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DIGITAL INNOVATION IN HEALTHCARE COMPANIES

Digital technology has been and is still transforming industries, opening prosperous new value pools. Yet, it is also posing a risk to longstanding business models. While some industries like retail, banking or media already went through significant digital transformation, the healthcare industry is on the brink of change with disruptive potential. Although executives in healthcare are aware of opportunities and risks posed by digital technology, they are uncertain about which initiatives to focus on and how to pursue them in the best possible way.

This series aims to illustrate major trends favoring digital transformation in healthcare companies, indicate common pitfalls in “going digital” and provide a three-phase model to fruitful and sustainable digital efforts.

 

1. Which digital trends are expected to transform the pharmaceutical industry?

As with all trends there is great uncertainty which of them will diminish over the course of time and which will sustain and grow in importance. However, what many experts do agree on is that digital technology as such will affect the pharmaceutical industry significantly in one way or the other. Below we have listed three trends with high transformational potential for the pharma industry:

Value-based care moving into the limelight

With the rise in chronic diseases and an overall increase of healthcare costs, payors and governments are managing costs while delivering improved patient outcomes. To justify market access and price point, pharmaceutical companies are even more compelled to demonstrate the value and efficacy of their products based on real world data – in addition to clinical trials. Ranging from early (self-)detection, increasing drug adherence to substitution of existing treatments, digitally enabled “around & beyond the pill” products are becoming crucial in this balancing act of costs and enhanced outcomes.

Digital healthcare opening the door for new competitors

The enormous potential of digital healthcare is not going unnoticed: With capital investments of $13.7B in 2019, funding in digital health start-ups increased fivefold since 2013. However, only 5% of these investments are accounted for by the 10 biggest pharma companies[1]. As capability requirements are diversifying, more and more tech-savvy companies and venture funds are moving into diverse opportunities around digital healthcare. Therefore, the healthcare industry is going to change significantly which will also affect market positions of long-established companies.

 


[1] StartUp Health Insights, 2019

Increasing patient engagement shifting pharma focus

In a digital age, patients are no longer exclusively relying on the advice of healthcare professionals but are increasingly able and willing to conduct extensive research on their conditions and treatment options themselves. The current global pandemic situation might accelerate this trend even further. Broadening the focus from HCPs to patients, many pharma companies are starting to (actively) engage with “end users” to ensure a seamless and convenient experience. In exchange, these companies are gathering and learning from extensive data provided by patient’s smart devices. With a 15-fold increase in healthcare data generation from 2013 to 2020[2], this data offers companies an unprecedented entry point to identify global macro developments and trends in disease patterns and consumer behavior.

 


[2] International Data Corporation (IDC)

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.

 


Coming next:

3. How can pharmaceutical companies succeed in digital innovation?


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.


 

 

Contact us now

Your expert for Agility & Digitalisation:

Dr. Alexander Tarlatt
Managing Director

+49 2156 4966 910
alexander.tarlatt[a]santiago-advisors.com

 

 

Your expert for Agility & Digitalisation:

Jan Smagin
Senior Principal

+49 2156 4966 910
jan.smagin[a]santiago-advisors.com