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An Industry in Crisis: Desperately Seeking New Strategies
Decision Resources, Inc, June 2006, Pages: 30
The time has come for the pharmaceutical industry to take a hard look at its business strategies and devise new ones more suited to the post-millennium period. The industry has been riding the crest of its once successful blockbuster business model, which has blinded it to new strategies for developing drugs. In this report, we address recent strategies that have failed to help Big Pharma, and we take a hard look at present day mindsets and organizations. We prescribe a bold new remedy for the industry's shortcomings and seriously discuss the advantages of downsizing--an opportunity that until recently was considered anathema by an industry long grown obese through its consolidation practices.
The pharmaceutical industry is entering a revolutionary period of time that will require radical solutions. The only way forward is for management to find the courage to discard yesterday’s now ineffective blockbuster business model along with its increasingly inefficient strategy of consolidation and its no longer efficient fully integrated business model.
The future success of a pharmaceutical company will depend in large part on the quality of decision making by its management. Management rather than products, technology, or money is now the defining factor for competitive advantage in tomorrow's pharmaceutical company.
Changing mind-sets is at the very heart of transforming any business. Successful companies will adopt novel, creative, and inspirational strategies. We propose the use of value chain restructuring and deliberate downsizing as the most effective tools for pharmaceutical companies to use in order to achieve success in tomorrow's world of personalized medicines and targeted therapies.
The jury is still out on whether pharmaceutical companies, which are desperately seeking new strategies, can or will adopt bold new strategies to shape the future of the industry. Many may try to escape today’s harsh realities for a few more years by using strategies that in the post-millennium period are now akin to rearranging the deckchairs on the Titanic.
Management must create and implement new strategies for creating tomorrow's value. No general theory of strategy creation will ensure success. Strategy comes out of a creative process conducted by thoughtful people. We propose that strategies for the post-millennium period should be patient focused and revolve around customers, dynamic markets, and evolving technologies.
- Need for Strategic Change
Blockbuster: The Poisoned Chalice
Curse of Conventional Wisdom
Rule of the Tool
Embracing New Technologies
- Failures in Attempting Strategic Change
Obvious Strategies—Follow-On Brands, Formulations, and Geographic Expansion
Mergers and Acquisitions
Pharmacy Benefit Management Companies (PBMs)
Fumbling the Ball
- Strategic Deja Vu?
Reinventing Itself—A Case Study on Bayer
“Plan to Win” Strategy—A Case Study on Merck & Co
- Prescriptions for Change
Critical Thinking on Spending Strategies
Meaning of Innovation
Approaches to Risk and Uncertainty
Yesterday’s Outdated Organizations
Impact of Technology and Consolidation
Continuing Foibles of Consolidation
- Revolutionary Times Need Radical Solutions
Critical Importance of Personalized Medicine
Releasing Hidden Value
Mechanisms for Downsizing
Revolutionary Times and Radical Solutions
List of Figures and Tables
Figure 1 Price per Earnings (P/E) Ratios Compared With Earnings Growth (Forecast to December 2006)
Figure 2 Blockbuster Business Model: The Silver Bullet
Figure 3 Marketing and Selling–the Largest Pharmaceutical Company Expenditures in 2005
Figure 4 Serial Consolidation in the Pharmaceutical Industry
Figure 5 Failure of Strategic Maneuvers to Change Opportunities for Pharma Companies
Figure 6 Novelty and Incremental Innovations Are Irrelevant: Addressing Customer Needs Is Paramount
Figure 7 Four Organizational Building Blocks
Figure 8 Which Parts of the R&D Function Are Crucial to a Pharma Company’s Value Chain?
Table 1 Leveraging Merger and Acquisition Strategies to Create a Sustainable Future
Table 2 Select Divestments of Non-Pharma Businesses to Create Pure-Play Pharmaceutical Companies
Table 3 Big Pharma Tidies Up Its Pharmaceutical Portfolio
Companies Mentioend Include:
- Merck & Co.
- Astellas Pharma
- Daiichi Sankyo
- Solvay Pharmaceuticals
- UCB Celltech
- Bristol-Myers Squibb
- Johnson & Johnson
- Schering AG