Navigating Digital Transformation in Pharma & MedTech

Digital innovation has become a central focus for Pharma and MedTech organizations worldwide - both in-house, by driving large transformational programs to become data-driven organizations as well as for digital products and services. In the realm of Pharma and MedTech, where complex, regulated products, and underlying development processes are the norm, the integration of digital solutions presets both opportunities and challenges. Developing and implementing digital innovation projects, such as (AI-driven) dashboards, digital applications for patients and patient monitoring services, proves to be a complex task with its unique set of hurdles.

In this comprehensive exploration of digital transformation in the Pharma & MedTech industries, we address both the opportunities and complexities that arise in this evolving landscape. We delve into the challenges faced by the industry and emphasize the critical need for a holistic framework to effectively manage digital innovation. By examining real-world examples, such as our collaborations with Evonik to become a Data-Driven Organization and Chugai Pharmaceuticals Germany for digital products, we illustrate the significance of embracing innovation management principles. This article underscores the importance of striking the right balance between strategic planning and execution, showcasing the impact of digital innovation management on the success of Pharma & MedTech players. Through our expertise and insights from multiple digital innovation projects in the Pharma & MedTech industries, we aim to empower organizations to tackle the transformative power of digital innovation while navigating the challenges presented by this dynamic landscape.

The dilemma of effectively managing digital innovation

The lack of a robust innovation framework poses one of the major limitations in the industry’s digital transformation journey. Many organizations find themselves either with only a high-level strategy - lacking the necessary execution and organization and focusing purely on pilot projects. In contrast, other organizations focus so strongly on strategizing (and its endless and rapid adaptations), which 'efficiently' blocks all pilots to reach the market. Both scenarios, result in reduced output, slow time-to-market and the inability to fully harness the potential of digital innovation.

Why is innovation management critical?

Generally, innovation management can be described as the 'operating system' that enables companies to manage and develop innovation projects efficiently and effectively. It encompasses the strategic planning, coordination, and implementation of initiatives aimed at driving innovation within an organization. Innovation itself is the key driver for Pharma- and MedTech companies’ success, which is driven by the R&D organization and its underlying well-established processes. Here, we focus on digital innovation management which supplements R&D processes - a field which is fairly new to most players and therefore often poorly developed.

Due to the pace of change in the rapidly evolving technological landscape and the emphasis on customer-centricity, digital innovation requires a very different approach including new processes, roles, strategies, and partnerships.

With the constant emergence of new technologies, organizations must adopt an agile and adaptive approach, quickly integrating innovations to remain competitive. Additionally, a strong focus on understanding and meeting customer needs is essential, necessitating data-driven insights and user feedback to iterate and improve digital products and services continuously. Moreover, the complex regulatory environment and data security concerns in certain industries, such as Pharma & MedTech, add further dimensions to the distinct approach required for successful digital innovation management.

By executing on a structured framework, (digital) innovation management enables companies to optimize their resources, foster creativity, and stay ahead of the curve in rapidly evolving industries, such as Pharma and MedTech.

Innovation management is required for both in-house and product & service innovation

Over the past years, digitalization has transformed the way companies operate internally and has expanded the established product portfolio by digital services. Many organizations have already initiated appropriate organizational adaptations to leverage digital innovation within their operations. These activities often include partnerships with innovation hubs, centers and collaboration with other industry players to stay at the forefront of technological advancements. Interestingly, the management approach of innovation either for in-house or for product innovation share many similarities, including a clear vision where to innovate and how innovation success is defined. For these objectives, an underlying innovation process with roles and committees as well as an innovation ecosystem is needed - either with external partners or internal departments.

However, in the context of these industries, innovation management encounters often astonishingly overlapping pitfalls that are worth paying attention to. These pitfalls can impede progress and hinder successful execution of innovation projects.

The consequences are significant for every company in the industry.

Let’s explore some of the main challenges caused by insufficient digital innovation management within the healthcare sector:

1. Narrow Trajectory

Narrow Trajectory - We think small.

The regulatory barriers and stringent quality assurance requirements in the Pharma and MedTech industry have created a risk-averse culture that hampers digital innovation management. Professionals in the industries are trained to prioritize compliance and quality, leading to a limited innovation mentality and thus, restricts the full potential of digital innovation. 'Fail fast and forward' is of course and thankfully a no-go for life-saving therapies. However, it is crucial for a fast, iterative and user-centric development of digital solutions in the healthcare sector. Considering this long-established mindset of employees in the underlying framework and including change management measures is therefore crucial for the success of all innovation activities.

2. Missed Opportunities

Missed Opportunities – We lose chances for business success.

