Previously, heavy investments in R&D were rewarded by years, sometimes decades, of exclusivity; successful drugs faced few, if any, direct competitors during that period. Today, every category of the pharmaceutical market is increasingly crowded; doctors, patients, insurance companies and health systems have more choices than ever before. As a result, they have become far more value-conscious. Claims of superior clinical benefits are scrutinized not only through the lens of medical science but health economics and other quantitative methods. Differentiating and winning on clinical performance alone has become a major challenge.
Sales departments in many pharmaceutical companies still place a high value on the personal relationships between HCPs (health care practitioners) and sales representatives. But thanks to new regulations and increased competitive pressures, that traditional model is fraying.
To win in the marketplace today, pharmaceutical companies must look beyond sales and marketing and consider what other customer needs they can address, and what other ways they can create value.
To win in the marketplace today, pharmaceutical companies must look beyond sales and marketing and consider what other customer needs they can address, and what other ways they can create value. Going forward, success will depend on clinical product excellence combined with a deeply nuanced understanding of customers, and the ability to develop differentiated solutions for them outside the laboratory. In short, they must become more customer-centric.
While most pharmaceutical executives acknowledge the value of customer-centricity, it very often remains an aspiration that is challenging to operationalize.
Evaluating and Understanding Stakeholder Needs
To be customer-centric, pharmaceutical companies must evaluate the needs of the myriad stakeholders — hospital systems, private and public insurers, individual practices, partnerships, HMOs, and patients themselves — and consider how they can address them. They must wrestle with important strategic questions, such as which non-clinical customer problems they should prioritize. Leaders must also consider how broadening the scope of their business model will affect their profitability, their operating model, and their required resources and capabilities.
A key tool in tackling these questions is the jobs-to-be-done methodology popularized by the late Harvard Business School professor and Innosight co-founder Clay Christensen. Its core premise is that customers engage with products or service providers only when they have a problem that they need to solve, or a job-to-be-done. Customers choose the product or service that addresses that job the most efficiently and competitively. Its principles are surprisingly simple, but they are not always easy to apply at scale.
The Value of Jobs-to-Be-Done Thinking
Jobs-to-be-done thinking requires companies to better understand their customers. When a company deeply understands its customers’ problems, it can align around a solution, clearly articulating its where-to-play and how-to-win strategic choices. To do this well, companies must do four things:
- Determine the relative importance of their customers and stakeholders.
- Determine the jobs that are most important to address to remain competitive, today and in the future.
- Determine what new skills, capabilities and resources are needed to address those jobs.
- Develop solutions that are aligned with their current business model.
Customers “arise” at the intersections of jobs and their solutions; economic value is created when companies develop superior solutions to the highest value jobs. But value inevitably migrates, because high margins attract competitors who develop their own solutions. When a job is understood to be disease prevention or cure, it may only have a few solutions, so the companies that provide them can command high premiums. That is certainly the case with breakthrough drugs in the early stages of their product cycles. But in time, other solutions will inevitably appear that have similar or better clinical profiles and that are cheaper. Given that reality, pharmaceutical companies must constantly consider what other jobs they can address.
That’s what AbbVie did. AbbVie makes Humira, which, while an effective drug and a well-established therapy, is older than most of its competition, some of which has superior clinical performance. But by pricing Humira competitively and investing significant resources and capabilities in customer service, AbbVie has continued to dominate its market. The company works with HCPs to answer their clinical questions and likewise provides extensive patient support, answering their medical questions and ensuring that they can obtain the drug affordably.
By addressing a broader range of customer and stakeholder jobs, AbbVie has not just retained market share but gained it. Most importantly, it invested in those customer service capabilities when it was still leading the market. All pharmaceuticals have life cycles; most will eventually be replaced. But the customer service capabilities that AbbVie invested in are drug agnostic; they can and will be used to support a wide range of products.
Overcoming Implementation Hurdles
Organizations that want to embed the jobs methodology into their operating model face two major hurdles. First, most already have existing methodologies for understanding, segmenting, and serving their customers. Second, different functions within those organizations, like marketing and sales, often believe that their approaches are sufficiently customer-centric already and needn’t change. But if they are no longer working, they must.
Leaders must clearly communicate that strategically-focused customer-centricity is a better way. For jobs-to-be-done approaches to have strategic impact, all functions, indeed, all employees, must share a common understanding of the concept and the job in question and use the same vocabulary, methodology, and tools as they pursue it.
Customer-centricity doesn’t require a company to change the fundamental way it operates, nor will it compromise its core business model. It simply requires all its functions and people to acknowledge that the reality they are operating in has changed—and then to identify and seize the new opportunities it offers.
About The Authors
Pontus Siren is a Partner at Innosight, based in Switzerland. psiren@innosight.com
Clara Christensen is an Analyst at Innosight, based in Switzerland. cchristensen@innosight.com
Sid Raman is a Manager at Innosight, based in Boston. sraman@innosight.com
Josh Suskewicz is a Partner at Innosight, based in Boston. jsuskewicz@innosight.com
Thiemo Werner is an Associate Partner at Innosight, based in Switzerland. twerner@innosight.com
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Source: Innosight
Fostering Customer-Centricity in the New Pharmaceutical Company