What Pharmaceutical and Biotech Industries Can Learn from Retail?

Having worked in leading multinational consumer goods companies such as Natura&Co, Nestlé, and Boticário and partnered with tech companies across the globe, I have witnessed firsthand the agility and success with which these organizations navigate business model transformations in highly competitive environments.

Reflecting on these experiences, it is possible to see in the daily routine a significant opportunity for the pharmaceutical and biotech sectors to draw on the capabilities developed by these industries, transforming emerging concepts into clear and fast actions to evolve their current business model.

The urge for transformation: what does it mean to pharmaceutical and biotech companies?

The pharmaceutical and biotech industries are at a pivotal moment. Despite their critical role in global health, the sector often lags behind in areas where retail and consumer goods companies excel, particularly the integration of customer-driven data to channels, marketing and operations strategies.

There is substantial evidence showing the competitive advantage of companies that embrace this transformation, as exemplified by the following cases:

1. Increased Revenue: According to a study by McKinsey, companies that leverage customer analytics extensively are more likely to outperform their competitors in terms of profit. They are 23 times more likely to acquire customers, 6 times more likely to retain customers, and 19 times more likely to be profitable.
2. Improved Customer Experience: A report by Salesforce indicates that 84% of customers say the experience a company provides is as important as its products and services. Companies that use customer data to personalize interactions see a significant increase in customer satisfaction and loyalty.
3. Operational Efficiency: The Boston Consulting Group (BCG) found that companies using data-driven marketing strategies can reduce costs by up to 20% and increase revenue by up to 10%. This is achieved through better targeting, more efficient use of marketing budgets, and improved customer engagement.
4. Market Leadership: A report by Forrester Research highlights that data-driven organizations are 58% more likely to beat their revenue goals than non-data-driven companies. They are also 162% more likely to significantly outperform their peers in terms of profitability and productivity.

Key Lessons from Retail: how traditional players are reinventing their businesses?

1. Bridging the Skills Gap

One of the most significant challenges for pharmaceutical and biotech industries is the skills gap. According to Bain&Co, 60% of pharma executives believe their companies lack the necessary digital and analytical skills to compete effectively.

In contrast, consumer goods companies have invested heavily in these areas, resulting in substantial growth and efficiency gains, as well as high index of customer satisfaction and engagement. By hiring professionals with track record in these disciplines, pharma companies can gain fresh perspectives and expertise, driving innovation and improving patient outcomes.

A good example comes from Unilever's, which by focusing on digital transformation and data analytics has led to a 15% increase in operational efficiency and a 10% reduction in costs (source: Unilever Annual Report).

2. Customer-Centricity

Pharma companies still relies (mainly) in traditional models to manage their relationship with physicians and other stakeholders. The urge for personalization and also the pressure for higher P&L efficiency will demand significant changes in the way these companies interact with their main clients.

Retailers like Amazon and Walmart have mastered the art of understanding and anticipating customer needs. Amazon's recommendation engine, powered by data analytics, has significantly boosted sales and customer satisfaction.

Nespresso also exemplifies customer centricity through its Nespresso Club, a loyalty program offering exclusive and personalized benefits. In the last years, Nespresso managed to retake YoY organic growth, even with the increasing competition, driven by the engagement of club members (source: Nestlé Annual Report). Internal surveys show that club members have significantly higher repurchase rates and levels of satisfaction and loyalty compared to non-members.

3. Omnichannel Strategies

To implement an effective omnichannel strategy, connecting different components of the value chain, is an ongoing challenge for many pharmaceutical industries.

Retailers provide some interesting cases about this subject by having integrated multiple channels to provide seamless experiences. Nike, for example, has successfully combined its marketing and sales strategies into online and offline channels, resulting in a 30% increase in digital sales in 2022 (source: Nike Annual Report).

Natura&Co also exemplifies an effective omnichannel strategy by integrating its online and offline channels to enhance customer experience. Natura reported a 50% increase in e-commerce sales, driven by initiatives such as their "Click & Collect" service and digitalization of sales representatives. Additionally, their mobile app, which offers personalized beauty consultations and exclusive promotions, contributed to a 30% increase in app usage and a 20% rise in customer retention rates (source: Natura Annual Report). This strategy has not only boosted sales but also improved customer satisfaction and loyalty.

