of leaders from across the spectrum of the life sciences. Many of them had a chance to get on stage and shine a light on the current state of the life sciences. With so many views, it was possible to triangulate a sense of where the life science industry stands and where it’s headed.
Banks Bourne, the CEO and Managing Director of Bourne Partners, uses this conference to provide his overview of the market each year. In the third quarter of 2016, a short summary might go like this: the pharma market is a mess. Total market valuation has fallen significantly in the past year. There is significant price pressure and increased media attention (some of which was brought on by a few bad actors such as Martin Shkreli and Mylan Pharmaceuticals and their much-discussed price hikes). Pharma will continue to look for ways to shift costs from fixed to variable. Outsourcing of pharma services is expected to continue to grow at 4% for the next several years. Recent evidence supports this: the big seven CROs grew from $15 billion to $18 billion in the last 3 years.
The definition of what constitutes a blockbuster drug will change
As organizations continue to pursue more targeted therapies, we’ll see many repercussions. The definition of what constitutes a blockbuster drug will change, with an overall decrease in revenue expected from any one drug. As drug volumes for any one drug shrinks, the typical contract manufacturing lot size will decrease to 4000 liters and smaller, and as a result, single-use contract manufacturing solutions will grow in importance.
Finally, large pharma will be getting bigger as they swallow medium-sized pharma companies. The small pharma sector will continue to see robust growth and new companies and startups will continue to be founded.
The ACP-LS conference was held in Philadelphia in October. This is one of the only conferences dedicated to the commercial aspects (think marketing and sales) of the life sciences. As such, it’s a rare chance for professionals focused on commercialization to get together and talk about trends.
One of the interesting activities here was predicting the future of life science marketing. Given the 80 or so attendees, there were dozens of predictions. Author James Surowiecki pointed out in the book The Wisdom of Crowds that, under the right conditions, the collective experience of crowds can be more on-target that any one individual. I’d love to be able to claim that those conditions (predictions must be made individually and independently) existed at this conference, but that was not the case; these predictions were made by small groups of participants. Nevertheless, these predictions provoked interesting discussions and, not surprisingly, a few disagreements.
Predicting the future is always an interesting exercise; it’s no fun if the results are boring (expected) or if the prediction is that conditions will not change. There were enough surprising and thought-provoking predictions from the ACP-LS conference that it’s worth grouping, clarifying and weaving them into a narrative. If you feel like these predictions are off base, well, just give it time. I’ll be accepting valid complaints in about 5 years.
These predictions cover a lot of ground. Some have to do with customers, some look at the ways technology will change our lives, and some focus on life science products and services, among many other topics. In the rest of this whitepaper, I’ll be reporting on what I heard at the conference, mixed with some predictions.
Products and Differentiation
Easy Prediction: Tech will continue to drive product evolution in the life sciences.
I’ll start with an easy prediction: technology will continue to drive product evolution in the life sciences. In many cases the base technology utilized by competitive products and services will equalize, so innovation will have to come from the areas that “surround” the base technology. One obvious example: software will continue to play a greater role in differentiating life science products and services. Products will become more “intelligent” and incorporate features such voice control—imagine the Amazon Echo or Apple’s Siri built into all capital expense products in a lab. It would give new meaning to the common sentiment that one instrument can “talk” to another.
Products’ physical form will continue to “evaporate;” that is, their physical form will continue to miniaturize. In addition, as connectivity increases between our devices, more of them will become part of the “internet of things.” It’s interesting to note (to say the least) that the recent distributed denial of service (DDOS) attack on the internet traffic management company Dyn DNS, which slowed much of the internet to a crawl in late October, was made possible by harnessing various smart-dumb objects such as DVRs, routers, even webcams. As more scientific devices get connected to the internet, the security of our infrastructure will rise in importance. I say this in jest, but there is kernel of truth here: anyone interested in a digitally secure petri dish? Actually, if we think about it, everyone will be interested in a digitally secure petri dish, assuming that petri dishes go digital.
