The Future of Pharma Is Digital

19 February 2015 G00263165

Analyst(s): Michael Shanler | Stephen Davies

Summary
Drug companies are under immense pressure to look "beyond the pill" and create new value.
Developing new patient-centric channels, products and services requires a solid digital
strategy. This research explores steps that CIOs and IT leaders should take to prepare for the
future.

Overview
Key Challenges

 Many CIOs and IT leaders have difficulty identifying value that could be delivered
through digital opportunities, and see this as a significant barrier to execution.
 Pharma CIOs are hearing urgent "digital" business needs, but they don't have
strategies in place to execute.
 Few CIOs and IT leaders are aligned with potential digital stakeholders. Many are
unsure how to proceed without taking on too much risk.

Recommendations

CIOs and IT leaders:

 Understand why the digital transition is important, and then socialize the business
rationale for going digital, while keeping the IT and business challenges in mind.
 Determine what must be done within your organization to change over to digital.
Focus on "burning issues" that will align to patient-centricity, and on how to enable
digital channels, services and practices.
 Get a snapshot of your current capabilities and match it to an appropriate level of
"hyped" technology. Determine what you must do to manage the pace of your
company's digital transformation.

Introduction
Clients from the pharma industry routinely mention that they are struggling to establish a true
digital strategy, yet they see the need for digital emerging in different pockets of the
organization. In order to have a sweeping impact, CIOs must be armed with information on
how to best manage a digital transition. For that reason, we've outlined: (1) steps to help
establish why the digital transition is important for your business; (2) several key burning
issues that deal with execution; and (3) what you must do to best manage the pace of the
digital transition.

In order to put ideas in motion, IT leaders need to collaborate with business colleagues on the
digital journey and align efforts to communicate with stakeholders, partners and customers.
Analysis
Understand Why the Digital Transition Is Important, and Then Socialize the
Business Rationale for Going Digital, While Keeping IT and Business
Challenges in Mind.

Pharmaceutical companies are still in trouble. The past few years have seen a major drop in
productivity. While 2014 was a good year for drug approvals at the U.S. Food and Drug
Administration (FDA), many companies are still in the middle of their free fall off the "patent
cliff." Most companies continue to spend more on sales and marketing than on R&D. 1 CEOs
have demanded that leaders think of ways to create value "beyond the pill," and their
companies need to change from being "drug centric" to "patient centric." This means R&D
groups need to develop more targeted therapies, and clinical and marketing groups need to
develop better patient engagement. It also means wrapping new digital services, channels and
practices around existing products — and developing new ones. Leaders must consider
industry fluidity, where new value streams or revenue may be generated via digital services
and cause major disruptions to existing legacy business practices (for example, Uber and Lyft
disrupting traditional taxi services).

Step 1. Build on the urgency. Socialize the idea that the window of opportunity will not
remain open forever.

In order to drive this new patient-centric value, CIOs and pharma executives must lead a
major transition to digital. However, the window for taking market-defining leadership
positions is beginning to close. The next 20 years of pharmaceutical innovation will be
defined by digital strategies that are put in place over the next 24 months. This is especially
true for drug development efforts. Companies that wait too long and do not adjust their
business models run a higher risk of irrelevance. The time frames and duration are a result of
lengthy R&D processes due to difficult scientific problems and regulatory hurdles. The time-
window-related urgency is due to the emergence of new thinking and available technologies.
On the commercial side, a pharma company can choose to expand its services in the digital
arena as needed, through internal efforts or via acquisitions or external partnerships. There is
still a sense of urgency, but the time to value will have a much shorter cycle. This is different
from the previous e-business era of digitizing assets and building automation. In essence, we
are at the dawn of a new era for "digital business."

Digital is essentially about leveraging pervasive, existing and potentially new data assets. A
digital business strategy creates value and revenue from digital assets. It also transforms
processes, business models and customer experience by exploiting pervasive digital
connections among systems, people, places and things (see Figure 1).

