You could say that the pharmaceutical business is all about chemistry. Discovering new compounds that will mitigate or eliminate the impact of disease is the reason that companies like Pfizer, LEO Pharma, AstraZeneca, GSK, and AbbVie are in business. Because they have traditionally been focused on the chemical compound, their business model is built around the product. And so is their culture.
Product focus, while common to many industries, is perhaps nowhere more intense than in pharma, where the long development cycle, the blockbuster patent and the big payoff are the way the game has been played – very profitably – for decades. But that model is under siege. The combination of a looming patent cliff, aggressive generic producers and financially strapped payers has created a perfect storm for the entire industry and is forcing it to reconsider its fundamentals.
The terrain has shifted in favor of payers and patients and the challenge for pharmaceutical firms is now to move their strategic focus from a product-centered business model to a patient-centered one. But how can this be done in an industry that has built its culture around the product and not the patient? And where does competitive advantage come from in this scenario?
In his recently launched book, Tilt: Shifting Your Strategy From Products to Customers, Ivey School of Business professor Niraj Dawar points out that while more and more ‘upstream’ company activities – things like sourcing, production, logistics – are becoming automated and outsourced, their potential for driving efficiency is reaching its limit as a source of competitive advantage. More companies are looking for competitive advantage in the ‘downstream’ activities: things like shaping customer perceptions, building trust, designing your offering to meet unmet needs, accruing and deploying customer data.
Dawar gives the example of Coke: you can buy it in a carton at the store for 25 cents a can, or from a vending machine for $2. On a hot day at the park, at the ‘point-of-thirst’, you don’t mind paying the $2.00 (a 700% markup of the per-can price at the supermarket) at a vending machine or concession stand, because It means “not having to remember to buy the 24-pack in advance, break out on can and find a place to store the rest, lug the can around all day, and figure out how to keep it chilled until you’re thirsty.” In other words, you’re thinking like a customer when you decide to put that machine at ‘point-of-thirst’.
Patients are no different. For a pharmaceutical company to do what Coke does, it needs to put itself at the ‘point-of-pain’. And that requires an empathetic stance that considers the patient as more than just a subject in a clinical trial or the beneficiary of a positive chemical reaction. It requires consideration of the patient’s emotional and psychological responses to having the disease, living with it, how it changes or impedes their lifestyle, or their relationships with family and caregivers. It requires getting up close and personal, listening and building a relationship.
For companies and cultures traditionally focused on the internal processes of product development, this is a fundamental and very disruptive change. You suddenly have to stop doing and start listening. You suddenly move from the hard ground of the lab to the soft, shifting terrain of patients’ feelings. You stop defining your patients by their disease and help them isolate it as only one part of a much larger, richer life.
This is where brand comes in. Branding is the art of perception management. A brand is little more than a measure of how your patients feel about you. Their feelings are shaped by their perceptions, and their perceptions are shaped by your actions. Therefore how you act ultimately determines the value of your brand, and the capacity for your brand to grow your business. So to build your brand, you need to act in a way that respects and nurtures the emotional as well as the physical well being of your patients.
Committing to patient-centricity demands that you shift your focus from the chemistry of the lab to the ‘chemistry’ of customer relationships. We are all familiar with the cliché “they have great chemistry”. It’s a metaphor that acknowledges the power of human interaction. Interacting with chemical compounds doesn’t just happen at the molecular level; it happens at the level of real human day-to-day life, the life we can see and feel and touch. Build your business around that and your brand will carry you through the perfect storm.
This article appears in MISC Spring 2014, The Brand Issue, on newsstands March 3