The Future of the Pharma & Automotive Industry

There are more similarities between the two than you may think

Engulfed in a strange new world, the pharmaceutical industry understands there are industry changes; however, they are not certain what to do about them. Interestingly enough, the automotive industry is facing similar challenges.

Both industries are multi-faceted behemoths with a traditional approach. And like many other industries – journalism, for instance, or music – it’s important that they recognize the changes that are occurring and plan for strategies that will keep them competitive.

Industries focused on breakthroughs

Both industries have focused on breakthroughs as key components of their business model. Pharmaceutical companies traditionally innovated by discovery, research, and development. The essence of the pharma business model has been: create the best clinical discoveries in medicine and generate superior drugs. That way, physicians would prescribe them and the companies would recoup the billions they ploughed into research and development.

While that worked for decades, the industry is changing to a ‘beyond the pill’ model that’s more customer-centric. This is an entirely diverse business model requiring different strategies.

Interestingly, I see the same with the automotive sector - another traditional, old manufacturing sector. Like pharma, auto’s big competitive approach was improved engineering, so instead of medical breakthroughs, they had engineering breakthroughs.

Ripe for disruption

Like big pharma, big auto can see that it is not just about manufacturing anymore, and they need to move beyond their simple ‘beyond the car’ approaches.

Uber disrupted the sector and showed big auto that the world is moving towards mobility as a service model; hence, the proliferation of Uber, Lyft and all the companies in that space.

We have 2 generational approaches with different wants and needs in auto. We have the younger generation who have minimal interest in car ownership but who need mobility and want this as a service option. At the other end, we have an aging generation who are used to owning cars, and are remaining active for a lot longer but need advanced safety options as they have declining driving ability.

New competitors are entering both categories (Uber, Lyft, Sidecar, Zip car, Here, etc. for mobility; Tesla, Apple and Google for ownership models with advanced safety features, including driverless options).

Big auto sees the success of these new models and is attempting to adapt by trying to either copy the new models to create their own autonomous vehicles or forging partnerships with these new disruptors.

Do they really understand the competitive difference?

It seems that many car companies are stuck in incremental thinking and innovation. Not unusual for decade-old companies, yet there's a missing piece. Consider the BMW i3 – an attempt at innovation with seriously flawed thinking. They believed weight reduction was the key – although ho­­w they got that idea is uncertain.

Maybe they tried to copy Tesla without understanding what they were doing. Essentially, they were copying and doing a “me too” without really understanding what the differentiator was. Because they were still caught in their engineering thinking, they assumed it was the aluminum body…and they failed completely. It was well engineered but described as an “ugly, cheap version of Tesla”.

Tesla, on the other hand, proved that materials are irrelevant as it used light aluminum for one model and heavy steel for the next, and both were very successful.

Why did Tesla sell over 350,000 vehicles before it even made one, while a company like Aston Martin has only sold 70,000 vehicles in the 109 year history of the company? Because Tesla understands it’s about their customers.

Disrupters like Tesla, Apple, and Google exploit the weaknesses of the large manufacturers by looking beyond traditional boundaries, by looking at their customers holistically, and by building the company around the customers’ needs and massive amounts of customer data, all analyzed with Artificial Intelligence and not old-fashioned customer surveys.

The reality is Tesla understands that the competitive advantage in the new world is data, and Tesla is an AI-powered, data-driven company.

Even Henry Ford understood that asking a customer what they wanted was pointless, as he said, “If I asked customers what they wanted, they would have said ‘faster horses’.” The key is getting all the data on the customers you can, and not asking them what they want but discovering this by using Artificial Intelligence to understand what they want more than they themselves do.

Think about the Tesla models. What is the biggest difference? It is the software configuration, not the physicality of the car alone anymore. The reality is Tesla understands that the competitive advantage in the new world is data, and Tesla is an AI-powered, data-driven company. They understand data and data partnerships, and what to do with the data to meet their end customers’ needs.

They think about the whole person, not just the vehicle, which means they have already planned where to charge the cars while the big auto manufacturers with their electric vehicles are still focused on the vehicles only.

For example, when the electric battery runs out, where can the drivers of the BMW i3, or the Porsche Mission E, or the Audi A3 e-tron, recharge? It is fairly inconvenient having to ensure that you are fully charged at home. And what if you need to travel more than the battery life of, for example, the Porsche Mission E’s 310 miles? Tesla may only last 270 miles per charge but you can be sure that wherever you are when it starts to fail, you are close to someplace you can recharge.

Of note is that the traditional auto companies may have to do a deal with Tesla to use the Tesla recharging pumps. That will make Elon Musk smile. Maybe it was his strategy for the whole business. If you think about the auto sector and the future, consider Amazon’s Kindle strategy – give away the technology cheaply because the technology is not what the customers want, they want to read. The same goes for cars - it is not necessarily the car itself for the new generation, but mobility. Maybe Tesla, or Amazon, or Google, will one day be giving away the cars very cheaply as a strategy to deliver something else as the experience.

Pharma mirrors auto

Like the big Automotive companies, pharma is in the same situation. The fundamental business model is changing. They understand that just doing what they always did is no longer sufficient; that they have to be ‘patient-centric’ and move ‘beyond the pill’.

However, all attempts at doing so are largely failing due to being insular and not fully understanding their customers as a whole but just focusing on the end customer as a patient. As you know, patients are people. They have different needs in different situations. Car users are people too, and sometimes they may be drivers and sometimes they may be passengers.

I drive cars in some circumstances; in others, I am an Uber girl– I just need to get from A to B and not worry about parking, etc. It all depends on the situation and place.

Consumers of medicines are the same – they are people and have lives not just defined by their illness. In some circumstances, they are patients, but not in others. By labeling them as ‘patients’ and being ‘patient-centric’, and assuming being a patient is their whole world, is erroneous and flawed. They’re also family members, friends, employers, employees. To ignore the other facets of a person’s life shows pharma companies are missing the big picture.

Instead, the data needs to be more holistic around the customer, to be aware of them in their lives as a whole, and to really understand their needs. On top of that, pharma are not able to get all the data they need on their own. They need far more encompassing partnerships – as do big Auto.

The future – Will big pharma & big auto be a part of it?

With Apple buying McLaren – or at least rumors of such (which makes sense when you analyze the fit) – and Apple getting into pharma and clinical trials, and Google getting into both autonomous vehicles and, simultaneously, genomic sequencing, it appears just a matter of time before Apple, Google, and Tesla swallow up both big pharma and big auto.

Pharma has a choice. Think about where the future is going – a future without doctors diagnosing, and a future without ‘patients’. Pharma needs to start thinking more holistically about the future of healthcare and the future of their customers, and then get big data – not just physician CRM and patient survey data, but real big data – with partnerships.

If everyone has the same data and uses the same platforms, there will be no competitive advantage. The advantage lies in using strong AI algorithms to understand what your customers need in their day-to-day lives with a view to solving not just ‘patient’ problems but people problems. Only then willPharmastart to innovate properly and move way beyond the current limited incremental approaches to innovation.

For more information on how big pharma can do this, and how Eularis are already part of the changes in the healthcare sector as well as pharma, contact the author - Dr Andrée Bates - at Eularis

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eyeforpharma Medical Affairs USA

Apr 20, 2017 - Apr 21, 2017, Philadelphia

Medical Affairs: bridging the gap between R&D and Commercial