Monday, December 19, 2011

Fade or Flourish?
Rethinking the role of life science companies in the healthcare ecosystem

Although this article deals with the life science industry, the lessons are profound and germane to all change marketplaces. The idea of innovating across business designs is the underpinning of our MDG process and our class at Kellogg (

The life sciences industry stands at a crossroads. Its business model is broken, and the surrounding healthcare ecosystem is changing dramatically. In addition, the industry’s scientific and commercial productivity has declined, the blockbusters on which it has long relied for much of its financial prosperity have come off patent, sales forces are shrinking as physician access is restricted, and payers are increasing price pressures. Economic, social and technological forces are simultaneously reshaping the world in which the industry operates.
 It’s clearly time for change. In today’s increasingly complex and fast-changing environment, business model innovation is critical to success. Yet few understand when to make a change or – more important – how to execute one. And the life sciences industry as a whole has generally resisted developing new business models. Life sciences companies could resist change and stick to the current course: consolidating, cutting costs, tinkering with adjacent market spaces, reorganizing the existing sales force and investing ever more money in searching for new medicines in crowded therapeutic areas. Or they could completely rethink how they engage with the healthcare ecosystem – i.e., all the entities, be they individuals, governments, healthcare providers, insurers or other life sciences companies, that help keep people healthy.  
Those companies that resist change could face the very real possibility of fading into irrelevance or disappearing altogether. However, those that choose to rethink and reform their business model will likely flourish. They will potentially be very different entities than they are today, as they join in setting the agenda, enhancing healthcare and radically redefining the industry.Life sciences executives face a "moment of truth." How will they effectively transform in today’s rapidly changing environment? Global business leaders are expressing a view that the speed, immediacy, unpredictability and viral nature of change mean they can no longer expect to manage through this environment. Rather, success will depend on their ability to innovate through it. In essence, there is more than one way to successfully navigate today’s challenges, and each company will choose its own path. The direction of this path will determine whether it will fade or flourish.

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