Without a well-defined strategic framework, organizations miss out on valuable business opportunities. Failing to identify emerging trends, overlooking disruptive technologies, or neglecting to capitalize on market shift, result in missed opportunities to stay competitive and meet customer demands. Despite myriads of innovation scouts in organizations, focus is still set too often on technologies only (Does "Potentials of 5G, ChatGPT, Metaverse & Web3, …" ring a bell?) and miss diving in underlying patient needs and a working business model. For the latter, it becomes crucial to think already in the innovation strategy ahead which business goals and models of innovation projects are considered feasible.

By defining upfront desired models, organizations can better prioritize their innovation initiatives and ensure they are driving towards the right objectives. For instance, organizations should think early whether their product innovation projects should follow direct-to-consumer, B2B or reimbursement pathways - or only follow indirect business models. The same is true for in-house initiatives: Should projects increase top-line growth or reduce costs? By considering the business perspective early on, innovation efforts and resources can be shaped and optimized in a way that aligns with the overarching strategy and thus minimize the risk of investing in projects that don’t generate the desired business impact.

3. Lack of direction and focus

Lack of direction and focus – We act without a clear approach.

Without a comprehensive framework in place, digital innovation efforts lack direction and focus. This can lead to scattered initiatives, conflicting priorities, and a lack of synergy among projects. Therefore, it is crucial to integrate digital innovation in the established business of the organization. An example: Digital health services need to be integrated in the brand strategy and brand plan. They should not be considered a 'nice-to-have' add-on which are the first projects to be de-prioritization when budget cuts are rising.

Anchoring digital innovation in the established business leverages synergies among initiatives, streamlines decision making processes and makes it possible to allocate the necessary resources. This alignment ensures that digital innovation efforts are directly linked to the organization’s overall objective, enabling more focused and impactful approach.

4. Limited commitment

4. Limited commitment – We implement half-heartedly.

Limited commitment of senior management to digital innovation initiatives leads to superficial implementation, inadequate planning and thus results in wasted time, effort and financial resources. Failing to plan ahead and create long-term, sustainable solutions leads to a cycle of constant adaptations and reactive responses rather than establishing a solid foundation for continuous innovation.

Without a sustainable planning security, organizations struggle to adapt to evolving market dynamics and face challenges in maintaining a competitive edge. Addressing these challenges requires not only a strategic mindset but also a cultural change within organizations. This involves fostering a culture that values innovation, encourages cross-functional collaboration, and promotes the integration of innovative thinking into everyday operations.

5. Employee Disengagement and Demotivation

Employee Disengagement and Demotivation – We don’t understand.

Confusion and frustration among product owners or idea champions involved in digital innovation initiatives can be the result of a fractured strategic plan. Without clear guidelines for the strategic focus and underlying process in terms of selection criteria, decision committees and business KPIs, employees become increasingly frustrated, impacting their productivity and overall commitment to driving innovation within the organization. Hence, high transparency and continuous support and communication by the core innovation team is crucial to provide guidance for ideation champions and prevent disappointment of not matching expectations.

In conclusion, digital innovation faces severe challenges in thriving without a comprehensive and strategic management system in place. The main impact is caused by superficial implementation and lack of foresight in creating long-term and sustainable solutions. The consequences are significant for every company and its success in this industry.

To navigate these challenges effectively, it is crucial to understand the concept of innovation management. By establishing an effective framework, companies can better target their resources, develop projects more efficiently, and overcome the pitfalls that arise during the process if executed poorly.

Guidelines for innovation management already exist

There seems to be a generally accepted misconception that 'innovation' is per se a mysterious force which is unforeseeable and therefore cannot be managed. In strict contrast to this, innovation management approaches exist and are not new concepts at all. Over the last decades, best practices and approaches for innovation management have been established and refined - similar to project management in the 1950s, quality management in the 80s and risk management in 2000. This evolution is evident in the development of a standardized approach, such as the international standards on innovation management, which captures the collective knowledge of managing innovation effectively (see: ISO 56002).

At Zühlke, we have recognized years ago the importance of embracing these principles and extend them continuously by our real-world expertise with more than 10.000 (digital) innovation projects. By this, we derived a framework that combines the strengths of the ISO standard with our insights and understanding of the digital innovation management landscape.

Our framework stand out for its simplicity, comprehensiveness, and high level of practical adaptability. It provides organizations with a clear structured approach to managing innovation projects, empowering them to navigate the complexities and challenges of the digital era successfully,

To address the challenges of digital innovation management in the health industry, our approach which encompasses five key dimensions has proven to be highly effective - with specific adaptations to the industry. Based on this framework, innovation projects can be executed faster and with more transparency, ensuring a faster time-to-market of digital initiatives.

