30 THE FUTURIST January-February 2006 www.wfs.org

Scenarios in Practice:Futuring in the Pharmaceutical Industry

By Eric Garland

A consulting futurist

offers insights on how

a key foresight tool,

the Impact/Probability

Matrix, enabled

decision makers in the

pharmaceutical industry

to see how certain

trends could change

how they do business.

PH

OT

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.CO

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©2005 World Future Society • 7910 Woodmont Avenue, Suite 450, Bethesda, MD 20814, U.S.A. • All rights reserved.

Future scenarios are useful toolsto stimulate strategic thinkingbecause they produce detailed

stories about what the future couldlook like. When a decision makerunderstands where we might beheading, he or she can decide whereto lead the organization.

Scenario building is like journal-ism, except in reverse. Instead of col-lecting rigorous data about the pastto write a story, in the scenario wemake projections based on trenddata that indicate the future. Basedon rigorous trend data, futurists candraw pictures of the kinds of worldthat the trends could lead to.

Trends alone are not enough forthe decision maker. Theyare the abstract forces thatwill act on us and our com-petitors. They show asliver of the future, butthey are not completeenough to deliver a pictureof the market in which wewill be competing.

Take these disparatetrends, for example:

• The cost of health careis increasing.

• The baby boomers willbe the largest group ofpeople over the age of 65 inAmerican history.

• The Indian middleclass is growing in number.

• Businesses outsourcing workoverseas is increasing as a strategy tokeep costs low.

• Diagnostics equipment is fallingin price and increasing in connectiv-ity to the Internet.

These are interesting observations,but the information by itself is so ab-stract that it isn’t useful as a strategictool all alone. But when the trendsare crafted into a scenario, a storyjumps out:

Scenario for the Year 2016America, fiscally burdened by the

cost of its massive retired population,begins to outsource some health-careduties to doctors in India.

Telemedicine becomes more wide-spread, involving the use of remotediagnostic machines, located in Amer-ican clinics, to take readings and doc-ument a patient’s symptoms and vitalsigns.

Much of the mundane work of theprimary-care physician is outsourcedusing the Internet, although toughcases are still referred to Americanspecialists.

This brief scenario tells a story—one that should give health-care ex-ecutives something to think about.Though it may not come true exactlylike that, the implications of thatstory as it develops will change howthe executive thinks about the com-ing competitive pressures on the in-dustry. This scenario asks importantquestions:

• Is globalization going to impactthe American hospital?

• Is the U.S. health-care industryinvesting enough in cutting-edge in-formation technologies? What aboutother countries?

• Will foreign medical studentswho come to America stay, or willthey return to their home countriesto practice?

• How much pressure is the babyboomers’ aging going to put onhealth-care practices? Can organiza-tions minimize the discomfort byplanning ahead?

Realistically, we cannot plan todayall the way out to 2016. Too muchwill change between now and then.But the tools of the futurist help toexpose our assumptions and ourblind spots. They serve to show usnot only what we assume to be trueabout how the future will play out,but also some of the things of whichwe are ignorant.

These insights are useful in busi-ness because they help point to com-

petitive threats and opportunitiesthat are over the horizon.

Using Future Scenarios In Real-Life Situations

Just as there are numerous ways totell stories—film, kabuki, standupcomedy—there are a number ofways to develop and presentscenarios to a group that is thinkingabout a problem.

One effective tool for scenario de-velopment is the Impact/ProbabilityMatrix (Figure 1, page 32). The ma-trix presents four potential scenarioscomparing each one’s potential im-pact and its probability of occurring.Impact is the estimation of whether a

trend could be mildly dis-ruptive (requiring a fewnew practices) or disturb-ing (requiring perhaps acomplete change of busi-ness strategy). Probability isa measurement of howlikely a scenario is andwhat events would need totranspire in order to bringit about.

The Impact/ProbabilityMatrix is useful for severalreasons. It is a quick way todevelop four individualscenarios with different im-plications for the organiza-tion. Four is a good num-

ber to work with because it gives arange of possibilities without over-whelming the decision maker withcomplexity. Offering two scenariosonly would introduce a football-match mentality—our side or theirside. Three lets people choose a mid-dle ground, an often falsely moder-ate position to take. And five ormore scenarios get difficult to un-derstand. With four scenarios, theImpact/Probability Matrix offersviews of distinctly different out-comes:

• Flash in the pan—low probabil-ity, low impact. This scenario showshow events could turn out to be lessof a disruption, and thus any over-reaction on our part would bewasted energy. This scenario oftensurmises that the coming changewill not really be a big deal, or willblow over quickly.

