Digital Transformation in Life Sciences, Part One
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Focus on: Why Cloud for Pharma |
In 2013, a team of researchers, led by Jordi Quoidbach, published a paper in the journal Science called “The End of History Illusion“. The paper detailed a study of more than 19,000 participants, all of whom were asked to report how much they had changed over the past decade, and predict how much they would change in the next. Across all age groups, the results were similar – participants described significantly more change looking back than they foresaw going forward. As the study described it, “people regard the present as a watershed moment, at which they have finally become the person they will be for the rest of their lives”
If it is our nature to underestimate the change that is going to happen in our personal lives, it is pretty likely that we will do the same for the companies we work in. A quick look back at the market capitalization of corporations over history demonstrates how quickly change can come in this area. Look at the top 10 performing companies in today’s market and only 2 (Microsoft and Exxon Mobil) were in the top 10 two decades ago. A further three (Amazon, Facebook and Google) did not even exist 25 years ago. And given the impact that new technologies are making throughout society, it is pretty likely that the next wave of companies will rise to dominance even faster.
At Microsoft, we spend a lot of time thinking about the effect that technology will have on individuals and organizations. In fact, our mission statement embodies this thinking, and our CEO Satya Nadella recently wrote a book that discusses it. But one of the main reasons we think about digital transformation, is our own journey as an organization. In the last 15 years, we have transformed ourselves from a traditional software company, to a continually evolving cloud services organization with hundreds of new services and thousands of improvements to those services. The old company was threatened by disruption, the new one creates disruption if it spots stagnation. As Satya puts it – our industry does not respect tradition, it only respects innovation.
In my discussions with Life Sciences companies, I have been struck by how many of them feel like the Microsoft of 15 years ago. Many are highly efficient, highly profitable organizations with a deep understanding of how to discover, develop, manufacture, distribute and commercialize products. Just like software companies they make large initial investments that they hope to recoup once the product is commercialized. And they regard disruption as a major threat, rather than an opportunity, relying upon IP protection and compliance regulations as key weapons in preserving their business position.
Early indicators of disruption in the life sciences industry are emerging from many quarters. Massive investments are happening at the country level, such as the recent announcement in South Korea. Technology companies are making huge investments in life sciences, and it is unclear whether some of these will result in services for traditional players, or whether it will represent direct competition. But perhaps the most fascinating wave of disruption is from patients and caregivers, who through the democratization of technology can build their own digital solutions that circumvent traditional players, such as the Nightscout Project we highlighted in a previous post, that provides remote monitoring of diabetes patients.
Each of these disruptive forces represents an existential threat in the ways that traditional companies do not. With good profit margins and deep pockets, life sciences companies have traditionally been able to buy their way into continued success, through mergers and acquisitions. But they cannot buy a country, and if a major tech company wants to compete, they will lack the resources to stop it. As for grass roots patient efforts, these play to different motivations than pure economics.
Fortunately, most life sciences companies recognize that change is necessary, and it needs to happen now. But while there is increasingly general agreement in the life sciences industry that digital transformation is essential, most of the customers we are talking to give us some pretty direct feedback – they understand they “why” of digital transformation, but they are stuck on the “how”. In short, they don’t know how to get there from here.
Executing true digital transformation (as opposed to opportunistically adopting new technologies) can be hard for any type of organization, but it is particularly challenging for life sciences companies, mainly due to the starting point in the journey. The “average” life sciences company of today faces technical, regulatory, and cultural barriers that stand in the way of the transformation journey. On the technical side, they have often adopted hundreds or even thousands of different systems, typically chosen as best of breed. Multiple mergers and acquisitions have made the technology architecture even more complex, and many life sciences companies’ IT departments are devoting most of their time to maintaining complex integrations rather than actually adding business value to the company. Add in the complexities of understanding and meeting the needs of the regulators, and getting true value out of technology investments becomes hugely challenging. One of the biggest elephants in the room is the cultural barriers to change. Those difficult to maintain technology architectures? They stem from a cultural need for everyone to have their own “perfect solution” that works locally, versus a good enough solution that works globally, and the natural human instinct to favor the familiar over the new.
These are difficult challenges, but our own digital transformation as an organization has convinced us that they are not insurmountable. We are partnering with companies across all industries to use new technologies such as cloud based artificial intelligence as the basis for business growth. And we are bringing our own experience of navigating the change to help our customers understand how to approach digital transformation in a comprehensive manner, from empowering employees and engaging customers, to optimizing operations and transforming products. Next month, in the second part of this series, I will discuss some of the key considerations for successful digital transformation in the life sciences industry, and provide examples of where it is proving effective.
