How to create a digital transformation in a business as big as a pharmaceutical company

The pharmaceutical industry has been relatively slow to digitalize, although Covid-19 has served to accelerate this process in recent months, expediting, for example, the digitalization of sales and marketing activities. This is indeed a welcome change. However, digitalization alone won’t suffice to keep pharmaceutical companies thriving in the coming years. Instead, business leaders must focus on creating a real digital transformation.

To do so, executives will need a strong understanding of digital transformation and how it differs from digitalization. Effecting a successful digital transformation in a business as large as a pharmaceuticals company also requires a clear vision, and strong leadership and organization.

The undertaking may be large, but as giant digital incumbents like Google and Amazon enter the pharmaceutical and healthcare markets, and new, more personalized therapies and technologies threaten to replace traditional molecules, successful digital transformation is perhaps the only way for pharmaceutical companies to avoid disruption.

Digitalization vs. Digital Transformation
Business leaders in the pharmaceutical industry often confuse digitalization and digital transformation, seeing as synonymous these two very different concepts.

Digitalization means improving existing business processes with the aid of new technologies. Switching from paper to digital record-keeping is one example. Importantly, digitalization is often accompanied by automation, whereby machines and artificial intelligence carry out processes with little to no human intervention. Digitalization can result in both important productivity increases and cost reductions, but the processes themselves remain largely unchanged.

Digital transformation, on the other hand, involves critically examining business processes from a customer-centric perspective and leveraging new technology including artificial intelligence, to radically change and improve the overall customer experience and the business results.

Digital transformation prepares businesses for an unsure and shifting future, safeguarding against changes in product and production and positioning them as disruptors rather than disruptees.
How big businesses are using digital transformation to get ahead

Big businesses face their own set of challenges when it comes to digital transformation. Pharmaceutical companies should look to their counterparts in other industries for inspiration and guidance.

UPS serves as one example of a large company undergoing a successful digital transformation. The company hired its first Chief Transformation Officer, Scott Price (now President of UPS International), in 2017. In an interview with Innovation Leader, Price explains some of the challenges he faced trying to transform a large company, one with thousands of employees, hundreds of systems and processes and a longstanding culture.

First, Price warns against confusing transformation with strategy. Transformation is the means to an end, but that end has to be clearly defined. For UPS, the path forward was built around key pillars, including enhanced services for SMBs and growth in B2B and B2C sectors. These pillars served to keep UPS’ compass pointed in the right direction.

Second, there is no cookie-cutter solution to digital transformation. UPS’ approach included reducing costs to reinvest in technology, which is key to any such transformation. However, Price also discusses having to identify the skills necessary for future employees and communicating them to existing ones.

Likewise, there are different ways to oversee transformation. “One is the activist, mercenary option,” explains Price. “You bring in a Chief Transformation Officer knowing they have an expiration date. They know they’re going to have no friends, but they get the deal done. That’s not how UPS operates. The second is how I was brought in. … You have to collaborate and you have to use persuasion. The third option is less effective. You let each one of the functions do it themselves. In my experience, that’s non-transformational. It generally doesn’t get you to top quartile performance, which was one of our objectives.”

Finally, transformation should be seen as an ongoing, independent process. “If it’s in a department like Finance, it is not seen as impartial.” That impartiality helps transformation leaders make objective decisions, but also facilitates collaboration with others departments and reduces the chance of infighting. Price closes the interview by emphasizing the importance of ongoing transformation: “Transformation never ends. Technology is always developing. New entrants are disrupting. Every company needs to stay on its toes.”

Commonwealth Bank of Australia is another example. The company started its digital transformation by planning to invest $5 billion by 2024, with the goal of becoming a digital leader not just among banks but on a global cross-industrial scale. True to digital transformation’s focus on the customer, Commonwealth’s new mobile app sits at the heart of its strategy. It is “customizable like an iPhone and personalized like Netflix recommendations,” says Pete Steele, Chief Digital Officer. (Commonwealth obviously knew where to look for digital inspiration.)

Likewise, the platform leverages sophisticated AI to respond to, even predict, customer needs. A ‘Customer Engagement Engine’ employs 200 machine learning models across 157 billion data points to learn from user behavior and send helpful, personalized messages to users to help them, for example, avoid late fees on credit card payments or being overdrawn. Rather than simply replacing processes with a digital successor, Commonwealth is using technology to build new ways of engaging with its customers.

“We are moving quickly to build, develop, partner and invest in new services we can integrate into the CommBank app,” explains CommBack CEO Matt Comyn. “Our ambition is that our ‘For You’ personalisation function will bring together internal and external services and provide a single place for our customers to receive personalised service, benefits and offers.”

Like UPS, Commonwealth Bank sees transformation as an ever-moving target, and banking as one of the threads common to its customers’ diverse needs and desires.