• Business as usual—high proba-bility, low impact. A change is com-

THE FUTURIST January-February 2006 www.wfs.org 31

“The tools of the futuristhelp to expose our assump-tions and our blind spots.They serve to show us . . .some of the things of which

we are ignorant.”

ing, but we can adjust to it withoutsuffering big growing pains. Weneed to observe the forces at play tosee if some things will changearound us, but our business willremain fundamentally unchanged.

• The brewing storm—high prob-ability, high impact. Thisis often what executivesfocus most on, a scenariothat would mean a realproblem. You can see thepath to this “brewingstorm,” and the explo-ration of this future willpoint to signs we need towatch for.

• Wild card—lowprobability, high impact.Wild cards are thosescenarios that are un-likely but could arrive ifa couple of events comein rapid succession andchange everything. It’sthe “We never saw it coming”scenario—something on our blindside that would result in severe con-sequences due to our lack of prepa-ration.

Lots of people will downplay theeffects of a wild card. Sometimes, ifyou propose one of these scenariosout of context, people will think youare an overreacting alarmist. Butwild-card scenarios play out inreality all the time, especially in re-sponse to catastrophic events.

The Impact/Probability Matrix inAction: Clinical Trial Disclosure

Let’s see how the Impact/Proba-bility Matrix works in real-life situa-tions where nobody knows the out-come of trends and potentialdisruptions that will affect an entireindustry.

The matrix was put to use recentlyfor a group of pharmaceutical indus-try decision makers concerned abouta potential shift involving clinicaltrials and their disclosure to thepublic. In the past, drug companieshave been able to conduct clinicaltrials to learn about drugs they aredeveloping or marketing, but theyhave been under no obligation topublish their findings.

Recently, several events have ledgovernment agencies to call formandatory disclosure of trial data.

GlaxoSmithKline was recently suedby New York Attorney General EliotSpitzer for fraudulently withholdinginformation on trials of the use of theantidepressant Paxil in children. Aspart of its settlement, the company isdisclosing all trials, regardless of

outcome, on a public database. Thishas spurred many stakeholders,from medical journal editors to Con-gress, to consider a permanent,industry-wide, mandatory databasefor all trials so that companies are nolonger able to hide unflattering data.Proponents argue that this wouldimprove the access that doctors andpatients have to information aboutdrugs.

For the industry decision makers,we used an Impact/Probability Ma-trix to explore how much disclosuremight be mandated and how suchmandates would change strategies atpharmaceutical companies. Figure 2shows how the scenarios played out.

Scenario 1: FalseAlarm—Low Probability,Low Impact

American business hasa short attention span,and there are sometimesfads and short-lived ob-sessions that quickly dis-appear. In the False Alarmscenario, the news cyclechurns on and the mediaget tired of discussingsomething as arcane asclinical trial design anddisclosure. Political inter-est, too, moves on whenthe election year is over.

The whole thing goes away in a fewmonths.

In this scenario, the politicianshave scored their victories andmoved on to reform industries otherthan pharmaceuticals. The electionyear passes, and no political pointsare left to win. The news media findthat the only details of the story leftto debate are so specialized andcomplicated that only pharmaceuti-

32 THE FUTURIST January-February 2006 www.wfs.org

Figure 1: Impact/Probability Matrix

High Impact

Wild Card Brewing Storm

Low Probability

High Probability

Flash in the Pan Business as Usual

Low Impact

PHOTOS.COM

“Lots of people will downplaythe effects of a wild card. . . .But wild-card scenarios playout in reality all the time,especially in response to

catastrophic events.”

cal company executives, physicians,and FDA regulators are willing totune in.

This scenario is unlikely, as agingAmericans, Medicare budget battles,and rising drug costs keep pressureon all aspects of the pharmaceuticalbusiness. The public probably won’tsimply turn away at this point.

Scenario 2: Self-Regulation—High Probability, Low Impact

If no additional major events oc-cur, and pharmaceutical companiesstep to the plate to increase theirown disclosure, the government mayallow the industry to police itself re-garding its disclosure of informationto the public. This is the low-govern-ment-intervention scenario, Self-Reg-ulation.

In this scenario, pharmaceuticalcompanies all agree to post the re-sults of completed Phase III trialsthat are material to understandingmarketed drugs. Phase II and IIItrials of compounds not yet on themarket will be conducted withoutany requirement for disclosure,though often the investment commu-nity will learn of these so as to un-derstand the impacts of R&D andproducts in the pipeline on a com-

pany’s future.

Scenario 3: GovernmentRegulation—High Probability,High Impact

The scenario with the greatest like-lihood and impact for the industry isone of federal regulations mandatingthe disclosure of clinical trials.

In this scenario, legal actions con-tinue to pile up, along with contin-ued pressure on the health-care in-dustry in general. The voluntarydatabase PhRMA (PharmaceuticalResearch and Manufacturers ofAmerica) fails to become a usefultool because of a lack of voluntaryparticipation. Public and govern-ment discontent continues to grow.

