By DJ Edgerton (@wiltonbound)
Are you a products or services company?
Some of the Pixels & Pills braintrust has been meeting to discuss company strategies within their organizations and that’s a big question that’s been raised.
It also got me thinking about the future of Pharma.
Right now the industry is product based. We spend hundreds of millions of dollars on new drugs, pray for FDA approval, and then hope that we’ve got a home run. It may not be as chancy as playing the lottery but there’s no question that the blockbusters have to cover the costs of a lot of less successful products.
And we all know that this is an increasingly endangered business model. Patent protection is ending, development costs are rising, and the huge sales machines we created to market these products are no longer economically viable.
We need new revenue streams and we need them fast.
Whenever digital innovators like Zemoga develop a new product for a client we always start with research on the client’s market and their stated business objectives. Then we conduct a facilitated session and really drill down in to the nature of the client’s business. Often the results are surprising.
There are real world examples of this. McDonald’s is in the real estate business not the restaurant business (the value of their real estate far exceeds franchise fees and food sales). Dunkin’ Donuts is in the coffee business. HP is in the ink cartridge business not the printer business. And so on and so on.
So what business are big Pharma companies in? I would argue that it’s not the business of distributing the latest pill to an end consumer. It’s the business of communicating to healthcare professionals and patients. Think about it. We’ve still got 75,000 people in this industry whose primary task is to talk to doctors (no matter what product they are selling). And that’s just part of this massive mechanism that has been created to disseminate healthcare information to interested parties.
If we as an industry recognize this, then it opens up a lot of new ways to think about our business. Communications is a service not a product. And by looking at our business this way, we can begin thinking about how we provide our customers with more and better services.
Maybe if we want to communicate with consumers better we need to think more like media companies. Heck, why not buy a media company? Why can’t Pfizer buy a big health media company like Rodale or Meredith and use all that intellectual property and editorial talent to communicate it’s messages better.
Or what about education? Merck could buy an events company like Reed and have them create local conferences that inform doctors about things like the HITECH act or how to better market or run their business. Or provide them with dedicated websites that address the specific challenges of running a medical practice. This is the type of service that companies like American Express provide for small business owners all the time.
Don’t get me wrong. I’m not saying that Pharma companies should shut down their research labs and abandon production of products that generate billions of dollars in revenue. I’m just saying that it would behoove us to think about our business in new and different ways. And to recognize where our core strength lies.
In services as much as products, right?
Which way are you currently running your business?