Distributor Markets? Half-Year Business Review Coming Up?

This half-year stage is an important milestone for many pharmaceutical and life science companies, which run a calendar year from January through December. This is especially true if the business model uses distributors in the Go-to-Market strategy.

Seniors will be busy gathering the numbers for performance versus targets (budgets). Team members will put together various chapters in a slide deck for the senior accountable person to present to the Executive Board of top-level seniors at the Regional or corporate level.

The slide deck chapters take a (same-old) format I have seen so often:

• Environment Analysis (SWOT) - standard PESTLE analysis (Political, Economic, Social, Technological and Legal factors in the environment that may impact the business)
• Distillation of the 5 or 6 Key Issues facing the business if it is to succeed. Put another way, the key actions that must be taken to mitigate or navigate these critical issues.
• Current Year half-year actual and projected year-end turnout for 2024 is termed Latest View 2024 (LV2024) or Whole Year Estimate 2024 (WYE2024) with P&L year-to-date and LV2024. This may be "On Budget", "Below Budget", or (rarely) "Above Budget". Many will turn in an "under budget" performance for this year in 2024.
• This will then be followed by five-year forecasts for sales, costs, margin, and gross profit from 2025 through 2029 as a first draft submission. These will likely be adjusted upwards for sales and downwards for costs to increase gross profit over successive years between September and December to set the 2025 targets.

This is all well and good in developed markets. But there is always one glaring omission I see in distributor market reviews. What is that omission?

A section on distributor partners.

Why is this omission of significance?

Businesses change. Their portfolios can change over a forecasting horizon. They may be presenting an underperformance versus their budget this year, as they did the year or more before. They try to put forward plausible explanations as to why they will not deliver their numbers. But if they have me to present to. I won't believe anything they say. I've heard it all before. You know:

• "We had stock shortages."
• "Vacancies meant we were down on share of voice (SoV) versus the competition."
• "The market was flooded with cheap generics from India."
• "Our export orders were blocked due to late payment of invoices by distributors."
• "It was half a year by the time I got my cluster head on board."

And so on. You get the drift.

All this is "old mindset/old results/old excuses."

The glaring omission is that they have not reviewed their relationship and choice of distributor partner. This requires a "new mindset" that can lead to "new results."

In my new book, released last month, I describe why so many seniors fail to deliver the results and their numbers. I have dedicated a whole section to factors that should trigger an immediate review of your relationship with your distributor(s). There is a need for a continuous review of your business and go-to-market model.

Why is a continuous review needed?

Because what was once the best choice and the best partner may no longer be the best fit. Or, as actor Michael Caine might say in his cockney accent:

"norra lo' o'people know that"

But such a review is remarkably uncommon among seniors.

Things change in your relationship with your distributor partner.

The marriage becomes tired. There is a loss of libido, leading to business and commercial menopause.

Your portfolio may shift.

A good example is a move away from primary care, which I describe as high volume/low margin and extremely competitive, with much generic competition fiercely undercutting you on price, to a specialist portfolio of high-price/high margin/low-volume oncology and immunology-based treatments with fewer competitors but has a different 'sales cycle' and distributor model requirements.

A shift in a business's portfolio and change of segments requires a new mindset to create new results if you are not to disappoint your Senior Executive Team.

The reverse also applies. I want to illustrate this with a good example from my over twenty years of experience in Sub-Saharan Africa (SSA).

Some large global R&D pharma companies focused on innovation set up teams across SSA to launch these new products. But they were disasters! They know who they are. They failed to deliver the numbers and investment cases for their portfolios. They threw away money into market preparation with a launch that was like trying to light a wet cigarette. Ultimately, they got rid of these incompetent crews (they are incompetent if they cannot deliver the numbers they promised to their Boards).

Seniors now had egg on their faces. What to do? After some deliberations, they decided that they would sell products at not-for-profit prices, declaring that they were in Africa only for an "Access Model" to provide the poorer populace with their drugs. So access became their thing. But such a shift changes the channel.

Often, their partner is no longer the best fit and is not strong in the new channels. They need to change distributor partners. How many did?

I'll leave you to guess.

So, a new mindset is required if you want to create a different set of results.

If I were a Senior Executive Team member, I would demand a whole new section in the slide deck. That new section?

"Distributor Review" by country by partner.

The senior manager responsible for the market needs to formally review this every two years against an objective Ideal Partner Criteria list and score against each factor.

NOTE: For Senior Executive Boards - does this happen in your company? If not, why not? When was a review of all the distributors last carried out?

In my book, I explore distributor selection criteria and provide some examples of Ideal Partner Criteria. The review should have been discussed with the partner distributor in person, with improvement areas identified in writing and sent by courier post to the distributor's CEO.

I hope that you choose partners based on an objective-scored assessment and your Ideal Partner Profile. You must then compare them to see if they are the best fit now versus any change in portfolio, channels, or segments for promotion.

If I sit in on the Review Committee hearing the half-year reviews, I want to see more actions to correct underperformance based on a new mindset. We may need to change partners and models, and we must be cognizant of changes in our thinking about the portfolio and future direction of the business.

In my book, I list ten situations that warrant an immediate trigger of your relationship with your partner. How many readers reviewed it based on these triggers?

If you change from rallying cars to Formula One or vice versa, the rally car is not the vehicle that will succeed in Formula One or vice versa. Yet this is precisely what some pharma companies do when faced with their business's underperformance — they carry on 'business as usual' with the current partner instead of choosing to terminate and select a better-fit partner cognizant of new mindsets in the business.

Changing distributors is tough and sometimes gruelling. There is blood on the carpet for both of you. But it is better to split from a partner that was a good choice ONCE but is no longer a good choice NOW if you want to drive the new results your seniors demand. There is a way to do it to minimise pain. I can show you how. I have much experience in this and can guide you on how to go about it.

Never be afraid out of fear and costs to take the path of such resistance. It is always better to take a one-off severance cost for a better future and better results than to put up with an unhappy marriage with your distributor.

How you do it before the opening dialogue, during, and after the termination are key. Never give a termination or dismissal to a legal guy in your business. This is absolutely the worst thing that you can do. Before you know it, it will be risk-averse lawyers versus other risk-averse lawyers, akin to trying to herd cats. You must negotiate the termination personally. The legal guy captures the agreement in legalese speak for you.

If you have not already bought my book, I ask that you please consider doing so. The Amazon listing allows you to "Look Inside" the book, viewing sample pages and the contents sections to help you decide before purchasing.

The link to sample pages and the Contents section of the book.

https://www.google.co.uk/books/edition/The_Right_Way/-94GEQAAQBAJ?hl=en&gbpv=1&printsec=frontcover

And the link to Amazon bookseller:

https://www.amazon.co.uk/Right-Way-practical-distributor-models/dp/1803817828/

If you would like to explore how I might be able to help you create and set a new mindset with your distributor business, you can book a free exploratory discussion directly into my diary with the link below:

Https://www.calendly.com/amitvaidya2021/