June 2012

FEATURE • MULTI-INDUSTRY

by Asa Cox

The turmoil engulfing the global economy has forced many industries into reinvention in hope of discovering new growth. Every company faces

the daily challenge of business growth; where to find it and how to generate profits from it. Every business leaders’ primary task should be aligning internal resources to capitalise on new growth opportunities quicker and better than competitors.

Meetings, management of direct reports, and putting out fires - two thirds of executives blame “urgent day-to-day business demands” for their lack of time to think about growth. Talk of the future is often confined to budget season and infrequent board meetings.

Planning for growth typically focuses on acquiring more customers or generating greater revenue from existing ones, and therefore falls on the sales, marketing and business development teams alone. Even then, little time is given to horizons beyond 24 months when making plans for growth, which is understandable given the uncertainty of the future.

It’s been proposed that this uncertainty should act as a driving force for managers to recognize the need to put forth a greater commitment to planning growth and innovation. Many top companies view innovation as a key weapon in their efforts to seize the potential benefits available in an economic recovery.

Do you?

“The best way to predict the future is to invent it.”

~ Alan Kay, Computer scientist

The long term viability of your company depends on its ability to innovate.

In the 2012 GE Innovation survey, 95% of senior executives said they believe that innovation is the main lever for competitiveness and is inextricably linked to growth. Companies in the pharmaceutical industry are feeling the pressure of competition like never before.

To some, innovation might be considered out-of-scope. Instead best left in the realm of research teams, high tech firms and inventors.

To innovate: “make changes in something established, especially by introducing new methods,

ideas, or products that increases its value”~ Oxford Dictionary

Grow your company in 60 MINUTES

How much time do you spend thinking on and planning the future growth of your company?

How many minutes per day, week, month?

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However according to this definition, the scope is wide open for every employee to contribute to the future success of the company. Innovation can be and should be at the core of your growth (a.k.a. survival) strategy.

To be a little more specific however, economists generally define innovation in terms of:

Product: the act of bringing something new to the market place that improves the range and quality of products on offer: for example, the Apple iPod is an innovation compared with the Sony Walkman.

Process: a new way of making or delivering goods or services: for example, going to visit the doctor and recording that you have arrived for your appointment by touching a screen instead of talking to a receptionist.

“For CEOs today, it’s all about achieving growth and efficiency through innovation. It’s not about product innovation so much

anymore as about innovating business models. process, culture and management.”

~ Ginni Rometty, IBM CEO

Harvard Business Review published a modified version of the classic Ansoff digram to help companies identify their innovation options (see Fig 2).

No time for innovation?The contributing Monitor Group research showed a clear inverse correlation between time invested by leading companies in the different types of innovation and the resulting profits.

Fig. 1 - Allocating Innovation Profits

Innovation Investment Return onAmbition Allocation Innovation

Core 70% 10%

Adjacent 20% 20%

Transformational 10% 70%

The report highlights that there is no single formula for what type of innovation a company should focus on. There are many variables to consider, including stage of business maturity and competitive position. However, just thinking about classifying innovation is a major step forward for most companies.

How does this apply to pharma?The author proposes that the current order of the industry is becoming obsolete.

The pharmaceutical industry is evolving; current segments and commercial boundaries are now blurred by the necessity to compete for less drug budget, in new markets, for more sophisticated consumers.

• Big Pharma companies have identified generics as a way to use their brand equity to unlock quick revenue in emerging markets.

• Generic companies understand that owning brands are a way to protect profits; so building OTC portfolio’s make sense

• Traditional biotech’s figure that biosimilars are a quick and simple way to utilize existing assets and know-how

• Consumer healthcare giants are stretching brands into diagnostics and nutritional sectors

What is the scope of today’s pharmaceutical company? Will it actually be undervalued by focusing on the traditional activities of its label?

The citizens of the new pharma world need to innovate or face extinction.

GROW YOUR COMPANY IN 60 MINUTES - MULTI INDUSTRY • FEATURE

Fig. 2

Innovation.”

FEATURE • MULTI INDUSTRY - GROW YOUR COMPANY IN 60 MINUTES

“Every organisation needs one core competence.

~ Peter Drucker

June 2012

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GROW YOUR COMPANY IN 60 MINUTES - MULTI INDUSTRY • FEATURE

In Pharma Industry 2.0, operational boundaries for such companies need to be reconsidered for an alternative future. New adjacents needs to be considered and those with transformational ideas will likely see matchless profitability.

Innovating enough?If you are based in mature pharma markets (historically powerful innovation centres), the future could look decidedly different. The same BCG innovation survey postulates that a new world order in innovation is taking hold, one in which rapidly developing economies (RDEs) led by China, India, and Brazil will increasingly assume more prominent positions, while the United States and other mature economies continue to play major roles but gradually become less dominant.

A similar survey by AstraZeneca already places China in 3rd place and India in 4th in terms of perceived innovation; and projects them to be 1st and 2nd by 2020.

How long until this becomes an equivalent reality in pharma?!

Do you know where the next game-changing innovation might come from? Are you confidant that you know what that innovation might be?

Innovate InnovationSo you understand how important innovation is to the future of your business. But are your innovation programs up to par? The truth is, your innovation programs might need some innovation themselves! CapGemini data suggests that only 1 in 3 innovation projects have a positive material impact on business results. Maybe you need to realign and rethink. 75% of respondents in the GE report strongly agree that the way companies innovate in the 21st century is totally different to the past and that innovation will be driven more by creativity than scientific research. Those same respondents believe that the most impactful innovations will require partnerships; collaboration will beat solo effort.

Innovation leaders report that nearly 50% of their new ideas come from either suppliers or 3rd parties. Are you looking in the right place for innovation?

Are you asking the right people in your organisation or in your value chain?

It’s all about you!In addition to looking in the right place, you might also want to look in the mirror; the biggest barrier to innovation could actually be you. 39% of innovation ‘laggards’ report

that inadequate leadership commitment is what constrains a company’s ability to achieve breakthrough innovation. Teams responsible for delivering growth need Innovation Energy to come from the top; driving both the organisational changes and attitudes required to succeed.

For some the biggest challenge might be where to start; for others it might be where to get the energy and inspiration for greatness.

The idea behind New Pharma Thinkers is to solve these problems.

We believe that with just 60 dedicated minutes of thinking time per week, you can achieve greatness. New Pharma Thinkers will provide you with stimulating articles from industry leaders and the opportunity to interact with other like minded innovators.

Your company needs a brain. You’re it!

Start your weekly commitment to innovation.

References & Bibliography:The Nature & Importance of Innovation http://press.princeton.edu/chapters/s9221.pdfBoston Consulting Group Innovation Survey: https://www.bcgperspectives.com/content/articles/growth_innovation_innovation_2010_future_innovation/http://www.ge.com/innovationbarometer/http://www.slideshare.net/Dianne_i/world-innovation-forum-survey-full-details-finalhttp://blogs.hbr.org/cs/2012/05/a_simple_tool_you_need_to_mana.html

Fig. 3 - What drives innovation

Universal Pharma

1. Evolving customer needs Changing patient/payer demands

2. Technological advances & changes Biotech & information availability

3. Internal demands Growth is slowing!

4. Macroeconomics Reduced drug budgets

5. Globalisation >competition & emerging markets

6. Changing supplier capabilities Contract manufacturer/developers

Asa is the founder of Generic Pharma 2.0; helping companies achieve transformational growth through smart ideas and innovative opportunities. Asa has worked in the generic industry for

15 years and sees change ahead.

Do you know where the next game-changing innovation might come from? Are you confidant

that you know what that innovation might be?