Approaches towards digital Innovation in Healthcare

To meet the trends described above healthcare companies are utilizing different approaches towards digital innovation and most do not rely on one single concept. Find a variety of approaches of how companies are engaging in digital innovation in the following graph:

Established healthcare companies that strive for digital transformation of their core business frequently choose an internal lab approach linked to existing corporate locations. Also, accelerators, incubators and network programs are frequently used approaches to access external innovation capabilities. Many companies define their digital ambitions and challenges that they want to solve internally before seeking solution options to these challenges from external sources. Typically, the more disruptive innovations a company aims at, the stronger its external orientation.

2. Why do many digital innovation initiatives run into trouble?

When entering the field of digital innovation, large healthcare companies typically run into diverse challenges that face severe obstacles to achieving its digital ambitions. The most frequently observed challenges are listed below:

• Little experience across organization & project teams
  Digital innovation requires capabilities that differ significantly from those available in healthcare companies. This gap does not only relate to technical knowledge, but also working methods. Not comfortable to deviate from well-established R&D and commercialization processes, healthcare companies struggle to adopt agile, iterative practices. Instead they manage initiatives in digital innovation based on requirements and habits of the core business, thus disregarding key success factors of digital innovation.
  
  To get a more in-depth look at current practices in agility, read Santiago’s study “State of Agile”
   
• Missing key stakeholder engagement
  While many efforts within digital innovation are driven by small teams in early stages, most initiatives become intertwined with the wider organization at some point. Key stakeholder and opinion leaders play a pivotal role in safeguarding access to critical resources. However, these stakeholders are frequently not involved early enough in the project and thus are not able to adequately mobilize the organization as a whole.
   
• Digital not embedded
  With bold statements, considerable investments and parallel cultures, healthcare companies try to close the gap to technology companies. Yet, if the wider organization is not involved adequately, this frequently leads to confusion, resource competition and a rejective stance towards digital innovation. Especially in situations where digital products or services are integrated into the core business along their lifecycle, this rejective stance can jeopardize the product’s or service’s overall success.
   
• Little attention towards cultural change
  Despite being addressed frequently, many leaders still underestimate the importance of managing the “people side of change”. As with many high impact changes, insufficient change management to promote the mindset needed for digital innovation can undermine success.
   
• Insufficient involvement of external partners
  Although partnerships are a long-established and valuable tool in the “conventional” drug lifecycle process, healthcare companies tend to approach digital partnerships to a rather limited extend. Bringing in external expertise is crucial to shorten time to market and attract required talent to the company when it comes to digital innovation. However, many healthcare companies struggle with strategic partnership management or simply lack adequate processes to enable flexible and short-term partnerships in the digital sphere. Moreover, an active management of a digital ecosystem of new companies with promising technologies with the right approach to bring them close to corporation but not too close to lose their start-up advantage, can rarely be seen with large healthcare companies.

3. How can pharmaceutical companies succeed in digital innovation?

There is no “royal road” to digital innovation which can be applied to all organizations and requirements. However, to address typical challenges and to account for the difficulties of a comprehensive transformation touching all dimensions of a company, healthcare companies can choose to follow this three-phase approach:
 

Phase 1: Provide a safe environment for digital innovation

Digital innovation initiatives are different from core business activities in many ways. However, the gap between requirements of a digital innovation and established ways of doing things might differ based on the type of initiative and company at hand. Nevertheless, legacy processes, systems, and structures frequently represent a burden to digital innovation initiatives, impeding these initiatives from realizing their full potential. Consequently, digital innovations evolve ideally in a safe environment with specific “digital-focused” boundary conditions.
 

Therefore, regardless of the type of digital innovation – e.g. an accelerator program, a digital lab, or a strategic alliance – in the first phase of a digital effort there should be a distinct separation from the existing organization, regarding:

• Budget, steering and incentives
  Establish a fixed budget for digital initiatives that is not in competition with other business or functional budgets to ensure a certain degree of independence in the decision process. Steer and incentivize by qualitative parameters derived from goals of the digital initiative / program

• Processes and organization
  Apply processes and methods customized to digital innovation requirements and unbiased by existing structures and approaches.

• People, skills, and culture
  Ensure focus by establishing dedicated roles with specific skillsets and fitting mindsets. Digital initiatives typically intend to breakout from existing thinking models, which requires fresh outside perspectives and talents.
   

Phase 2: Foster culture of digital innovation

Changing people’s behaviors and ways of doing things is important to realize digital innovation and requires a change in mindset first. Therefore, it is important to strengthen the recognition of the opportunities and advantages of digital innovation to achieve more institutionalized digital transformation in subsequent steps.

Use successful digital initiatives as lighthouse success stories. Foster individual engagement of different parts of the organization with the digital innovation initiatives and start deriving implications for other working situations. There are different ways how a “spirit of digital optimism” can be strengthened in the organization:

• Job rotation program
  Integrate individual employees for a certain period of time in in digital initiatives or organizations for them to experience the mindset of these teams and their different ways of working first-hand. These colleagues might then serve as advocates and champions for digital innovation in the rest of the organization. There is obviously a difference between working on a digital initiative and reading about it on the intranet. Open door or dialogue days are other formats that can have a similar effect on the overall culture

• Idea competitions
  An effective way to engage the corporate community is to offer a dedicated channel for employees to actively contribute to digital innovation, e.g. by providing ideas to real problems of the company.
   

Phase 3: Integrate digital innovation

To become an accepted part of the organization and deliver sustainable value, digital initiatives must be integrated into the organization at some point of their lifecycle. However, this needs to happen in a modus operandi that respects and caters for the requirements of the digital initiative, the core business as well as the needs of external partners.

This integration means finding processes and organizational forms to make digital initiatives work in the corporate context. Depending on the long-term strategy and the needs of the digital initiatives, there are different forms of integration, for example:

• Scale up organization
  Provide an organizational frame for growing digital business initiatives, making use of established corporate structures and support processes

• Digital Business Area
  Establish an independently steered digital business unit, focusing on delivering value from digital innovations

• Digital capability pools
  Build up a center of expertise for digital innovation. Pool scarce digital capabilities and deploy them to digital initiatives as required

When it comes to the decision on how to integrate digital innovation into the organization, digital innovation has already reached some maturity in a company. Still, this step is decisive to ensure that digital can deliver long-term value and contribute to growth as an accepted element of the set-up.

Santiago as trusted partner in digital transformation

In recent years we have successfully supported several leading healthcare companies with different digital programs and initiatives. Some examples are the buildup of a global digital innovation network, the setup of a digital commercialization organization or the realization of a digital transformation roadmap in R&D. In close partnership and with targeted approaches we have supported our customers in accomplishing their digital goals by leveraging our deep expertise in digital strategy and organizational development. We would be happy to discuss your digital transformation goals and how these could be broad to live or further developed sustainably.