One of our clients was trying to reinvigorate its building materials business in a recent project. The initial work focus centered on potential levels for innovation. The executives considered developing a more flexible manufacturing process, or possibly increasing the effectiveness of their distributors, or even reducing package sizes if that might meaningfully change the economics of their business. They argued that growth had to come through the existing business system. It was entirely rational, yet it entirely missed the mark.
In taking this focus, the executives were more concerned about their own business practices and not thinking about why people bought their products. It wasn’t because customers woke up in the morning with a burning desire to buy lumber, but because a homeowner dreamed of achieving a better life in a better home. By taking a step back, our client realized that the market didn’t want hammers and nails; it wanted walls and rooms.
Traditional commercial models for biopharmaceutical companies drew clear lines. A company’s audience mainly consisted of physicians. Its offerings stressed the clinical efficacy and safety of its products. Its channel strategy comprised mostly in-person contacts and direct-to-consumer advertising. But a number of well-known trends have made these models outdated. Chief among them are changes in technology, costs, and channels.
Technology advances enable patients and physicians to share and analyze both qualitative and quantitative data online for even very rare diseases. They provide tools that can supplement, challenge, or even replace the data and communications provided by biopharma companies. For instance, over 9,000 health applications are currently available for consumers holding iPhones.The market for mobile health care apps that link to enterprise information systems is predicted to reach $1.7 billion by 2014, a 17-fold increase from today.Half of the physicians in the United States are using full or partial electronic medical records systems in their offices, up from 29 percent in 2006.These technologies create new opportunities for biopharma companies.
The rising cost of health care changes treatment dynamics and shifts the relative influence of stakeholders. Physicians now have less decision-making power, while payers play a larger role. Products are increasingly assessed based on their economic impact and effectiveness compared to alternative treatments. As an example, cost pressures have driven up the use of generic drugs to unprecedented levels: in 2010, 78 percent of prescriptions written in the United States were for generic drugs.
Doblin co-founder, Larry Keeley spoke at TEDxAcademy in Athens, Greece. He described promising opportunities in innovation and argued that the most interesting experiments are actually more correlated with resource-scarcity than with resource-abundance.
Pharmaceutical executives understand that they must confront multi-layered demands. They have to explore new business models while attending to their existing, highly profitable commercial model. The important question is: How can they actively pursue both paths to create their own future?
Designers, who are trained in creative problem solving, excel at solving these kinds of complex, multi-dimensional challenges. While designers are respected for their vision and creativity, their disciplined approach to problem solving often yields solutions not discoverable through traditional business methods.
Though design has historically been applied to the development of new products, in recent years leading companies such as Intel, Toyota, GE, and P&G have implemented design in conjunction with traditional business thinking to create new offerings, customer experiences, and business models.
Two summers ago I was biking in the Alps and got a call from a client CEO who expected me to drop everything and meet him in New York City the very next day. I said it was impossible, that it would take me two days to get there. He said he would wait, though in a tone of voice that clearly suggested he shouldn’t have to. Thinking it unwise to appear in biking duds, I bought some business-meeting clothes and flew to New York, got to his conference room, and he promptly walked in to tell me a tale.
Three days earlier this CEO, head of a $70 billion financial services firm with offices in 40 countries, had met with stock analysts. He was reporting on his achievements—which were numerous and impressive. Over the prior year or so he had cut $100 million of annual costs out of the firm; consolidated a bunch of bad data centers into two great ones; dumped several businesses that were not core to operations; improved customer response time; and a dozen other advances. He sort of expected the analysts would at least give him a standing ovation, or perhaps carry him out of the room on their shoulders.