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Belief that today’s commercial model is “broken” elicits a wide range of responses from industry
As part of its ongoing analysis of trends in commercial operations in bio/pharma, TGaS Advisors has recently completed in-depth interviews and study of a broad cross-section of industry players, ranging from multinational pharmacos, to regional mid-size companies, to emerging biotechs. This investigation was focused on the evolution toward “new commercial models” in life sciences today (Pharmaceutical Commerce, July/Aug, p. 1).
Industry observers invariably describe the bio/pharma’s commercial model as “broken,” highlighting the need for the industry to adapt new practices and alternative methods of delivering products to market. TGaS Advisors’ work, however, shows that while many companies are undergoing changes, relatively few have undergone dramatic transformation. Some companies are changing very little. The major points of this study are published in a white paper, “The New Commercial Model: Reality or Rhetoric?” available on the TGaS Advisors’ website.
Here, a few of the “fact vs. fiction” findings regarding new commercial models.
1. Across the industry, organization structures have recently undergone and will continue to undergo significant reconstruction.
FALSE. Only three of the 21 companies studied had undergone significant structural change in the past year, and only one anticipates significant structural change in the coming year. The key word here is “organizational structure.” While many of the companies have initiated or completed downsizing, integration efforts or some change to specific functions, all but three have maintained their fundamental commercial structures.
2. Profound change to commercial models is limited to a very few companies.
TRUE. Significant change has and will continue to play a forcing role for a few companies who either 1) are facing daunting challenges to their sales and profitability in the immediate term, OR 2) wish to radically challenge existing ways of working or the business model.
3. Intense focus on the customer is the key driver of current and anticipated commercial model evolution.
FALSE, technically. Customer focus is one of many perceived drivers of commercial model change. However, this perceived driver is not highly correlated to commercial model changes that have been completed or undertaken, especially when compared to other factors such as pipeline and growth prospects, payer influence and the extent to which promotional effectiveness and efficiency prospects are changing.
This may be purely a function of how leaders conceive the order of these factors. For example, declining effectiveness of promotional approaches could be a “first order” driver, with customer focus as an underlying “second order” driver. Regardless, it is revealing to see the different orientations that companies take.
A very small group of companies clearly holds customer focus as the most important factor and has undertaken significant change plans. The theme of customer alignment and dramatic commercial model transformation needs separates these companies from their peers.
4. Evolution toward greater decentralization of the sales force is a myth.
FALSE. While it is true that no company represented plans to implement decentralization models of the Regional Business Unit (RBU) with P&L accountability and aligned functions “hardwired” into the RBU leadership, most companies expect to create or maintain planning, decision-making, differential allocation of resources and differential strategies and tactics at the sub-national level. At the same time, very few expect that brand marketing approaches and materials or managed care account responsibility will be accorded to regional sales leaders.
5. The commercial model is broken. TRUE and FALSE. It depends on the company, tier or business unit within the company. Generally speaking, specialty companies or specialty business units find their models to be relatively well evolved to align with the customer and to support the commercialization of products generally perceived to deliver value. The former or existing model for products, business units, companies that are predominantly focused on non-specialty and/or largely undifferentiated products, however, is not viable. Product value appears to be far more important than the structures, processes, ways or working or technologies that a company brings to bear.
Companies are attacking commercial model change with different strategies and approaches and at different paces. Studying others, learning from innovators and cautious players alike and keeping an eye on competitor companies, particularly those implementing substantial commercial model changes, provides a critical perspective for a company’s decisions about commercial model evolution.
ABOUT THE AUTHOR
Anna McClafferty, Vice President, Management Advisor, oversees Marketing Sciences, Global Marketing and Executive Commercial Operations practices at TGaS Advisors (East Norriton, PA; 610 233 1210; tgas.com). She brings 25 years of pharmaceutical marketing, marketing sciences, commercial operations and general industry experience to TGaS Advisors and its clients. McClafferty was most recently a senior leader at GlaxoSmithKline where she led a wide range of shared service and center of excellence functions, supporting US business units and the managed markets division.