Strategic Market Research: In Search of Greater Value and Efficiency

By Mike Zubey, director and senior principal, IMS; Gavin Krumenacker, director, product & portfolio management, IMS; Srinivas Pothukuchi, senior principal, IMS A frequent refrain within pharmaceutical business intelligence/ market research departments these days is, somethings gotta give. The typical market research department is tasked with doing more with less at a time when market analytics are part of a companys secret sauce for competitive differentiation. So what, exactly, can give? Many companies have tried to offload repetitive, number-crunching projects to outsourcers offshore as a way to save money and gain some staffing flexibility. That solution, a form of cost arbitrage, does succeed in cutting costs initially and indeed helps with staffing for a period of time. However, it frequently offers diminishing returns and can be fraught with problems without the right oversight and project management. Besides, the goal for market research departments is not merely to trim the market research budget, but to add greater value and contribute more strategically to the organization. This paper presents a new model for partnering with external suppliers. By partnering, business intelligence/ market research departments can serve their many internal customers better, with more insights, and stronger decision support. It involves flexible structures of market research teams over time to support commercial objectives and working with a partner that has sufficient domain expertise to free in-house staff to perform analyses, interpret findings, and prepare recommendations the higher level work that organizations want and need to be doing.

FIGURE 1: FUNCTIONS THAT PROVIDE BUDGET CONTRIBUTIONS TO MARKET RESEARCH

Percentage of Companies Functions that Provide Budget Contributions
Marketing 86.4 54.5 31.8 18.2 18.2 18.2 13.6 13.6 9.1 0 20 40 60 80 100

Market Research New Product Planning Managed Markets

Sales

Competitive Intelligence Business Development

R&D

Medical Affairs

Source: Cutting Edge Information, 2008. Developing Integrated Market Intelligence

THE MARKET RESEARCHERS PREDICAMENT A pharmaceutical market research department must serve many masters: marketing, new product planning, managed markets, sales, competitive intelligence, business development, R&D, and medical affairs, roughly in that order of magnitude. (See Fig. 1) Juggling the needs of such an array of internal clients requires a high degree of flexibility because while some of the work is regularly scheduled, some is ad hoc and must be completed at once. When business development requests an analysis at the same time that a weekly report is due, someone is bound to be disappointed in the level of service they receive from the department.

It used to be that market research departments staffed for peak demand and so could more easily cope with competing requests. Resourcing conflicts were much less common, and the staff was able to support special projects such as the annual forecast, product launches, messaging development, brand planning exercises, and business development research. (See Fig. 2) Now, however, due to commercial cost pressures, staffing levels are more likely to be adequate only for the trough in the varying workload. The staff is consumed with addressing recurring projects such as preparing brand dashboards, overseeing data management, gathering secondary competitive intelligence, and tracking promotional effectiveness. Often, anything extra, untoward, or ad hoc that comes in poses a resourcing challenge. In a survey conducted among a slice of IMS market research contacts, we found that over the last 18 months, 86 percent of the respondents experienced budget reductions and more than half experienced staff reductions. Meanwhile, theyve been asked to sustain the long-term competitive edge that comes from their expertise and to serve a broader set of stakeholders. Forty-three percent saw the number of internal customers expand. One respondent lamented, We are asked to do more, with fewer people and reduced budgets. The result is very long days for everyone. Im worried about staff burnout. Through no fault of their own, then, market researchers are not always able to deliver the kind of service their internal customers need and expect. The result is frustration on both ends. THE MARKET RESEARCHERS ROLE IS INTENSIFYING Ironically, even though market research departments have experienced budget and staffing cuts, the work they perform is more important to a companys success than ever. In Competing on Analytics, Davenport and Harris assert: At a time when companies in many industries offer similar products and use similar technology, distinctive business processes count among the last remaining points of differentiation. Many previous bases for competition such as geographical advantage or protective regulation have been eroded by
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FIGURE 2: THE CHANGED OPERATING MODEL

Annual Forecast Product Launch Support Messaging Development Brand Planning Business Development Old Staffing Models Market Demand & Workload Variation

Variable Workload (Time and Resources)