Figure 1. Digitalization and the Convergence of the Physical and Digital Worlds Will Create
Digital Moments
Source: Gartner (February 2015)

The focus during the digital age should be on leveraging new data sources to drive informed
decisions. The outcome of the digital era is new business models that leverage pervasive and
dynamic data. The value stream can consist of new "business moments," where a catalyst
event drives automated decision making involving business systems, people and things (such
as smartphones, wearable objects, instruments, consumables, devices and so on). The overall
process brings the real world closer to the digital world. The advantage is that this allows for
better simulation and characterization, and enables information to be leveraged in new forms
for new purposes. Digitalization also allows for IT and business groups to be continually
enlightened.

Across all industries, new data sources, new methods of engaging consumers and customers,
and new platforms, service models and tools are enabling data scientists to better handle the
massive amount of data and associated data complexity associated with new data formats.
Many other industries have started to "go digital." In a recent CEO survey (n = 391; see "The
2014 Gartner CEO and Senior Executive Survey: 'Risk-On' Attitudes Will Accelerate Digital
Business" ), nearly 50% of the CxOs (non-industry-specific) claimed to have a digital
business strategy today. Twenty-two percent said they currently have digital business, and
approximately 83% expected to complete the journey in the next two to five years.

The pharma industry is lagging. Only 12% (6 of 49) of the CxO leaders polled at the 2014
Gartner Symposium/ITxpo events suggested that they were developing an enterprise digital
business strategy today. This presents a great opportunity to really help change the business
with a solid strategy (see "Predicts 2015: Digital Business Accelerates Strategic Focus in Life
Science" ).

Step 2. Socialize what patient-centricity really means in digital business and IT terms.

Previously, the drug was most important. Today, the patient is most important. Putting the
patient at the center requires a fundamental cultural shift — looking completely at a disease
state instead of focusing only on a drug. The cultural change is especially difficult in
companies that continue to be profitable even in light of patent issues. It also means that
business processes, skills, staffs and technologies need to be upgraded (see "Business
Moment: Wearable Technology Predicts and Prevents a Diabetic Crisis" ). To put this into
context, CIOs need to anticipate upcoming requests from business partners. Examples may
include:

 Support a new digital R&D process that will create a better scientific understanding of
how a drug is researched and put into clinical trials, leveraging external and
precompetitive resources. This may involve understanding how specialized clinical
therapies are targeted toward a very specific and select group of patients.
 Understand and link information between the external community of doctors,
clinicians, patient forums and patients along new digital services.
 Use genomics data and biomarkers to develop a better understanding of how one
patient's drug response is related or different when compared with a larger pool of
patients.
 Create a more accurate summary of what the patient's "real" profile is before, during
and after treatment, as well as what other elements (for example, health, fitness,
lifestyle, health history and so on) impact efficacy and toxicity.
 Assemble tools to better predict therapeutic responses while developing a deeper
understanding of patients who are taking multiple drugs or therapies targeted for
specific diseases.
 Identify revenue opportunities for digital services (for example, Merck Global Health
Innovation Fund is a pharma company that is building out new revenue areas via
external collaboration, venture capital and acquisition).
 Better engage patients through new and pervasive platforms and channels.
 Activate new services that offer greater connectivity and get closer to patients,
especially for targeted therapies.
 Support better data linkages that are exchanged between payers, providers and
pharmacies with a focus on ontologies, semantics, analytics and big data tools.

Step 3. Identify the current business and IT challenges associated with transitioning to
digital.

In developing a digital strategy, IT and business partners will expose major gaps. The ones
that we anticipate will be the biggest include the following:

 Currently, there is much internal "tribal distrust," and many older policies are in place
that restrict access to data. There is very little transparency between functional groups:
Research and drug discovery groups lack visibility into clinical research
manufacturing operations, and extended supply chain groups often lack visibility.
Sales and marketing groups need more alignment. Key opinion leaders are not tracked
versus closed-loop marketing efforts.
 A cultural change is required to move from a focus on the drug (and an organization,
company and process set) to "patient health."
 Patients are still unknown entities. Few companies know how to engage patients and
what level of engagement is appropriate. Social media policy has only recently been
developed, yet most organizations are still "churning" instead of acting.
 Consider the data capture opportunities versus the challenges of digitization. Processes
for how data can be translated into business intelligence, and the governance platforms
that will control and manage this data visibility, are still maturing.
 Most decisions are process-based or compliance-based, not necessarily based on data
or socialized knowledge. Older architecture, data management practices, and data
stored in silos might be restrictive. Few companies have analytics centers of
 excellence (COEs) that can improve the depth of knowledge and industrialize new
decisions.
 Many current architectures are restrictive or brittle. A small change or a new method,
application or process can paralyze activities.
 The rate of change desired by the business is higher than what IT groups currently can
handle. Much of this is because of IT handicaps due to organizational structure and
governance.
 Driving the compliance and integration of validated systems requires due diligence.
Constantly changing regulations needs to be understood at a granular level.

Step 4. Establish a future vision with "the drug as a link in the overall value chain."

Similar to the storied "phoenix rising from the ashes," embracing and executing a patient-
centric digital technology will enable the industry to rise again. Digital "business moments" at
the intersection of people, processes and things will enable the "new possible." While
becoming more patient-centric has a significant upside, the business transition involves IT
leaders playing a central role in helping to define the digital future. It requires CIOs and IT
groups to work hand in hand with functional groups (R&D, marketing, medical affairs,
quality, regulatory and so on) to develop novel ways to leverage new and unique data sources.
Successful digital strategies will create innovations, improve product quality and drive
efficiencies to the business. This massive change requires a major shift in thinking. New
business processes that leverage digital need to be created. The drug is still essential, but other
services and capabilities need to be factored into the future because these services can be
monetized.

Pharma needs to go digital for business reasons, not IT reasons. CIOs and IT leaders should
work with the visionary strategic functional-oriented and process-oriented stakeholders to
identify the opportunities that are just beyond grasp. They should be proactive about
canvassing digital opportunities and promising technologies. They should discuss the business
potential and "new possible," but keep in mind that, in order to scale a technology pilot,
significant disruption may be required. CIOs and IT leaders need to engage as a partner for
innovation, but identify the major processes that will be impacted.

Determine What Must Be Done Within Your Organization to Change Over to

Digital. Focus on "Burning Issues" That Will Align to Patient-Centricity, and
on How to Enable Digital Channels, Services and Practices.

Setting a "digital strategy" will be comparatively easy. However, there is no easy path to
actually going digital. Fortunately, the pharma industry can learn from other industries. In
Table 1, Gartner outlines seven "burning issues" that need to be addressed (before spending
resources) in order to go digital.

Table 1. Seven Burning Issues That Must Be Addressed to Go Digital

Burning Issues What to Consider When Developing the Strategy
Who leads the enterprise Fortunately, in other industries, IT has been involved in recent
digital transition? digital strategies, and is rarely actively excluded. However, there
are conflicting views about who actually leads the strategy
between IT and business leaders:
Burning Issues What to Consider When Developing the Strategy
 How involved is IT in existing leadership decisions? Is IT
viewed as a partner? What about digital strategy
leadership?
 Has IT been excluded in discussions? Does IT have
credibility?
 Who is in the best position to lead for long-term success?

Where and how deep is Currently, most analytics tools in pharma operate within
the role of analytics in a applications. Extracting information for custom analytics is
digital pharma business? challenging without an end-to-end vision and a COE strategy.
Going digital requires accessing data more quickly (for example,
live data) and arranging it more quickly so that it leads to
assisting with complicated decisions, exposing new findings and
industrializing processes with automation.

Analytics often must be leveraged in-between existing functional

systems. The COE strategy must be flexible and guidance must
be clear on when tools should be given directly to business
groups or regional groups.
How do we become Patients, payers, providers and pharmacies increasingly have an
players in this arena and impact on choices. Going from "as is" to "to be" will require
contribute value? significant resources, and must be aligned with business needs.

A digital strategy requires a firm understanding at the macro

level in order to plot the connectivity, data exchange, integration
and communication. Then the digital business processes must be
overlaid before the scale and scope of the digital work can be
truly understood.

