Are you structured for success?
pharmafile | June 18, 2004 | Feature | |Â Â Â
In a world of constant change, why have many pharma companies stuck to traditional organisational structures? Are they really the best way to meet new challenges in technology, regulation and the market? Or should they be looking at better ways to ensure that the customer remains at the centre of their thinking? It may be time to re-evaluate the traditional pharma company model.
The pharma industry has had to be good at responding to change – its market is constantly in a state of flux, driven by political imperatives, technological advances and regulatory strictures. By and large it has coped well with these constantly shifting sands.
But for some reason pharma companies have persisted with traditional, function-based organisational structures. Apologists might argue that they have served the industry well for more than half a decade, but whilst technological changes were certainly in abundance, the market was not changing at anything like the current rate. And certainly not as rapidly as we will see over the next decade.
Customer focused organisation structure
Now is the time to re-examine the historical pharma company structure, and to put in place a model which will meet the challenges of the future. Companies should be asking themselves what kind of organisation they need to be if customer focus is really to be at the centre of everyone thinking, then the structure needs to reflect that.
So where does the marketing function fit in? It clearly has to play a lead role in imbuing a culture of 'customer first' throughout a pharma company (becoming 'marketing leaders' not just marketers) from the scientists in the research laboratories to the compliance managers in regulatory. It difficult to see how it can do this from its traditional ivory tower position. Marketing as a mindset has to become the role of non-marketers.
Can this be done? Yes, but it requires a mental shift on the part of both marketers and non-marketers, and that is not achieved just by drawing a new organogram. The process of achieving a customer focused organisational model has to be strategic, cultural and owned.
There are a number of pressures which are driving this imperative for change. Whatever their views on particular options for organising a company, no one can question the following four facts:
- The development of breakthrough new drugs, through discovery and sourcing of innovative new molecules, is still the most important source of competitive advantage in the industry. However, pipelines are suffering from a lack of really new entities that threatens to last until 2010 at least. Hence the need to do more with existing products.
- Revenues are under unprecedented pressure from new pricing laws, loss of patents, generics and competing products, patent challenges, and increasingly stringent approval and marketing regulations.
- Key stakeholders in the healthcare market are changing their roles, their influence on prescribing, and their attitudes toward the pharma industry. Physicians are restricting the time they give to the industry; patients are taking more responsibility for their health, and payers are tightening their grip on prices and prescribing using restrictive formularies.
- As the marketplace becomes increasingly more crowded with competitive equivalents, it has been necessary for pharma companies to rely more heavily on their salesforces to increase share of prescriptions written. Sales reps were added in unprecedented numbers during the 1990s; these efforts paid off initially, but the success of this strategy led to a disproportionate increase in the number of sales reps relative to the pool of practicing physicians and they are not gaining incrementally increased time with physicians and now yield only marginal returns.
Many businesses, not just in the pharma industry, organise themselves in a way which is easiest for HR managers. Generally this can result in cosy, stale environments, where the driving force becomes internal convenience.
Commercial and market needs at the hub
The way a company is organised should be based on commercial and market needs, something very different. If you are going to be customer focused, then these needs should be at the hub. Too many people in pharma companies and pharma marketers principally are happy to stay in their own functions (the ivory towers I referred to a few paragraphs ago) if not physically then mentally. This results in the company being driven by R&D, rather than letting true customer needs drive the whole business, R&D included.
Traditional marketing structures – whether local or international – do not help. These organise marketing around product, brand, therapy area or franchise marketing teams, based in 'silos' supported by functional specialists – market research, health economics, medical, etc. So it's hardly surprising if people in these functional specialties leave the marketing thinking to the marketers. But to suggest that they have nothing to contribute to understanding and meeting customer needs is obviously nonsense, an almost negligent waste of real customer knowledge and expertise.
It's made worse by the fact that individual brand or portfolio responsibility can be spread across or divided among people, dependent on the size of the company. So a product manager in a smaller company might be responsible for a number of brands, making in-depth customer focus very difficult, whereas in a larger company with a big brand, product managers might have responsibility only for one or several marketing mix areas for that one brand, restricting them from seeing the whole picture.
What is common to both is ivory tower thinking: In this set-up, there is always the danger that marketers become divorced from reality or even worse, from the customer! At the same time, this kind of structure encourages a conflict for limited resources, reduces synergy across the brands, and certainly does not lead to buy-in of the strategy across the rest of the organisation. So implementation of customer focus across the board is patchy at best and non-existent at worst. Major gaps in driving marketing and sales efforts are common across the pharma industry. A significant contributing factor is hampered marketing efforts directed towards the customer. This in turn is closely tied to a lack of alignment in customer and organisational goals and strategies.
To achieve a more cohesive customer orientated effort, manufacturers must work to identify and map how their products fit within patient usage lifecycles in both a micro and macro view. This will help develop customer strategies that align with manufacturing goals.
This can be exceedingly difficult even when considered only from a product focus, as each pharma company has a different product mix, as well as varied competitive sets and specific R&D direction.
On top of these product focused considerations are additional consumer drivers such as usage, tangible benefits and compliance (is it about pain management or health maintenance, for example). Add to that brand and category awareness, and pricing issues, and you start to get a picture of the environment in which all pharma companies live and work.
Tremendous opportunities exist to define and align customer lifecycles and product paths, and to develop and collect valuable customer data.
Involve non-marketers in the process
But for that to happen, all functions need to be involved, which is where the multi-functional business team comes in. By involving non-marketers in the marketing process, you open it up from marketing communications to a more strategic, truly customer focused marketing. Multi-functional business teams don even have to be led by a marketer – it could be a medic.
Are marketers ready for this? What are the advantages of this approach? First, duplication is avoided. Development of business plans and marketing plans happen from a position where the vision for the future is truly understood from a corporate perspective, not just from the marketing igeonhole Clinical trial planning and evidence can be used at an early stage to provide segment specific marketing information and focus marketing resources where they will be most effective.
Secondly, functional specialists with their own perspective of the customer can contribute to building the whole picture of the customer and their needs, current and future, not just that derived from market research.
Finally, all the people who have to implement the strategy are involved in its development and execution. In short, the multi-functional business team allows pharma companies the flexibility to adapt to evolving market conditions.
Adapt to changing marketing conditions
So what of the future organisation structure? Environmental forces including globalisation, mergers and alliances, increased speed to market, consumer awareness and cutting edge R&D will require the best pharma companies to adapt quickly by building a well-equipped, well-organised, competitive workforce.
The roles of key stakeholders in the healthcare market: their number, influence on prescribing, and attitudes towards the industry require a change. Changes in the pharma business in response to these trends will mean changes in work activities and competencies of employees, requiring increased levels of ability, action, and knowledge.
While in the long-term, increased R&D effectiveness will continue to have a strong impact on economic return, the major opportunities for increased performance lie in improving sales and marketing and operational excellence through developing a customer facing organisation structure with the right competencies and processes.
