Disrupting Everything

When I was young everyone would watch the Emmy’s to see if ABC, NBC or CBS won the most awards.  It was a three horse race.  Everyone could name every prime time show and had an opinion on which was best.  Sunday night we saw something completely different.  Cable killed the networks in this year’s Emmys and in many ways made the major networks look irrelevant.  I guess ABC did televise the award show and that may be the eventual role of the networks to be a neutral observer as others win all the awards.  I don’t think anyone who has a television was surprised by the results, as how many of us rely on the traditional networks for news and entertainment?  I think there is a lesson here for the pharmaceutical industry as well.

For decades the pharmaceutical industry was dominated by just a few companies and even today if you look at the annual revenue the industry is still a little top-heavy.  A better measure of a company’s impact may be how many prescriptions they sell or how many people rely on them for their healthcare.  In an industry where 85% of all prescriptions are generic one could argue that the entire branded part of the industry is being marginalized in some way.  Perhaps the branded part of our industry could be viewed as network TV and the generics, biotech companies and specialized companies might be compared to all the cable stations that are winning the awards.  Go to the CafePharma website and click on “company boards” and look at the huge number of companies there.  It is very similar to scrolling through the guide on your television.

One of the most profound business ideas of the past twenty years is Clayton Christensen’s theory of disruptive innovation.  Take a look at this website and watch the YouTube video.  The theory talks about industry leaders continuing to develop better and more expensive products for their existing customers while outsiders are looking at a different plan.  The disruptive innovators are looking for simpler, less expensive ways to enter a market and provide products to a much wider group of customers who can now afford to buy them.  Does this seem to be the generic model?  It really is worth the time to study Christensen’s work, look at his examples from other industries and try to figure out how to be an innovator rather than a target.

For our industry the first step is to realize what is happening.  Innovation at the high end is good and needed if breakthroughs are to continue.  The world counts on our research to wipe out AIDS and cancer, but if we treat everything we sell as a medical breakthrough we will continue to be niched for customers where there are no other alternatives.  We need to develop strategies to provide products to a much broader base of patients.  This may require regulatory work or just more creativity, but it definitely will require a change to our business model.

Perhaps the most relevant metric for companies today is not top-line sales but rather how many of the over 315 million people in the US or 7 billion in the world take one of their products every day.  It is a sobering thought, but perhaps it could be viewed as a challenge.  Companies need customers if they are to remain relevant.  There is no shortage of people who need our products, just a lack of imagination on how to price and distribute them so everyone can benefit.  Think about it while you watch TV tonight.  I’ll bet you won’t be watching a network show, right?

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