Big Pharma Makes Moves To Manage Disruption

File under: agile methodology, Digital Health, Global Pharma Marketing, Healthcare innovation, Patient Engagement, Pharma innovation

What I liked most about a recent HBR article was what wasn’t mentioned.

The recent Harvard Business Review article, “How Merck is Trying to Keep Disrupters at Bay,” is all about disruption, and anyone who reads HBR on a regular basis knows that anything written about industry disruption or disrupters owes at least a tip of their hat to Clayton Christensen.

Christensen, a Harvard professor, has written extensively about disruption, innovators and the innovator’s dilemma, highlighting the fact that most large companies, including pharmaceutical companies, are not great at innovation or staying nimble enough to respond to changing customer needs and expectations.

Often it’s the small startup companies who aren’t respected by big companies that wind up disrupting the marketplace. They upend the value proposition in the marketplace, and by the time large and established companies can see what’s happening, they’ve lost market share – or maybe even the entire market.

I think it’s interesting and very compelling that Merck – a large and established company – recognizes this threat and is trying to work from both the inside-out and the outside-in to keep disrupters at bay.

babarThe HBR authors reference another large company, IBM, and how it essentially remade itself 20 years ago under the leadership of Louis Gerstner, who wrote his own best-selling book, “Who Says Elephants Can’t Dance?” on the IBM journey.

The way Merck is doing it really impresses me. Merck recognizes that as a firm it already has certain core attributes, capabilities and priorities that it isn’t going to throw out. But by creating an internal Emerging Businesses (EB) group, it’s also inviting a high level of innovation.

Merck has tasked this small group to look outside the firm, but also, and more importantly, within the firm for new ideas for both products and services. EB created a Strategy & Innovation Council to identify and scale new internal initiatives and a Global Health Innovation Fund to find external partnerships.

Fundamentally, Merck is a products firm. They’re a drug manufacturer, but they recognize that innovation extends beyond new Rx products and into the entire customer experience, which can include other revenue opportunities like services and technology.

Merck recently took a large investment interest in Preventice, a firm focused on remote patient monitoring and patient compliance. This investment allowed Preventice to turn around and buy eCardio Diagnostics, a leading remote cardiac patient monitoring platform.

Whether Merck buys out Preventice in its entirety or not, this partnership is very strategic by virtue of the front row seat it’s given Merck to watch and learn from the workings of a high-growth, innovative digital health company.

Essentially, this approach is an excellent example of one strategy big companies should consider. By making even modest investments in small companies that are starting to emerge, even if they’re outside the traditional biopharma sector, they are positioned front and center to watch innovation unfold, and then bring that learning back into the company.

Perhaps at some point companies like Merck will actually buy these smaller adjacent companies and integrate them, but that’s another chapter that has yet to be written. It will take a few years for pharmaceutical firms to invest in moving significantly beyond product and actually become total solution companies with integrated products and services.

Merck is in the middle of an important experiment. I have to commend them for committing resources to an innovation team that is both encouraging internal experimentation and investing externally in startups, as well as making the hard decisions about who they continue to invest in and who to divest from, spin out or wind down as they realize a particular alliance isn’t strategic for them.

Since Christensen wrote his groundbreaking book, The Innovator’s Dilemma, large companies have been on notice about the risks of disregarding upstart companies in their space. Merck seems to be one pharmaceutical company that is making sure that it will continue to dance.

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  • Vera Milan Gervais

    I also commend Merck, although it’s from a slightly different perspective: meeting the need for customer service. “…they recognize that innovation extends beyond new Rx products and into the entire customer experience, which can include other revenue opportunities like services and technology.”

    A prescription isn’t enough. One huge revenue opportunity in pharma is based on patient adherence and compliance, which ultimately increase sales. it’s been proven that providing JIT support to patients/customers increases an individual’s understanding of their medical conditions, as well as the need for various treatments, lifestyle changes and medications. All this leads to appropriate expectations and a better experience. Yes, there’s a cost to providing this service, and yes technology will help us provide it more efficiently. However, technology needs content. In this case, that means listening to people’s needs and providing relevant information and follow up.

    We may live in a digital world, but successful customer service innovation occurs when interactions meet the human need for compassion and care.

  • DaveO

    Vera, thanks for your comment. Yes I agree that the definition of providing a full solution has to include thinking about the entire patient and physician experience. You rightly point out the benefits of patient adherence to the entire ecosystem, from patient to provider to insurer to pharma. Tech may help us deliver customer service more efficiently, but it has to be built on a foundation of understanding, empathy and ultimately the right kind of content and services that will help the patient.