As the base technologies continue to mature, technological advances will become less important in the overall product mix. In contrast, customer experience will become more important in differentiating products, services and companies. Some attendees believed that customer experience will become the only differentiator that really matters. Customers will learn to pay increased attention to the entire customer experience—from the very early phases of the buying cycle through to the very end, including:
- unpacking and installation
- service and maintenance
And as customers focus more on these issues, manufacturers must do the same. This was reinforced by a presentation of some interesting research by the research organization Bioinformatics. According to their results, scientists report that the experience with the product is the most important touchpoint affecting their impression of an organization and its offering. That’s not surprising—but the next four most important touchpoints occur pre- or post-sale. The importance of the product and its function is going to be taken for granted by our customers; we must look beyond this to the entire product life cycle for opportunities to differentiate and to connect with our customers.
The rise of customer support
Customer support will become more important. Here’s one example. Though it’s trivial to predict that the pace of life will increase, the implications are interesting: customers will demand immediate responses to their inquiries, their challenges and their issues. Expert support that’s available 24/7 will become more prevalent, and will play a larger role in purchase decisions. The rise of customer support will give opportunities to organizations that are wise enough to take advantage of new business models; different levels of service may be able to be priced differently. Are you ready to implement support through Twitter?
Are you ready to implement support through Twitter?
Smart products and services
Products will get smarter. What does this mean? The definition of a “smart” product or service will expand to include a life science product or service that is:
- Contextualized: aware of and sensitive to the context in which it is located and operates
- Personalized: aware of and sensitive to the individual needs of a specific user
- Adaptive: able to adapt and change according to the user’s responses and tasks
- Proactive: able to anticipate and respond to user needs
Communicating this ability and putting the intelligence of a “smart” product or service in context will be a challenge for marketers.
Democratization of access and responsibility
I remember seeing a presentation by Xerox years ago. They had spent years trying to make their copiers as reliable as possible. But no matter how successful they were, in the end users were always frustrated by a machine that could only flash a blinking light and instruct them to “call your technician.” After banging their heads against this impenetrable wall for years, Xerox finally switched approaches. They took resources that had been spent on making their copiers more reliable and reallocated these resources to making the machines easier for the user to fix. As resources were pulled from increasing the reliability of the machines, the MTBF (mean time between failure) decreased. But overall user satisfaction increased. Users didn’t perceive the consequences to be negative if they could diagnose and fix any issues by themselves, in most cases guided by visual cues on the machine. This is a great example of design thinking, and the descendants of this mode of thinking shows up in any office printer/copier that today has a large enough screen to display graphics of which door to open to remove a sheet of mis-fed or jammed paper. This evolution represented a trend: the democratization of access and responsibility. By pushing responsibility for maintaining the machine down to the user, Xerox was giving up control. They had to design for a wider variety of circumstances. And yet, this thinking can lead to higher user satisfaction.
This trend shows up in many part of health care delivery today, where decisions and responsibilities that used to be the purview of a clinician are now being pushed onto the consumer. I predict this trend of increased access and responsibility will change the landscape of life science products and services, affecting sectors that are as diverse as the way large scientific instruments are typically serviced (by a technician coming to the lab or hospital), to the rise of “home-based clinical trials.”
This democratization works the other way as well. Customers will be removing intermediaries that stand between them and the person who can give them the answer. Dealers will cease to function as separate organizations, and instead be a conduit to the supplier directly.
Industry consolidation will continue, including a consolidation in the number of suppliers. Consolidation will affect the buying side (customers) as well as the selling side (providers). Intermediaries, such as buying groups, distributors and consolidators, will become more important in some situations. As a result, there will be fewer customers to sell to, and those that remain will control a larger share of the market. As suppliers acquire their competitors and grow their offerings, there will be pressure on purchasing groups to consolidate their power as a countervailing force. Purchasing departments will also drive the consolidation and reduction of their supplier base. This will make it harder for smaller organizations to break through the purchasing hurdle, and will give an advantage to larger companies.
One of the few things that will allow smaller organizations to prevail in the face of the consolidation of power will be innovation. This innovation will begin with the product itself, but will not be limited to technology alone. As I discussed, the entire product life cycle and the entire buying cycle will be fertile ground for innovation. (After all, Uber didn’t reinvent the car, just a method through which transportation could be ordered, delivered and billed.)
Uber didn’t reinvent the car, just a method of ordering transportation.