Variability of Demand & Cost

New Market Reality Trough Staffing Brand Dashboards Data Management Secondary CI Promotion Tracking Staff completing repetitive tasks

Time

globalization. Proprietary technologies are rapidly copied, and breakthrough innovations in products or services are increasingly difficult to achieve. That leaves three things as the basis for competition: efficient and effective execution, smart decision making, and the ability to wring every last drop of value from business processes all of which can be gained through sophisticated use of analytics.1 As a result of the pressures on the pharmaceutical industry today, many market research and business analytics executives are caught, with less than adequate staffing levels, trying to manage a very difficult balance. The competing objectives are, on one hand, to manage a team and its research efforts optimally through reducing or variabilizing operating costs and, on the other, to adding strategic value and perspective to the organization. Achieving differentiation and competitive advantage requires a flexible operating model complemented by technology. Differentiation and competitive advantage can also be achieved through relationships with variable-cost partners that can add value to both the market research teams and their stakeholders. The way forward is less about cutting costs than about a combined effort to increasing value and improving efficiency.
1

Davenport, Thomas H., and Jeanne G. Harris, Competing on Analytics: The New Science of Winning, Boston, MA: Harvard Business School Press, 2007.

STAFFING MODELS AND APPROACHES TO OUTSOURCING How a companys Market Research/Business Intelligence and Marketing Support functions are set up affects how it might best approach outsourcing. In this paper, well discuss two illustrative organizational models, which represent two polar opposites (See Fig. 3). There are many possible variations in between these two models. In a pure Vertical Brand Support Model, each brand in effect owns the resources that support it: brand analytics, forecasting, brand reporting, primary research, and secondary data management. Whether or not companies have retained this model typically depends on the size of the organization, the size and breadth of the product portfolio, and lifecycle. Even in large organizations, this model is often employed for leading brands. The Vertical Brand Support Model lends itself most easily to project-based outsourcing with subject matter experts who support individual areas of the organization. Great innovation can occur but often remains contained in pockets, and broad-based resource optimization is hindered. While individual instances of outsourcing from this model can and do work well, the approach becomes inefficient when scalability is required.

In a fully Shared Services Model, the marketing and analytics resources are pooled, with users tapping into various services as needed. Not necessarily the more sophisticated of the two, this model can, however, drive more efficiencies and offer more leverage and flexibility. It also lends itself to pure offshore outsourcing of repetitive tasks, reporting, and adhoc analytics in a way that allows the company to capture economies of scale. (However, as we will explain, outsourcing in this fashion must be handled properly, or it will yield no more than just the initial cost removal without adding further value. In some cases, it can disrupt business flow and insights delivered to stakeholders.) In reality, most companies implement a hybrid, combining some of the features of each of these models to balance franchise or therapy skills supporting the commercial teams, and generalist analytics skills pooled to support greater efficiency and productivity. Such hybrid models tend to be dynamic in nature and flex with the changing needs of the organization. Over time, this flexibility given changes in the product portfolio, competitive profiles, partner status and many other factors is absolutely critical to ensure that market research/business intelligence teams deliver strategic value to their stakeholders and the organization.

FIGURE 3: VERTICAL BRAND SUPPORT MODEL

Brand A Brand Analytics Forecasting Brand Reporting Primary Research Secondary Data Mgmt Brand B Brand Analytics Forecasting Brand Reporting Primary Research Secondary Data Mgmt Brand C Brand Analytics Forecasting Brand Reporting Primary Research Secondary Data Mgmt Marketing Shared Services Brand Analytics Competitive Intelligence Forecasting Brand Reporting Primary Research Secondary Data Management

SHARED SERVICES MODEL

Franchise Alignment Therapy Area 1 Brand A Brand B Therapy Area 2 Brand C Brand D