“It’s a given that every customer wants their banking to be safe, secure, easy and convenient. But they also want digital tools to help them plan and budget, set goals and achieve them, predict and manage their bills, and achieve their dreams of owning a home, running a business or securing their retirement.”

As a result of its strategy, CommBank has already seen increases in app engagement and transactions. More than 6.3 million customers use the CommBank app, with 6.95 million log-ins per day. App transactions equated to roughly $1 billion per day, and over 6 billion personalized messages were sent to customers in 2020.
Creating a digital transformation in a business as big as a pharmaceuticals company is certainly possible. But for a variety of reasons, that doesn’t seem to be happening as often as it should.

Where pharma is and where it should be
The pharmaceutical industry, as a whole, isn’t where it should be. Digitalization has been relatively slow. A 2019 study by Simon-Kucher, for example, showed that “59% of pharma, medtech, and consumer healthcare companies still lack a fully defined digital strategy.”

Of course, Covid-19 served to accelerate digital innovation in the pharmaceutical industry. Based on a study by Verdict, roughly one third of respondents believe Covid-19 accelerated the digital transformation of the pharmaceutical industry by more than 6 years. Still, a Pharma Manufacturing survey of pharma leaders showed that only 31% considered digitization a leading priority in upgrading manufacturing facilities. 50% of the respondents said their company was still “at the starting gate” of its digital transformation. LIkewise, only 10% foresee great benefits to R&D, only 24% to supply chain management, and a mere 2.5% to equipment maintenance—all areas where other industries are seeing phenomenal returns on digital investments.

Plus, pharma as a whole is playing catchup. A 2016 report from McKinsey paints a grim picture of the pharmaceutical industry relative to other global industries. Other than the public sector, pharma shows the least digital maturity compared to insurance, banking, media and entertainment, telecom, retail, and travel and hospitality. Covid-19 may have helped jumpstart the digital transformation in pharmaceuticals—but it was no less transformative for banking and retail.

Of course, it’s not all doom and gloom. Covid-19 pushed things along. The well-funded global effort to rapidly produce a viable, scalable vaccine led to digital innovations in research and development (R&D), production, and distribution. Advances were also seen in clinical trials. According to Global Data’s State of the Biopharmaceutical Industry 2021 report, more than 1000 clinical trials were disrupted as a result of Covid-19 but were later resurrected thanks to innovations in remote patient monitoring (RPM) and virtual trials.

Nonetheless, pharma as an industry is falling behind. Companies cannot approach digital transformation with the same complacency as they have digitalization, or the consequences could be severe.

Enacting digital transformation in the pharmaceutical industry

Digital transformation is a bit like trying to manoeuvre a massive container ship. The sheer size of the beast makes it difficult to turn about and a lot of energy is required to get it moving. Once it’s underway, though, all that’s needed is a clear destination, good navigation, and strong leadership.

The first step is to focus on what matters most. This will serve as a polestar in your digital transformation, informing decisions and allowing for all the minute corrections necessary to stay the course. It might be argued that in pharmaceutical companies, drugs should be the focus. However, as we’ve seen from successful transformers like Commonwealth Bank, both product and technology really should take a backseat to customers. Moreover, new therapies are being developed rapidly. Pharmaceutical companies that focus solely on their drugs will flounder as early intervention from genetic therapy and others, alongside non-drug treatment approaches like digital therapeutics and immunomodulatory nanobots gain traction.

The next step is to plot a course from where you are to where you want to be. There is an almost endless number of ways to do this, both conceptually and technically. It is simultaneously the most important and the most difficult phase. Planning for digital transformation requires taking stock of your existing assets, processes, and resources, both human and technological. Individual stages will often revolve around the digitalization of these elements, but reinvention is equally important.

Finally, businesses must adjust course as new technology becomes available. Digital transformation is a journey, not a destination. Pharmaceutical companies should look to leverage disruptive technology like digital twins, smart materials, 5G and the Internet of Things (IoT), sensors and wearables, nanotechnology, decentralized production like 3D printing and smart factories, and platform enablers (components that improve the function of an existing platform, like iOS or Android). But these are all tools only to be used when appropriate to the strategic aims.

That said, transformation needn’t come at the cost of day-to-day business or quarterly objectives. With the right strategy and approach, it’s possible to enact change without disrupting ongoing business or threatening your bottom line. In an article from the Harvard Business Review, Drs. Nathan Furr and Andrew Shipolov dismantle some of the scarier popular misconceptions regarding digital transformation, including the idea that it requires “a radical disruption of the value proposition” or “overhauling legacy systems.” Neither of these things is true, and there’s no reason a company can’t undergo a successful digital transformation while continuing to thrive in the short-term by implementing intelligent, incremental changes in light with its overall transformation strategy.