Profitability in the Life Sciences market: bridging the skills gap
SummaryIn an increasingly competitive Life Sciences industry, many providers are concerned about a lack of in-house talent and expertise, as they recognise the need to better manage revenue performance
In an increasingly competitive Life Sciences industry, many providers are concerned about a lack of in-house talent and expertise, as they recognise the need to better manage revenue performance.
End-to-end revenue lifecycle management has emerged as a key methodology which places price and profit maximisation firmly on the boardroom agenda. As a relatively new concept, it is perhaps no surprise that there are few specialists with the expertise to drive the necessary transformational change within most businesses.
There are two primary reasons why the ability to understand and control key aspects of pricing and margin performance is vitally important. First, without visibility of all elements of pricing – both in terms of cost of manufacture and net pricing – the organisation risks unwittingly damaging the bottom line, with a potentially devastating impact on the longer term viability of the business.
Equally importantly however, effective differentiation in ever-tougher markets now centres on the organisation’s ability to move beyond price and successfully identify and promote the distinctive value of their proposition. In both cases this will typically require a significant change of mindset within the business and the pace of change is likely to be driven by an inevitable caution.
Many Life Sciences companies have to look outside the industry for specialist development and implementation expertise. Yet with a clear vision and commitment at board level, supported by the right systems and processes, there is almost certainly a pool of talent within the existing business capable of embracing a more strategic approach to revenue management.
On the way
A snapshot of providers to today’s Life Sciences industry would show an increasing number of companies starting to undertake change initiatives in improving their approach to pricing. Yet too many are doing this in a fragmented way, with no vision of what the end-to-end process of price, profit and revenue lifecycle management should look like. They have yet to recognise the importance of developing skills and talent in-house if the business is to move from a narrow siloed approach to a broader, enterprise-wide commercial view.
There are three key elements in effectively addressing key skills issues around ownership, leadership, management and people development.
First, to make it happen, board-level project ownership is crucial. Second, in an essentially global pharmaceutical industry, it requires staff who can take a multi-national, multi-departmental view of managing the complete revenue lifecycle, at both a strategic and operational level.
Finally, much is changing in the sector in the area of pricing and margin control. Not only is revenue lifecycle management a relatively new concept, but aspects of the sales process itself such as tendering have also rapidly increased in importance. The result is that the new skills required to enable the enterprise to take full advantage of the opportunities they offer are in relatively short supply.
A bolder stance
In response, it is tempting to take a ‘sticking plaster’ approach to the problem as a first step, by deciding to take on one or two pricing managers and have them report into the commercial or finance team. Experience to-date shows that this will have limited success, for a number of reasons.
Without ownership at a senior level and a mandate to drive cross-functional change, the pricing organisation will not have the authority to create and implement sustainable operational enhancement throughout a business which remains essentially siloed in its approach to pricing and profit optimisation.
Organisations that have successfully put in place revenue lifecycle management initiatives delivering sustainable revenue and profit performance improvements have recognised the highly transformational nature of breaking down functional and other organisational silos. As a result, they have made the CFO and CEO directly responsible for sponsoring the required steps, so very visibly prioritising pricing within the business as a strategic, cross-functional and urgent initiative.
The role of training
In a fast-evolving revenue lifecycle management environment, training has a key role to play in developing the skills required, at several levels.
At the point at which the seller meets the buyer, the emergence of tender management, for example, has resulted in major industry-wide change. The days when the representative of a pharmaceutical company would act primarily in an advisory capacity with physicians, supported by a distributor network handling order placement are disappearing fast. These have been replaced by a much more structured and remote tendering process in which the power seems to sit firmly in the hands of the procuring organisation.
Providers have quickly recognised the major long-term impact that losing tenders can have on regional market share. Some have responded to this by outsourcing their tendering process, but the majority are looking to sales training organisations to help them develop the selling/negotiation skills and support processes to maximise their chances of success at each point of the multi-stage process.
Once again however, issues around maximising price and profit performance sit within a much broader context of taking full corporate control of revenue management. As a result, many companies are working with specialist consultancies to develop appropriate revenue strategies which look to define the most effective balance between centralised and local control of the sales process.
Here, improvement is best achieved when viewed as a seamless end-to-end process rather than a series of individual elements of a pricing and sales strategy. An initial diagnostic approach of existing price and profit performance will establish where the main problems and challenges lie.
This provides the essential visibility and clarity to create a recommended framework for improvement, involving skills, processes and technologies. Critically, it forms the basis of a pragmatic step-by-step roadmap towards building sustainable competitive advantage based effective price and profit management. Such analysis also helps identify - and deliver - what constitutes meaningful value in the eyes of the customer.
Everyone throughout the business is responsible for optimising revenues. As the best- performing companies have shown, by adopting this shared vision and with the right training, an appropriately-skilled pricing team can be transformed from a departmental admin function to one which provides strategic commercial support at the heart of the business.