Which major domains For example, a patient may communicate with a pharma
need to be addressed by company in a variety of ways (through call centers, through
the different digital healthcare providers, over social media, via educational forums
business "facets?" and so on). This information can be leveraged in a variety of
business areas, but, to do so, the interaction within the different
"capability" domains should be considered. Gartner has identified
at least six domains:

 Bidirectional patient channels

 Health ecosystems
 Business systems
 IT
 Integration
 Collaborative networks

How those "capability domains" are impacted needs to be

subdivided along at least three major "facets" of digital business:
Burning Issues What to Consider When Developing the Strategy
 Channels: Patients or customers want flexibility, and
they want to consume any service from any channel.
 Services: New products are defined and deployed easily
and consistently.
 Practices: Patient or customer context can be used as a
decision mechanism.

Note: Digital products combined with digital services could

emerge as a facet of digital business, as the Internet of Things,
sensors and "smart machines" evolve. While not every pharma
will sell "devices," the information/service market based on the
data generated by things will grow in importance.
What are the The facets of digital business need to be addressed for each
"transformational pillars" transformational pillar of each capability domain impacted.
for the digital business? These include:

 Controls: Operations and management

 Tools: Technologies and architectures
 Techniques: Methodologies and processes
 Resources: Skills and competencies

What skills gaps need to Attracting and keeping the talent required to make digital
be addressed in order to go programs a success will be challenging, and will require
digital? aggressive tactics. Other industries that are a few years ahead of
pharma have leveraged the following elements in their talent
strategies:

 Using loosely federated virtual teams

 Creating global COEs
 Identifying experts through competitions
 Mastering reconfigurable work models
 Using global talent ecosystems
 Developing digital "versatilists"
 Converting human jobs to software jobs
 Acquiring digital business startups

Are there changes to Whenever patient data is discussed, many business leaders talk
governance, risk and about constraints that are put in place by regulatory, compliance
security? and legal groups. Dealing with new patient channels requires
conversations and executive buy-in. IT needs to understand the
landscape.

There are plenty of examples of patient data being used in the

cloud. Many e-clinical applications are already being run using
SaaS models. Patient data can be protected and anonymized.
New policies will need to be put in place on global and regional
levels to deal with privacy and compliance. Your strategy may
Burning Issues What to Consider When Developing the Strategy
require third-party data services or leveraging healthcare
analytics vendors.

Organizing these discussions requires conversations at the upper

echelons of the business. To protect your organizations, IT will
need to be supportive of the change, but also offer some
surveillance and policing duties. Credibility and knowledge of
patient privacy data policies and business cases must be
socialized among the IT leaders who are the points of contact for
the digital teams. Building credibility requires learning the
tactical issues, and also requires education.

Source: Gartner (February 2015)

Get a Snapshot of Your Current Capabilities and Match It to an Appropriate

Level of "Hyped" Technology. Determine What You Must Do to Manage the
Pace of Your Company's Digital Transformation.

Going digital requires new "working parts." It is impossible to simply replace one business
system with another when working on a digital strategy. Often, the new process will require
different interfaces, policies, procedures and so on, so keep the capability domains and
transformational pillars in mind. To do this well, remember three major elements:

1. What is your IT organization's capability for managing the change to digital?

o You have to maintain a fairly high level of IT maturity, and have solid
execution (or at least work on improving your ability to support these types of
projects). Doing a quick self-assessment on your "readiness" for digital may be
a worthwhile exercise.
o If the relative level of maturity seems low at first, then perhaps a grandiose
digital strategy on a fast-pace trajectory is not the best plan. Smaller, "quick
wins" will definitely be necessary to build confidence and capabilities. If this is
the case, then a higher investment in outsourced capabilities or technology
partnerships must be included in the strategic business.
2. What is the "hype" of the new technologies your business needs you to bring in?
o If your organization already has some experience or is positioned to succeed,
then it may be able to take a more aggressive approach. This may include
handling more "hyped" technologies, carrying more projects in parallel or
managing digital programs for bigger impacts.
o If this is not the case, then consider a more conservative approach with fewer
"hyped" technologies and fewer programs. Because there is risk, not every
technology will be a winner. Give yourself a chance to resource the projects
appropriately (see "Hype Cycle for Life Sciences, 2014" ).
3. Are you able to initiate and sustain a digital push using the appropriate approach and
methods?
o Bimodal IT is essential for running digital projects. Creating a competitive
advantage with digital requires lightning-fast teams that are extremely agile
(see "Bimodal IT: How to Be Digitally Agile Without Making a Mess" ).
o A pace layer methodology (see "Achieving Agility in New Product
Development With R&D IT Alignment and Pace Layering" ) may be required
 to manage a complex and evolving portfolio. In order to sustain a digital
strategy, some of the successful applications that are developed may have
longer utility and could move down to systems of record or systems of
innovation. Understanding how these applications will interoperate, how they'll
relate from a business perspective and how data should be modeled is essential.

Develop a digital strategy and build alignment and execution. You need to determine who
leads, how the core analytics will be aligned, how those architectures will evolve, how the
capability domains are impacted by the different facets of digital business, how the
foundational pillars will be impacted, and how to manage the talent. This is quite a tall order.
Before progressing further, CIOs need to focus on addressing internal IT maturity and
matching it to the technology "hype." Also, organizational, planning and execution tools will
be required. Getting into digital is not a question of "if," but "when." Staying ahead of the
issues, sharing your knowledge and putting good skills to use will help you better position
your company to be competitive for years to come.

Case Study
Building "digital urgency" at a U.S. pharmaceutical company: In late 2013, the CIO was
responsible for working with clinical development, marketing, patient engagement, regulatory
and medical affairs groups to develop a broader patient engagement strategy. Previously,
there were four separate mobile strategies utilizing different development groups: a
marketing-driven patient engagement program, a clinical partnership for trial recruitment, a
gaming app for younger patients and a health-related app for patient education. Each group
was funding programs separately, but not sharing knowledge. The CIO worked with the
different groups and identified internal leaders to outline a plan to help expand the mobile
capabilities and build a COE for digital practices. The CIO also worked with IT leaders to
align the business justifications for different services and channels, thus reducing the number
of workflows and vendors in the overall ecosystem. Today, the COE along with the business
and IT leaders have built alignment for the digital projects, and have moved many of them
past the pilot phase.

Developing a digital patient-centric strategy at a European pharmaceutical company: In

2013, a CIO reported that many executives wanted the organization to transform the way they
were connecting with patients and develop new services that created value. The executives
said that "the drug is only a link in the overall value chain," and that payers, providers and
pharmacies were increasingly involved in the choice of therapies. Meanwhile, the CEO was
driving the organization to "develop a digital strategy."

After discussing emerging technology trends and the need for more patient-centricity, the CIO
initiated a review of how IT supports the existing business processes. Together with business
partners, the IT team identified the major impacts on controls, tools, techniques and resources,
if it was going to proceed with several "favored" strategies that dealt with pervasive data. It
was determined that, based on the company's internal capabilities and the risks, the projects
were not possible, thereby resulting in a new strategic technology partnership with a key
vendor in order to drive the activity.

The CIO reported that, if the digital services being proposed weren't reviewed with rigor
against the transformational pillars, then the projects would have failed. Now, there is a
unique process being driven by the CIO for reviewing "services" and "practices" that deal
with pervasive data.
Gartner Recommended Reading
Some documents may not be available as part of your current Gartner subscription.

"Hype Cycle for Life Sciences, 2014"

"Predicts 2014: Life Science Manufacturers Transition to the Digitalized Era"

"Business Drivers for Technology in Life Science Manufacturing"

"Let's Get Digital: A Template for Digital Business Strategy"

"Digital Business Technologies Are Changing the Nature of Change"

Evidence
1
R. Anderson, "Pharmaceutical Industry Gets High on Fat Profits," BBC News, 6 November
2014.