Why the current approach to Commercial Model innovation won’t be successful.

“In a 2015 survey, a majority of executives believed their companies would be restructuring their commercial models over the next two years”. That’s how the recent EyeforPharma whitepaper on Integrated Commercial Models began and continues by highlighting the lack of certainty and direction across the industry.

But the reality is that Pharma has spent years and years, and tens of millions of dollars attempting to innovate, improve, renovate and more often than not, restructure its commercial model. And this recent and renewed enthusiasm and focus on developing a new commercial model is nothing new, it’s being bubbling along for more than a decade.

And what has the industry to show for all this effort and expense?

Not a lot, in my opinion. The model stubbornly refuses to change significantly and as an industry, pharma seems content to milk the cash cow that is the current model, albeit with some relatively minor tweaks and changes.

Why is this the case? Why have strategic innovations such as Customer Focus, Customer Experience and more lately Patient Centricity failed to deliver the breakthrough they promised. For me, the issue is pretty simple.

Pharma is clearly resistant to change, but apart from that, it is looking for tactical solutions to a fundamentally strategic problem.

Whatever has been done to the existing commercial model in recent times, ends up only a weak attempt to restructure, develop an integrated sales and marketing function, change the sales model or some such tactic. While the basic, underlying problems are that the model is fundamentally broken, and can only be ‘fixed’ if one understands and address 2 critical issues:

  •  The reasons why the broader business model is broken and what that means for the commercial model
  • What aspects of the business model need to change – either stopped, amended or started

And then, and only then, one needs a strategic change of direction first and then design a commercial model to deliver on that strategy.

I take my hat off to GSK, perhaps the highest profile pharmaco to take serious action on their commercial model beyond merely restructuring it. But even the highly ‘controversial’ approach of not rewarding reps on product sales, is neither truly innovative nor strategic, and certainly won’t solve the many issues that face GSK, but at least it will help address a particular tactical issue.

Today, as it has been for decades and decades, pharma is focused on selling products (I won’t call them brands). That has been, and it still mostly is, still the main motivation for the industry. It is all about the products.

The old model has been pretty effective in days gone by and it is hard for the industry to leave it behind, either though most would agree that the model is broken, but moving away from a successful model to something else is frankly, perhaps, a bridge too far for most of pharma.

Sending reps out to deliver product messages to primarily physicians remains the essence of the current model. OK, supplement it with some multi channel, add in some new roles, KAM and the like, but it is still about products.

Patient Centricity has the potential to drive a strategic shift across the industry but the reality is certainly more rhetoric than action, and again, more tactical in practice. Take a look at how resources are allocated across pharma today. The percentage of people and money dedicated to Patient Centricity is miniscule compare to traditional product sales and marketing. You are either Patient Centric or you are not – its like pregnancy – you can’t be piloting Patient Centricity or learning to be patient Centric, it is a strategic decision. I’d say pharma is not pregnant with Patient Centricity.

The recent whitepaper even says in the conclusion “pharma finds itself with a broader arsenal of weapons with which to talk about the value it brings”, which pretty well sums up pharmas approach to selling. Pharma continues to want to talk about ‘the value they bring’, while customers determine value for themselves. If the industry needs to continue to upsell the value then perhaps that is a big issue, and no amount of ‘education’ from the manufacturer will convince customers.

The conclusion of the report is spot on “many of those now running pharma organisations have come through the ‘golden age’ of pharma and so may be reluctant to change”.

But it is more than simple reluctance. Most do not see, or believe, that there is a better alternative to the traditional approach, and that there are new business strategies that will provide significant benefits over the old model in terms of revenues, costs, customer engagement, trust and sustainability. Yet, for the most part, they remain unwilling to confront the risk of change.

 

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