Many attendees thought that the increased use of automation will affect the buying decision-making process. Routine purchases will fall under the control of the purchasing department, but this will occur through the creation of purchasing algorithms, processes that make it possible for individuals to complete purchases within the bounds that have been set up by the purchasing department, but without involving purchasing personnel at all. There may also be purchases that don’t involve any humans at all, even to initiate. Like the smart refrigerator that knows when you’re low on milk and places the order automatically.
China and India will continue to become more important in the global economy. South America will follow, but will lag behind. By 2030, China and India are expected to become the world’s first and third largest economies, respectively. Global support for products will rise in importance.
The shifting nature of the marketing and sales functions
The nature of the marketing, sales and customer support functions will shift. The silos that now exist between sales, marketing and technical support will decrease in importance.
Content-rich websites will become the norm, and users will expect to get their questions answered quickly with only one or two clicks. This will put a focus on clear content that is well organized, and optimized for search engines. The best organizations will harness the stream of user queries to guide them in creating new content. The amount of resources devoted to customer support will increase.
Marketing automation will continue to control and refine our interactions with customers and prospects. Marketing will increasingly be handing “marketing-qualified leads” to the sales organization. There will be less focus in the sales department on making cold calls. Marketing will segment customers by how they want to be talked to, not by demographics.
Sales will become more centralized. There will be a shift towards more inbound sales and less outbound sales. The number of sales personnel in the field will shrink. The rise of personalization will mean that there will be fewer cold calls. There will be an increase in the virtuality of the sales and technical support function. For example, it’s not difficult to imagine that technical support personnel will take Skype calls from a screen on the product itself, rather than sit at a phone bank or make site visits.
The rise of social media in the sciences
At ACP-LS, one of the most interesting presentations was given by Dr. Hrissi Samartzidou, VP of Marketing, Biosciences, at Thermo Fisher Scientific. Her thesis was that our customers are evolving faster than our marketing.
She pointed out that information—in the form of the description of methodology, the results/data, and the interpretation of data—has long been the “currency” of science. As I’ve written elsewhere (NEED LINK TO VOL 2 NO 2), scientists invented content marketing. Dr. Samartzidou extends this thought; she claims that the refereeing, review, acceptance and dissemination of scientific discoveries is the oldest form of social media. Given this parallel, she wondered why it has taken scientists so long to gravitate towards using social media in their professional life. She believes that centuries of tradition (“this is the way it’s always been done”) is what’s holding scientists back—but she also believes that this will soon change.
The drivers of this change include:
- the overwhelming amount of content that scientists must keep up with; for example, there are now over one million papers published every year in the biomedical field alone
- the need, therefore, for scientists to improve their search and filtering algorithms and techniques
- the frustration that many scientists feel with many of the traditions of science (such as peer-review journals acting as gatekeepers)
- Users experiences with social media outside the lab, which will of course be brought to bear inside the lab as well
- the rise of ubiquitous technology (the smart phone and tablets)
- the growth in the “internet of things”
Dr. Samartzidou argued that these trends will force all companies to strive towards what she calls “digital maturity” to achieve new types of relationships with customers. To bolster this argument, she presented some interesting data from a consulting firm (The Digital Advantage: How digital leaders outperform their peers in every industry. Capgemini Consulting 2012) that found that companies that invested in the proper forms of digital infrastructure (beyond just emails and content) stood well poised to reap the benefits. Companies that excelled in both technology and their transformational leadership are predicted to realize increases in revenue generation, profitability, and market valuation.
Dr. Samartzidou then plotted various industry sectors according to their prowess at the two factors that will drive these benefits: “technology intensity” and “transformational market intensity.” Unlike the high-tech and telecomm sectors, organizations involved in manufacturing and pharma are relative beginners. Dr. Samartzidou issued a call for all of us to work towards connecting with customers in new ways.
The call to action
That’s a lot to digest. (Take your time—but not too much.) There are, however, a few immediate takeaways from these two conferences that are worth pondering.
First, have you examined the customer experience of your product/service mix, taking a complete 360° view? If not, you should do so. This is going to form an increasingly important method to achieve differentiation.
Second, the closer to the customer you (the reader) are, the more valuable you are to your organization. How can you use your marketing tools and techniques to gain insight into your customers’ lives and their opinions to inform and improve your outreach to and relationships with customers and prospects?