4. Agile Supply Chains

Multinational pharmaceutical and biotech companies are finding their way to achieve optimal operational efficiency, evolving their capacity to serve multiple markets and to establish real-time reaction to markets demand. However, a proper connection between demand-generating activities and S&OP strategies is still a challenge.

Retailers have optimized their supply chains for maximum efficiency and resilience. A solid example comes from the Boticário Group and their capacity to implement an agile supply chain through its rapid response to market demands and efficient inventory management. In 2021, the company implemented a strategy that reduced lead times by 30% and decreased inventory costs by 20% (source: Boticário Annual Report). This was achieved by adopting advanced analytics and real-time data monitoring, allowing the company to quickly adjust production and distribution based on consumer demand. Additionally, their flexible logistics network enabled faster delivery times, enhancing customer satisfaction and loyalty. These results are particularly interesting, considering that Boticario operates multiple brands and business models across the globe.

5. Data-Driven Decision Making

Maybe the most popular jargon, data-driven became an obsession in pharmaceutical industry. However, while many companies are still discussing concepts or implementation of the traditional data-lakes, the most innovative players starts increase their competitive capacity testing emerging concepts like data-mesh, a decentralized approach to managing and accessing data, designed to address the limitations of traditional centralized data architectures and promoting higher scalability, flexibility, and faster data delivery and insights (source: Data Mesh: A Solu??o para o Caos dos Dados em Grandes Corpora??es? - Diego Albino and Edurardo R. Francisco).

It is well recognised that retailers leverage data analytics to drive decisions for many years. Target's use of predictive analytics for inventory management led to a 15% reduction in stockouts and a 10% increase in sales (source: McKinsey & Company).

"Nestlé Wellness Ambassador" is also an interesting example from Japan, which uses AI and data analytics to provide personalized dietary recommendations. By analyzing data from user inputs, such as dietary habits and health goals, the platform offers tailored nutrition advice and product suggestions. This initiative led to a 15% increase in customer engagement and a 10% rise in sales of personalized nutrition products in 2021 (source: Nestlé Annual Report).

So, where to start? Actionable Strategies for Pharma and Biotech companies

To implement these lessons is not easy. Is important to have in mind that pharma and biotech segments are heavily regulated and submitted to complex and needed compliance rules that , many times, are not observed in general retailing sector. However, there is still many compliant and ethical ways of exploring new and emerging technologies that will allow pharma and biotech companies to excel in their transformation journey. To start, some practical actions are proposed below (note: the following actions are categorized by impact, complexity, and time required):

High Impact, High Complexity, Long-Term

• Develop Comprehensive Digital Health Platforms: Invest in integrated digital health solutions offering telemedicine, remote monitoring, and personalized treatment plans.
• Build Collaborative Ecosystems: Establish partnerships with tech companies, research institutions, and other stakeholders to drive innovation and share resources.

Medium Impact, Medium Complexity, Mid-Term

• Enhance Data Analytics Capabilities: Invest in advanced data analytics tools to improve decision-making across R&D, supply chain, and patient engagement. Concepts like date-lake and data-mesh can be leveraged with the support of specialised teams.
• Implement Agile Supply Chain Practices: Adopt agile methodologies to enhance supply chain resilience and efficiency. Benchmark with companies that exceed in this field is a must.

Low Impact, Low Complexity, Short-Term

• Improve Communication Channels: Develop user-friendly digital platforms for patient and health-care professionals communication and support.
• Adopt Sustainable Practices: Implement eco-friendly practices in manufacturing and distribution to reduce environmental impact.

Conclusion:

By learning from the retail sector, pharmaceutical and biotech companies can navigate their challenges more effectively and seize new opportunities. Embracing customer-centricity, digital transformation, agile supply chains, and data-driven decision-making will be crucial for their success in the coming years. This journey is not easy and most likely will not be possible using current resources and capabilities, demanding focused investments and smart choices in hiring professionals with track records from other segments and ensuring a cultural environment that fosters diversity, risk tolerance, and a good dose of openness and boldness to drive change.