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| Business Models

Heather Fraser at IBM

The life sciences industry has faced a series of wake-up calls over the past decade. Despite this uncertainty, companies have generally continued to deliver acceptable returns to their shareholders. However, global forces – such as increased competition and regulations, escalating healthcare costs, and expectations for better quality, value and outcomes – are lowering pro t margins. dd to this the impact of disruptive technologies, and it is clear that life sciences companies will need to re-evaluate the nature of traditional business models, processes and operations.

In a 2013 survey, 73% of life sciences and pharmaceutical executives stated that new business models will profoundly impact the industry (1). In fact, a new type of ecosystem model is rapidly evolving that requires a level of cooperation, as well as inter- and intra-collaboration, that organisations have not engaged in before.

hile there are many potential bene ts from participating in this, most companies struggle to both understand the broad impact of these changes, and take the necessary steps to realise them.

RADICAL DISRUPTION

The competitive landscape in healthcare and life sciences is changing quickly. New technologies – for instance, social, mobile, analytics, cloud, 3D printing and nanotechnology – are creating an

rapid growth with an openness to innovate, in order to address their health and wellness challenges.

In addition, 38% expected partnering with organisations from other industries – from health, wellness, electronics, technology and beyond – to energise innovation (3). For example, Roche and telecommunications company Qualcomm formed a partnership to improve remote chronic care management and drive

environment that is connected and open, simple and intelligent, fast and scalable. Value chains are fragmenting, industries are converging, and ecosystems are emerging. Ecosystems comprise entities that operate out of mutual self-interest: as Figure 1 illustrates, they are made of sets of individuals who formally or informally operate together to produce something of greater value for the mutual bene t of the organisation and the ecosystem as a whole (2).

TRANSCENDING BORDERS

Life sciences companies have to decide the level and nature of their participation in these ecosystems, with the emphasis on being collaborative and open. The evolving model will transcend traditional boundaries – by geography, product and service, and industry – helping participants to break down barriers that separate silos.

In a global study of 750 life sciences executives issued in pil 2015, 7% said they expect that expanding into emerging markets will stimulate industry innovation (3). These markets combine

Pharma and life sciences collaborations will be taken to a whole new level as emerging ecosystems shake up traditional practices. The emphasis on operations for mutual self interest and broader bene t will spur openness to innovate and the free ow of ideas and resources

Eco Friendly

Patients and consumers ocial media data Personal health records Medical device tracking data

Figure 1: Life sciences ecosystems span multiple activities,

geographies and industries – including public and private

institutions as well as patients

Public and private payers Patient education isease management Fraud prevention isk management ocia media data

Healthcare providers Electronic medical

records ealth information

exchange Patient and e ealth ocial media data

Health clubs ealth and wellness

programmes isk management ocia media data

Medical research centres linical research ohort studies linical trials

Retail clinics onsumer services

Pharmacies e prescribing ew services

Public health Pandemic readiness accine inventory

and distribution anitation and public safety ealthy lifestyles and diet iving with chronic disease

Transaction services laims processing Banks health savings ccounts and

payments

Employers Bene t plan design ealth and wellness

programmes

Life sciences linical development linical trials Medication compliance Medical devices onsumer relationships

Food Food compliance onsumer

relationships utrition and

wellness programmes

Regulators ealthcare policy Medical research egulatory compliance

Source: IBM

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edition

patient engagement. With Roche using Qualcomm’s 2net Platform to wirelessly capture data from patients’ medical devices, healthcare professionals can remotely keep in touch with patients – helping reduce therapy complications and total cost of care for chronic disease patients (4).

OPEN FOR INNOVATION

There will also be a reliance on the free ow of ideas, knowledge and resources among ecosystem participants to spur innovation. The global study found that 79% of executives said open innovation plays a role in their innovation process, while 61% reported that it makes the development of ideas better and faster (3).

Organisations that pursue open innovation tend to obtain higher value from their innovation activities and investments: the most successful ones are integrating both data and expertise from multiple and open sources. AstraZeneca, for instance, initiated an open innovation programme inviting academic researchers to collaborate in new drug development. It grants UK academic investigators free access to the 22 candidate compounds it developed. External researchers are encouraged to submit research proposals for funding to further develop these compounds into new drugs. Within one year of making these compounds available, the UK Medical Research Council awarded £7 million in funding for 15 research projects (5).

CONNECTING TO COLLABORATE

Emerging life sciences ecosystems are extremely collaborative, allowing organisations to communicate, act and work in new ways. Still, 64% of executives believed that their organisation struggles to establish partnering relationships, according to the global survey (3). New technologies, such as ideation platforms and cognitive computing, will aid the exchange of ideas, knowledge and drive insights.

Shared goals and metrics will provide the vision and direction, enabling decision-making that bene ts all parties. Furthermore, opportunities will be created to access people, resources and technologies in order to drive innovative projects. These uid, ongoing relationships

are built over time through partnering on new drugs and other projects with mutual value. Life sciences executives are looking to build their ecosystem by pursuing these types of collaborations, as the outline in Figure 2 shows (3).

RENEWED FOCUS

As life sciences ecosystems take shape, companies will require a renewed focus on their strengths as they prepare to play new and di erent roles, and consider how they nd and connect with partners. The orchestrator of these ecosystems will potentially take a lead role in facilitating and managing innovation across the complete spectrum from health, wellness and care. They might come from traditional life sciences companies, including pharmaceutical contractors, but equally well the role could be occupied by new players in the space.

What is certain is that organisations that choose to avoid ecosystems will face di culties keeping up with new and changing innovations, as traditional relationships dissolve and the emerging framework matures and develops.

References

1. Berman S, Marshall A and Leonelli N, Digital

rein ention re aring for a er di erent

tomorrow, IBM Institute for Business Value,

December 2013. Visit: www-935.ibm.

com/services/us/gbs/thoughtleadership/

digitalreinvention

2. Fraser H and Marshall A, The new age of

ecos stems. Rede ning partnering in an

ecosystem environment: Healthcare ecosystem

edition, IBM Institute for Business Value,

Heather Fraser has over 30 years of experience in the life sciences and healthcare sectors, working across community pharmacy, the pharma industry and in

consultancy. She is currently Global Leader for the healthcare and life sciences in IBM's Institute for Business Value. Recent studies Heather has overseen have investigated the future of the life sciences industry and the implications across the value chain, as well as ecosystems, alliances and convergence. She has also developed a set of viewpoints based on interviews with life sciences and healthcare C-suite.

Email: hfraser@uk.ibm.com

Figure 2: Life sciences organisations look to build

the ecosystem through pursuing collaborations

48%CROs

59%Data/analytics organisations

81%Academic research

58%Payers/providers

82%Competitors

March 2015. Visit: www-935.ibm.com/services/

us/gbs/thoughtleadership/healthcareecosystems

3. Fraser H, Marshall A and Melese T, Reinventing

life sciences: How emerging ecosystems fuel

innovation, IBM Institute for Business Value,

April 2015. Visit: www-935.ibm.com/services/

us/gbs/thoughtleadership/reinventingls

4. Roche and Qualcomm collaborate to innovate

remote patient monitoring, FierceDiagnostics,

29 anuary 2015. Visit: www. ercediagnostics.

com/press-releases/roche-and-qualcomm-

collaborate-innovate-remote-patient-

monitoring

5. AstraZeneca press release: Alzheimer’s,

cancer and rare disease research to bene t

from landmark MRC-AstraZeneca compound

collaboration, 31 October 2012. Visit: www.

astrazeneca.com/Media/Press-releases/

Article/20121131--astrazeneca-MRC-

collaboration-disease-research

Source: IB

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