Will Pharmaceutical Companies Win the Healthful Market?

One of the key capabilities of an elastic enterprise is radical adjacency, the ability to move into adjacency markets with relative ease. An interesting phenomenon in the health care market is the switch out of illness-defined market segmentation (cancers, cardio, depression) to health-defined market segmentation. Like all change it is not absolute but for sure assisting people to monitor and improve health is a growth business. Will the pharmaceuticals be elastic enough to seize the opportunity? Only if they understand business ecosystems.

A relatively superficial manifestation of that would be the rise of neutraceuticals. But neutraceuticals are familiar ground for pharmas and are more of a release from regulations than a change in business approach.

A week or so back I interviewed GE about their health-related plans. Here was a company building its future in a very elastic way one that pharmas would do well to emulate.

These are the most important aspects of GE’s current positioning in health:

  • The adoption of a business ecosystem approach to market disruption and growth.
  • An acceptance of shared value as a metric or motive for action and investment.
  • A willingness to act on these precepts at scale.

My guess is pharmaceuticals still see these as alien ways of doing business.

Here’s how I summarised the GE approach, over on Forbes.

The fascinating aspect of the project is that the output metrics, what GE gets back on its money, according to Mike, are all related to patients.

The hope is for the $1 billion to deliver better care to 10 million patients by 2020, and healthymagination to positively impact 1 million women.

The investment though is not just about delivering these noble social objectives. That would make in only philanthropic.

The strength of the investment resides in creating shared value, and that is what makes it a strong, and significant, social business strategy. One we should all care about.

Let’s think how.

If you try to nail down what spending $100 million on healthymagination means to GE’s business then the best you can get to is “a richer business ecosystem”. There is no revenue ROI involved. There are no senior executive metrics that stipulate that the $100 million must produce, say, a new $1 billion a year business. It doesn’t have an innovation metric like 5 new products of 20% in cost savings.

Mike says GE are looking “at the yield in terms of have we found new ideas, new concepts and concepts that impact patients, and long-term, have we created a new ecosystem of new partners?”

This new business ecosystem is a way of creating shared value.

We need to be alert to how new it is for companies to invest in something that would traditionally be seen as ill-defined and to take a strategic view without a return on investment in the way that ROI is traditionally understood.

In fact the business process appears vague when compared to traditional $100 million investments.

In place of revenue, the return is all about ecosystems, new players, new opportunities.

By any traditional yardstick that vagueness would paralyze decision-making in many companies. Few would pony up for a new ecosystem.

And if you talk to executives involved in innovation that’s what you find – there’s plenty of cash but an inability to make crucial decisions in part because traditional business calculations don’t seem to stack up or appear to need ground work or paradigm change.

The $100 million GE investment though will help generate new business ecosystems – drawing in people from new specialist backgrounds such as data analytics, software developers and …. who knows. At the very least you can anticipate that such a highly scaled challenge will entice very bright people.

But to invest in ecosystems you need faith in a new business process. And that’s what is so impressive about the project.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s