Which internal support structure and hence which type of outsourcing approach will serve a company best depends on a number of factors: The diversity of the companys portfolio The number and size of products in each therapy area The stage that products are in their lifecycle The companys growth prospects Settling on the right organizational structure is the first challenge that Market Research/Business Intelligence leaders face in determining how they can serve their many internal customers and gain the latitude to function as stronger strategic advisors to the business. Once clients have addressed the structure issue, thay are in a position to address optimization through outsourcing. COMMON PITFALLS OF OUTSOURCING Project-based outsourcing, which has been employed for many years, has remained partner-oriented and typically aligned to specific decisions of a given brand team. An example includes primary research partners that engage with brand teams to deliver therapeutic or methodology expertise in a particular geography. Unfortunately, the organization is often not able to exert buying power across brands, especially when individual internal teams all competing to be cutting-edge are working with multiple vendors on multiple initiatives. While this form of outsourcing has the potential to add value, special care must be taken to ensure that the organization is managing costs and realizing gains in the aggregate. A piecemeal approach leads to inefficiencies over time. At the other extreme, for those tapping blended resources in the Shared Sevices Resources Model, the beginning attempts at outsourcing have been handled almost exclusively from a cost-cutting perspective. Unfortunately, many companies have failed to realize this goal because ongoing commitment, communication, and project management are required for the targeted savings to be achieved. Many outsourcing solutions have gone sour because: Partners who lack the necessary domain expertise require a great deal of upfront training as well as ongoing development. Often, those employees who had been the ideal mentors are now gone.
4

FIGURE 4: TRADITIONAL OUTSOURCING PARTNER VALUE ADD OVER TIME

APLD Specialty Therapy Area As new approaches are developed or new assets become available, partner ability tends to rapidly decline then build more slowly

Partner Value Add

Ongoing Project Management Partner Domain Expertise

Time

Large-scale outsourcing projects require a surprising amount of project management. Companies often underestimate the amount of oversight time required. Communication difficulties due to language barriers and time zone differences. If the offshore provider does not specialize in the pharmaceutical industry, market changes can leave it behind the curve. As new approaches are developed or new assets become available, the ability of the outsourcing partner tends to rapidly decline and then rebuild more slowly. (See Fig. 4) All of these difficulties fall into the category of relationship management, an area that has often been mismanaged, downplayed, or even forgotten in the process of outsourcing, particularly when offshore models are pursued. In Key Lessons Learned in Offshore Outsourcing, Tandy Gold explains: This area is one in which even experienced large firms often trip and fall in offshore outsourcing. Structurally, management of vendor selection often focuses on procurement, with the inevitable spreadsheets of checked-off success criteria, or through an offshore consultant specialist, who runs interference in a similar manner, perhaps with a bit more specialized offshore focus. Neither really gets at the heart of the offshore vendor relationship, because

in simple fact, most consulting relationships are much less strategic in footprint. As a volume play, and with the cost of knowledge transfer, a short-term offshore contract doesnt make much sense on either side customer or vendor. So, it is really not so much a purchase as it is a merger, and the overriding criteria are not so much based upon finely dissected objective criteria, but on relationship management and similar factors. This does not mean that the objective due diligence does not need to be exercised of course it does but that this is not the seat of decisionmaking, [its] just the beginning. 2 Even with an initially successful outsourcing venture, it eventually becomes more difficult to sustain value in the long term. IMS estimates that by focusing only on ways to cut costs through outsourcing, companies miss out on 70-80 percent of the value to be gained from the right arrangement with the right partner. Indeed, many of the organizations that have tried offshore outsourcing as a way to reduce costs are now backtracking as models for optimal execution are still developing. They are looking to create efficiencies and incremental bandwidth through variable external staffing and support. Existing staff will then be able to move away from redundant tasks toward adding valued for a range of stakeholders. Existing market knowledge and a long-term competitive edge should not be lost in the transition. THE IDEAL SOLUTION To fully realize the benefits of outsourcing, companies need partners that understand their markets and business models. Outsourcing is not just about cost cutting via offshoring: It is about extending the organizations business edge while gaining resource efficiency and operational capacity. Increasingly, an overarching requirement of the ideal strategic market research partner is that the company be able to blend capabilities to deliver cost savings while enabling the internal departments or teams to do more themselves. The cost savings of business process outsourcing have been documented in functions such as Finance, Human Resources, and IT.
2