To avoid further legal actions,drug companies agree to a govern-ment-run database disclosing dataon all Phase III and IV trials, regard-less of their results. There would bepenalties for a lack of disclosure.

Scenario 4: Total Disclosure—Low Probability, High Impact(Wild Card)

If there are more scandals involv-ing drug safety or obfuscation oftrial data, the public could becomeso distrustful of the pharmaceutical

industry that government agenciesmight move to demand full registra-tion of all research activities, frompreclinical to Phase III and IV trials,irrespective of the market potentialof the drugs.

All participation would be manda-tory. Other drug company activitieswould likely be monitored as well,including whatever the sales repre-sentatives tell prospective customersand how much doctors are paid toprovide clinical information.

Business Implications of ClinicalTrial Scenarios

The Impact/Probability Matrix hasdelineated a range of scenarios, allwith varying degrees of disclosureimposed on the pharmaceutical in-dustry. There are scenarios in whichbusiness won’t change much, andothers where pharmaceutical compa-nies must operate with unprece-dented transparency.

The next step is to look at the po-tential impacts of these scenarios.Here are a few:

• Silence might win. If the move-ment toward more disclosure ofdrug-trial results is only a flash inthe pan, then the smart companiesare followers, not leaders. If GSKand Eli Lilly put forth a clinical trialdatabase with full disclosure, theywill be stuck with it, while othercompanies still have options.

• Disclosure becomes a way oflife. The pharmaceutical industry iscertainly regulated, but we could seea new era of government oversight.There may be new regulatory boardsadded to government agencies, andcompanies will need to augmenttheir government relations depart-ments, because the regulations arenow mandatory.

• First to market not alwayspreferable; fast followers gain newadvantage. The new era of disclo-sure will change how companiescome first to market. It is conven-tional wisdom that the first to mar-ket gets increased brand recognition.Now there is a trade-off. Later en-tries into markets may be able tostructure Phase III programs morecheaply because companies willlearn from their competitors aboutblind alleys not to go down.

THE FUTURIST January-February 2006 www.wfs.org 33

Figure 2: Scenarios for Clinical Trial Disclosure

High Impact

Total Disclosure GovernmentRegulation

Low Probability High Probability

False Alarm Self-Regulation

Low Impact

PHOTOS.COM

• Learn from every lab in theworld. There will be a loss of secrecy,as competitors can observe trial de-sign, patient populations, endpoints,and eventually results. Drug compa-nies will be able to reap greater effi-ciencies as companies learn fromother labs in all other drug compa-nies. The total costs of drug develop-ment could be reduced as competinglaboratories avoid duplicating eachother’s mistakes and improve the de-sign of their clinical trials.

• Fewer studies. Companies maypotentially limit studies if all trialsmust be registered and all resultsdisclosed. A faulty or even ex-ploratory trial design could result inimmediate exposure to criticism byone’s competitors. Post-marketingstudies are typically more open, buthead-to-head trials will instantly sig-nal to a competitor of an attack on itsmarket share. Head-to-head studiesmay become riskier, as it will be lesspossible to conduct trials such as thePROVE IT statin study by Bristol-Myers Squibb, which inadvertently

showed the superiority of Pfizer ’sLipitor. Pharmaceutical companiesmay adopt a more targeted approach.

• More-successful studies. Evenwell-designed trials may result inunfavorable results due to poor en-rollment, uncertain methodology, orendpoints of disease that are not uni-versally accepted. Learning the pit-falls of other laboratories could helpcompanies avoid them.

Futuring for Decision Makers

This is only a partial list of impli-cations. Once the decision makersare engaged in developing thesefutures tools and analyzing thescenarios, their open discussionabout possible implications leadsthem to consider potential impactsthey could have been denying.

For these reasons, futures tools areuseful not because they are somesort of crystal ball, but because theyinspire people to consider what theyalready know about their world—whether it’s a business, an agency, a

school, a community, or even a fam-ily—and how it will change. In busi-ness, these tools get leaders a stepcloser to anticipating how their mar-ket will be different in the future.They can thus become better equippedto handle the competitor of tomorrow.

Competitive intelligence is allabout the future, whether 10 years or10 weeks from now. Learning whatmay be around the corner is essen-tial to strategy, and the tools of thefuturist are ideal for improving othermodels of competitive assessment. ■■

About the AuthorEric Garland is the principalof Competitive Futures Inc., a futures consultancy, www.competitivefutures.com;e-mail egarland@competitivefutures.com.

This article draws from hisforthcoming book, Fast Forward Thinking.

34 THE FUTURIST January-February 2006 www.wfs.org

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