Business in the year of the ox

We are essentially linear creatures. Whether this is the native mode of humanity, or whether it is the result of acculturation, is open to question.

We are essentially linear creatures. Whether this is the native mode of humanity, or whether it is the result of acculturation, is open to question. Western society fosters and rewards linear behavior and performance from kindergarten on. Our educational system teaches and grades on it; our social programs are designed and executed on it; and it drives decisions throughout most government, non-government, and commercial settings.

The strategic context for business has changed radically, with old patterns of power fracturing along new lines. Culture itself is passing through a new time, and the journey promises to be more transformative than the industrial revolution at the turn of the century, and the agrarian revolution sparked by the development of agriculture in the Neolithic Age. We are now facing multiple shifting paradigms at a global system level, and it calls for a completely different mode of thinking, a fresh approach to growth and competition defined in 21st-century terms.

Despite its size, Pfizers idea to swallow Wyeth feels more routine than imaginative, more tactical than strategic. The deal looks like a linear move at the operational level. And its center of gravity the focal point for overall competitive capability is still squarely sitting on a commercial model whose success depends on promoting the features and benefits of individual drug brands in an operating environment that sees little value in, and does not trust, pharmaceutical promotion. Yes, it avoided stepping off a $13 billion cliff, but these cliffs are a permanent feature to the geography. And Pfizer will continue to buy services from a marketing industry that itself is collapsing from a disintegrating business model. The challenge now is to leverage a leadership position to create new marketspace, deliver service innovation, and forge unique directions strategically.

Pharmaceutical companies face an adaptive challenge to a changed context for business. The whole framework for getting new medicines approved is evolving, the amount of revenue generated by new drugs is dropping, and atomizing customers are awash in information and competing data claims. The marketplace is moving away from accepting laboratory measurements as evidence of real clinical benefit, focusing instead on improving health outcomes. There are five classes of drugs that all control blood sugar effectively, yet the incidence of adults with diabetes has tripled from 1980-2005. There are more than 150 drugs for high blood pressure. From the perspective of the insurers (these are the customers, like states and the federal government, that buy in bulk), many medicines are commodity inputs to electronic treatment algorithms, which are being used by huge integrated delivery networks to standardize care. Share and formulary position for a drug are more a function of contract negotiations that revolve around deep price discounts, often up to 70 percent, and less about specific product attributes. And these integrated delivery networks, like Barnes Jewish Healthcare in St. Louis, now account for greater than 80 percent of the U.S. hospital pharmaceutical business, regardless of therapeutic category.

As the meltdown in the world economy moves from link to link, engulfing industries and commercial relationships from which no one seems immune, it reveals the potent networking effect that encompasses economic and technological connectivity. It also highlights a central feature to strategy in an advanced economy: the concept of separation between people, between markets, between governments, between countries, between ideas -- is bankrupt. Everything is connected to everything else in complex systems of behavior. The winners will know how to work with all this interconnectivity, the chaotic, and the nonlinear. They will know how to build whole new forms of collaboration, like P&G and Google, who recently exchanged employees in a move to spark marketing innovation.

The future of the pharmaceutical industry is broader than pharmaceuticals; it also lies in servicing health. Even more specifically, it lies in transitioning from an industrial-era view of a business focused on manufacturing and promoting physical products (i.e., drug brands), to a model based on organizing industry environments around shared marketspace. This is about creating new wealth by forging new business ecosystems: Pfizer linking with Dole Foods to invent a new standard of care in diabetes; Pfizer connecting with Apple to design a unique aggregation of health information; Pfizer aligning with IBM to develop a new health infrastructure in Africa. These are the kinds of creative strategic moves that will address the unmet needs of patients, physicians, and customers around the world.

According to the Chinese zodiac, 2009 is the Year of the Ox. The sign of prosperity through fortitude, the Chinese say the Ox works methodically, a born leader possessing an innate ability to achieve great things. There is opportunity to transform the pharmaceutical industry, as Pfizer claims in its news release announcing the Wyeth acquisition, and the new even-bigger company has the resources and positioning to do it. But it will take a different kind of strategy and action, an evolutionary leap to adapt to a new world where there are no easy answers, no proven routines, and no straight lines. This is the strategic challenge for Pfizer.

Author: John G. Singer, Founder, Blue Spoon Consulting Group, LLC

About Blue Spoon: Blue Spoon Consulting is a strategy and marketing consultancy. We are at the leading edge with a framework to help clients innovate their tactics, differentiate their strategies, and create at a system level.

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