Why Pharma needs a New Commercial Model

Huw Tippett, head of global sales for Novartis, explains his firm's new focus on creating customer value and unlocking value from key accounts.



Huw Tippett, head of global sales for Novartis, explains his firm's new focus on creating customer value and unlocking value from key accounts.



 


Not long ago, the pharmaceutical industry was cruising through wildly profitable times. Sales forces were growing, market access was easy, and loss of exclusivity was an afterthought. How things have changed.


Today, sales forces seem bloated, rep productivity is falling, market access is more difficult, cost containment pressures are greater, shifts in stakeholder power are substantial, and competition from generics is formidable. Taken together, these changes constitute an inflection point for the industry, says Huw Tippett, head of global sales for Novartis.


The inflection point


An inflection point is where a growing industry arrives at a critical juncture that requires change if former growth is to be maintained.


"It's exactly where we are in pharma today," Tippet says. "Things are happening in the marketplace, which means the ways were used to doing things arent so effective. Its a time of opportunity, it really is. Its a time when if you grasp the opportunity and you have first-mover advantage, you can really change things."


Tippet says there are several ways a company can choose to address an inflection point. The first is to do nothing; that is, continue on with business as usual. Historically, these are the companies that follow a parabolic plummet to obsolescence.


The second is to make minor adjustments; in the case of the pharma industry, that would be geographic tailoring and cost removal, improved sales force automation, and a more targeted approach to customers. Historically, these companies slow the rate of their plummet, but their business declines nonetheless.


The third is to institute new capabilities; again for the pharma industry today, that would constitute upgrading talent, adopting smart resource allocation across sales forces, and integrating micromarketing and regionalization to get closer to customers. Historically, these companies maintain growth but at a slower rate than before the inflection point.


"This is still about incremental sales improvement," says Tippett. "It's not going to transform your business."


Change the game


Indeed, the only way to maintain former growth rates, and perhaps exceed them, is to change the game completely; that is, to adopt an entirely new commercial approach.


"If you think about the complexity of [today's] markets," Tippett continues, "then no longer can we focus just on the prescriber. Really that's been the core of our strategy for decades, but we have to move beyond that. We have to identify our patients, no longer just carpet bomb our prescribers, and look beyond subscriptions and support our customers and our patients in terms of long-term fulfillment and retainment. That's good for our customers, that's good for our patients, and it's also really good for us."


Tippett says the best way to change the game today is to adopt a value-based approach, one that focuses on creating value for the customer and unlocking value from key accounts.


The Akzo Nobel model


He derives that advice largely from studying other industries that have undergone similar transformations. One of many examples is the coating industry. During the past four decades, one of its leading companies, Akzo Nobel, has been forced to reinvent its business model each decade. "It's very, very instructive for us with pharma," Tippett says.


 


In the 1970s, for instance, Akzo Nobel sold paints to painters on a regional model. In the '80s, when confronted by more competition, more margin pressures, and more cost containment, it developed paint systems that ensured paints were of a higher quality and delivered more reliably to suppliers.


In the '90s, as market pressure continued to increase, the company looked to segments of the market where new profit could be realized and settled on the car refinishing business. And in the '00s, facing ever more pressure, the company developed a key account management global business strategy that moved beyond small local outfits to focus on body shop managers, insurance and leasing companies, and car manufacturers.


Today, roughly 40 percent of Akzo Nobel's total sales and 60 percent of its total profits come from these key accounts.


"So their business has completely turned around in 30 years, and they've reinvented their whole commercial approach," says Tippett. "Just think about this model and think about the implications for us in pharma."


Customer value


Novartis, for one, has embraced those lessons and integrated an entirely new commercial approach with customer value as the keystone. "It's a departure from the way our business model normally runs," says Tippett, "because our current selling model is based on short sales interactions, repeat calls, call frequency, mass calling, but here we're talking about creating long-term relationships with customers over time."


"It sounds simple but it's difficult to do, fully understanding and supporting your customers' goals and needs," he continues. "It's a fundamental shift to putting your customers' prosperity at the heart of the business and really understanding their point of view."


Novartis has discovered that implementing such an approach takes a lot of time (likely on the order of three to five years) and training. "People think they understand, they think they get it, our sales teams really embrace it, but to get it right, even the first stage of understanding customer goals and needs, means a quantum shift in mindset," Tippett says.


Get management on board


Another lesson is that management must be fully on board with the transition. "In big pharma organizations, it all starts at the top," Tippett says. "Whether it's in global, regional, or local headquarters, the fastest moving companies are those with management fully engaged in the process, from their executive teams all the way down through the organization. This is not just about KAM teams on the road. It's about a whole KAM mindset right across the organization with customers at the heart of the business."


"In the end," Tippett says, "it's about learning from the business-to-business environment and taking all these learnings from B2B and bringing them into pharma. When we do that and integrate them into our approach, I think we cannot just be successful but be super successful, as this industry always has been. For me, it's one of the most exciting times we've ever had because we're truly going to change our approach and get to our customers in ways they've never seen before."