The State of Digital Excellence in the Global Pharmaceutical Industry, 2018: Organizational Readiness
Digital teams inside large pharmaceutical firms are reporting progress in setting themselves up to make an impact and prepare the organization to execute its digital transformation. Budgets are up, ambition is strong, and the focus for digital is shifting from building digital capabilities to partnering with business teams to achieve their commercial objectives through digital. Teams must align all of the success factors to increase digital maturity—but our research, involving twenty-four VPs and heads of digital, indicates that no company is there yet.
Companies Surveyed For This Report: AbbVie, Amgen, AstraZeneca, Bayer, Biogen, Bristol-Myers Squibb, Ferring, Gilead, GSK, Janssen, Leo Pharma, Lilly, Lundbeck, Merck Group, MSD/Merck, Novartis, Novo Nordisk, Pfizer, Roche, Sanofi, Takeda, TEVA, UCB, ViiV.
The Current State of Digital Excellence in Global Pharma
The digital transformation of pharmaceutical companies’ commercial organizations is a multifaceted tale of firms appointing chief digital officers, creating multichannel customer engagement (MCE) transformation programs, dissolving global teams, and slashing budgets in half. In addition to these dramatic plot points, the past year has seen the emergence of some common themes:
- Organizational changes stall digital transformation. Earlier this year, digital teams at Janssen, Lilly, and Novartis saw their transformations falter for reasons including disappointing financial results and corporate restructuring. This affects individuals, team-level workstreams, and company- level decisions about digital capability investments. At no firm has digital transformation attained the exalted position of being immune to these company-wide changes. There were bright spots at a few firms, like Biogen, that invested strongly in digital capabilities and got the leadership team to align the organization on the digital vision and objectives.
- Lots of technology deployment, but little business commitment. Firms like AstraZeneca, Bayer, and GSK successfully increased their installed base of digital capabilities including CRM, webcasts, and email. But teams at Amgen, Novo Nordisk, and Pfizer have neither achieved the desired progress nor made any recent big investments in their fragmented marketing technology landscapes. Most firms struggle to get product or marketing managers to include the available technologies in annual plans due to complexity of execution, lack of knowledge at the approval level, and missing platforms.
- Disappointing digital customer initiatives. Adoption of digital capabilities by local brand teams has been weak. This has led above-market digital teams to take the plunge in areas where they can operate like global marketing campaigns, regional or global HCP portals, and patient support programs. Aside from Merck, few of the industry’s top twenty-five firms report success with these initiatives, mostly blaming the irrelevance and inadequateness of the initiatives for local customers.
Digital Teams’ Remit Has Grown As Accountability Expands
This year for the first time, we analyzed the key success factors behind global and regional digital teams’ ability to lead their company’s digital transformation effort (see Figure 1). Ambition reflects what the firm perceives the digital opportunity is and which strategic priorities the team is involved in. The plan that the team operates from gives insight into how the firm tries to realize its ambition. Structure indicates who is accountable for the transformation and how it is anchored in the organization. The available resources indicate the scope of the effort and whether the firm can adequately support the plan. Finally, skills look at the combined competences of the team of individuals leading the transformation effort. So how are pharma’s digital transformation teams set up?
- Ambition: firms want to use digital broadly. “Very strong” ambition for digital transformation is characterized by direct C-suite involvement, awareness of the need to change the business model, and new revenue opportunities from digital technologies; seven of the twenty-four firms we looked at report this level of ambition (see Figure 2-1). Nine firms have strong ambition; they limit the scope of transformation to optimizing internal processes in commercial and clinical operations but don’t necessarily look at new revenue streams. Digital transformation teams tend to be involved in their firm’s strategic commercial priorities, such as launching new products and increasing sales of existing products; they contribute less to strategic priorities more aligned with other parts of the organization, like R&D and clinical operations (see Figure 2-2).
- Plan: building capabilities and leading digital pilots. Of the twenty-four firms analyzed, nineteen lead a key initiative to demonstrate the value of a new capability (see Figure 3-1). Eighteen have set their digital, MCM, or MCE strategy in stone and work with affiliates and global brand teams to activate their related excellence framework. At the other end of the spectrum, no firm is setting up a new digital media capability any longer; just eight are selecting one or more technology platform vendors. In terms of the newest technology, AI is part of the plan for two out of three firms (see Figure 3-2).
- Structure: accountability aligns with P&L, not operations. Digital teams have reach beyond marketing: eleven cover sales, nine cover medical affairs, and four support all of these plus research and (early) development (see Figure 4-1). In terms of accountability, teams typically report to the VP of a commercial business unit, territory, or division; only six report to a CMO or COO (see Figure 4- 2). In terms of seniority, nine of the VPs of digital have two reporting lines to their firm’s CEO (see Figure 4-3).
- Resources: average budgets now exceed $7 million. The average 2018 budget of the group in charge of building digital capabilities for commercial teams increased by 4.2% over 2017, to $7.3 million (see Figure 5-1). This doesn’t include budget allocated to the ongoing costs of operating the digital platforms and services. Ten teams saw their budget rise year over year; another ten saw it at least hold the line (see Figure 5-2). The average transformation team is comprised of sixteen FTEs and ten external consultants (see Figure 5-3).
- Skills: most teams indicate fair knowledge levels. For the purposes of this report, we only looked at the knowledge the digital transformation team has about the latest technologies in the industry. Eleven indicate that their team’s knowledge of these is above average (see Figure 6). Four firms felt that it was high or very high.
Organizational Readiness In 2018: Pharma Firms Have Made Moderate ProgressTo understand the pharmaceutical industry’s progress in digital transformation, we held to our tradition and looked at another key factor: the organizational readiness to achieve a higher state of digital excellence maturity. As in 2014 and 2016, we applied our Digital Excellence Maturity Model to the twenty-four firms and found that:1
- The industry has made moderate progress since 2016. In 2016, the average organizational readiness score—a composite of twelve critical components of a company’s digital transformation effort—of 58 (see Figure 7). Two years later, this has increased to 65. Nine firms are now in the Excellent zone, but ten are stuck in the Good zone, indicating that one or more organizational factors are hindering accelerated progress in digital maturity.
- Teams get leadership support but still struggle to cover all of the bases. Most teams report satisfaction with the level of endorsement they get from executives and their commitment to the team’s role, vision, and responsibilities, making it the best covered organizational factor in our model. While the scores for organizational readiness factors are closely packed, the cohesiveness of the full digital transformation effort breaks down at the level of the strategic plan and the related assessment of the digital opportunity (see Figure 8). In other words, while most teams rely on a clear vision of the future backed by leadership, that vision and support actually rests on a relatively weak assessment of the disruption or opportunity and results in an unclear plan and objectives.
DT Consulting fielded its Q1 2018 The State of Digital Excellence in the Pharmaceutical Industry survey to twenty-four VPs of digital (or multichannel customer engagement or multichannel marketing) inside pharmaceutical organizations. We fielded the survey in January and February 2018. Respondents receive a copy of this report containing the collected survey data prior to publication. Our sample is not guaranteed to be representative of the population. Responses do not convert directly into precise maturity scores for respondents’ respective companies. Unless otherwise noted, data is intended for descriptive purposes.
Tim van Tongeren
Dennis van Rooij