Infrastructure support companies have also proven value in process improvement and data management. The most significant value-added benefits, however, will ultimately come from content experts: those able to lead organizations toward improved capabilities through commercial transformations, greater insights, faster business responsiveness, and competitive differentiation. With these relationships, the ideal set-up is one in which the information and analytics partner can handle variable demand (as is common in IT and computing). Ultimately, the partnering organization will be able to help shift the effort toward decision making and implementation. (See Fig. 5) The client can spend less time collecting and piecing together information while moving toward providing analysis and insight. RECOMMENDATIONS How do you want to serve your organization? What do you want to be? A new approach to optimizing marketing research requires a shared vision as well as a thorough understanding of the current state of affairs. When determining how the market research function can efficiently and effectively deliver value to the organization, several goals are recommended: 1. Working with your stakeholders, create an 18- to-36month strategic plan for Market Research and related functions, ensuring that what you envision will fit their needs. (Be sure to keep in mind any known events or possible changes or evolutions of the business that would impact the structure.)

FIGURE 5: THE SHIFT FROM COLLECTING INFORMATION TO DECISION MAKING

Operating Effectiveness 20% Decision making & pull through 30% Analysis 50% Collection & piecing the information Centralization 50% Decision making & pull through 30% Analysis & insight 20% Collection & piecing the information

Standardization

Optimization

Gold, Tandy, Key Lessons Learned in Offshore Outsourcing, Piscataway, NJ: IEEE Computer Society Press, 4, 2010.

2. Evaluate a strategic support model that offers the best blend of brand-specific capability and organizational leverage 3. Engage partners that know the industry and can deliver value through domain expertise while also offering scalability and the means to drive larger cost savings 4. Outsource to complement and extend capabilities not replace them 5. Manage market research functions with an integrated services approach 6. Share success and learning across the organization A partner with industry expertise locally and globally will eliminate the need to start at square one when anything new hits for instance, an issue requiring longitudinal or specialty data or knowledge of an additional therapeutic area. A partner with the ability to tap into resources offshore to do repetitive work while serving as an information and analytics consultant on-site could serve the broader strategic needs of an organization. RESULTS: WHAT A STRATEGIC MARKET RESEARCH MODEL OFFERS Through a strategic approach to market research outsourcing, organizations can operate in a way never before possible. The improved processes vary by company, by market, and by the specific challenges met head on. But the new approach could very well result in a world where: The department has reduced overall costs of non-core services The team has delivered brand insights far beyond what was previously achieved (for example, using patient longitudinal analysis to drive competitive advantage) On an ongoing basis, you provide in-depth understanding of emerging market dynamics plus the ability to tap competitive briefs on target companies or therapy areas

Youve delivered greater consistency in information governance, delivery, and interpretation The department has documented higher end-user satisfaction Dashboards are run offshore so that on a Monday morning, your local team is already at work interpreting rather than crunching numbers serving as true consultants to internal stakeholders Your analytics team is now spending more time on forecast commentary rather than building reports The department has migrated to a variable cost structure, supported by offshore development and production Your company has met goals for significant supply chain savings and improved KPIs Youve achieved strong organizational buy-in and satisfaction with the process and results Your department is known for providing strategic value to the organization CONCLUSION In a highly dynamic marketplace where the need for differentiation grows daily, pharmaceutical companies face pressures to optimize resources while offering increased insight. Outsourcing routine functions has been gaining adoption as models for optimal execution are still developing. As you move beyond cost-cutting and straight offshoring, taking a strategic approach to implementing a support model that enables key internal stakeholder success and optimizing the execution to strategic partners with strong domain expertise will go along way to ensuring your organizations competitive edge. l

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Operating in more than 100 countries, IMS Health is the worlds leading provider of market intelligence to the pharmaceutical and healthcare industries. With $2.2 billion in 2009 revenue and more than 50 years of industry experience, IMS offers leading-edge market intelligence products and services that are integral to clients day-to-day operations, including product and portfolio management capabilities; commercial effectiveness innovations; managed care and consumer health offerings; and consulting and services solutions that improve productivity and the delivery of quality healthcare worldwide.

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