The framework defines the following five key dimensions:

Vision & Strategy

The first and most important dimension defines the underlying vision, mission, strategic focus of the chosen innovation approach. It is crucial to establish a clear vision and value proposition of the endeavor and set specific strategic guidelines that help finding the right way through the innovation jungle. Furthermore, it is fundamental to align the innovation strategy closely with the overall business strategy and goals. Too often, we see Digital Health strategies which run in parallel to the existing, unfortunately often called 'core business' strategies and miss integration completely. Key areas to define here include targeted markets and regions, therapeutic areas, intended use and associated medical device classes, strategic fit to the drug pipeline etc. Our recommendation here is to follow a rolling strategy process where a strategy is defined rather fast and is then regularly adapted to the new learnings instead of a multi-year strategizing process without any real-world feedback from its execution.

Offer & Service

Offer and Services focuses on transforming innovation outputs into valuable offerings for customers. Here, innovation areas are defined in which projects are executed. Hence, this dimension highlights the importance of translating innovative ideas into marketable products or services that resonate with their target audience. If your organization really wants to live up to the often-claimed goal of 'being patient or user-centered', then you should start by analyzing the patient journey and user needs. Only in the second step, the organization's goals should be mapped against these needs to prioritize initiatives.

Organization & Processes

This perspective encompasses the establishment of an innovation team, the innovation process itself, and the implementation of gates, committees and criteria to evaluate innovation projects. In this context, forming cross-functional innovation teams, defining easy to understand and MECE roles, establishing measures to track progress and success are essential. Quickly, it gets obvious that an innovation process itself is not sufficient at all to execute innovation projects. Instead, many supporting processes needs to be adapted, including contracting with HCPs and patients, social media guidelines, innovation budgeting, invoice procedures and IT infrastructure accessibility. Remember: If your budget approval process and payment schedule take too long, your partnering startup might go bankrupt before the first prototype.

Methods & Tools

To maximize the effectiveness of innovation projects, organizations should create a method portfolio that encompasses a range of innovation techniques and approaches. Utilizing innovation software can streamline and enhance innovation processes. Additionally, ensuring that employees have the necessary skills and competencies to utilize these methods and tools is essential. This dimension requires the implementation of design thinking methodologies, utilizing rapid prototyping and validation techniques, and understanding data analytics for informed decision-making. Importantly, methods go far beyond running a design thinking sprint only. Competences of innovation champions need to be developed in innovation management, technologies, the regulatory and reimbursement landscape as well as the therapeutic area. This is by far not a trivial task and requires close support and collaboration with multiple domain experts.

Partners & Ecosystem

Innovation cannot be executed alone - of course. However, partnerships create high efforts and need to be managed carefully to bring value to all parties. As one of the earliest steps, the appropriate collaboration archetypes for an organization should be considered, such as strategic partnerships, joint ventures or M&A, as well as open innovation initiatives. Then, the already established landscape of collaboration partners should be evaluated, which often includes research institutions, patient advocacy groups and HCP KOLs - with often insufficiently defined partnership goals and associated attention and resources.

For digital innovation in specific, an additional set of partners are required. This includes startups, technology experts, (MedTech) regulatory experts as well as digital health policy makers. In Germany, collaborations with innovation hubs are currently a common approach for startup scouting and engagement. By analyzing the hub landscape, an optimal fit of the organization's need to the offered value proposition of the hub can be made sure.

“(Strategy) ideas are easy. Execution is everything.”

Once an innovation management framework has been established, the real fun part begins. Of course, all defined approaches along the five dimensions have been drafted and aligned with your organization, but are they really implemented in every day lives? Writing down strategies ideas, processes and roles is one thing. Aligning them with key stakeholders the next. But this is by far not sufficient for a successful execution of your system.

As the introduction of an innovation management framework will affect employees with new tasks and a whole new set of skills to learn, especially the fundamental changes in the way of working (i.e. agile) create significant fear and rejections to the organizations goals. To live up to that, innovation management should be seen and managed as a continuous change journey - similar to digital transformation programs executed in most organizations. Hence, it's crucial to constantly, patiently and closely work with all involved stakeholders, including senior management, innovation scouts, product and process owners, etc. to ensure a fast understanding of goals and proactive development of the new situation. Only then, the underlying framework can really unlock its real business value to bring innovation projects to live.

Contact person for Germany

Dr. Stefan Weiß, MBA

Principle Business Consultant

Dr. Stefan Weiss is Principle Business Innovation Consultant at the Zühlke Group and has a broad background in Neuroscience combined with a profound expertise in economics and innovation management. Before joining Zühlke, Stefan shaped the future of Healthcare and Life Sciences at the Innovation Center of Merck KGaA. He is passionate about the digitalization of the Pharma- and MedTech Industry with innovative solutions and business models by applying his scientific and economic expertise. At Zühlke, he extends technical excellence with domain-specific insights and thereby strengthens the partnerships with Pharma- and MedTech customers

Contact

stefan.weiss@zuehlke.com

+49 89 262 041 401

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