Market issues
Identifies key issues driving and transforming your market from Customer and Offer perspectives
Main Qs
What are the crucial issues affecting the customer landscape? Which shifts are underway? Where is the market heading?
Pharmaceutical Industry Landscape
• Skyrocketing healthcare costs
• Emphasis shifting from treatment to prevention
• Treatments, diagnostics, devices, and support services are converging
• Emerging markets becoming more important
Market segments
Identifies the major market segments, describes their attractiveness, and seeks to spot new segments
Main Qs
What are the most important Customer Segments? Where is the biggest growth potential? Which segments are declining? Which peripheral segments deserve attention?
Pharmaceutical Industry Landscape
• Doctors and healthcare providers
• Governments/regulators
• Distributors
• Patients
• Strong potential in emerging markets
• U.S. remains the predominant global market
KA What new key resources do we need to develop or acquire in light of the ongoing shift from treatment to prevention?
KR What does the convergence of treatment, diagnostics, devices, and support services mean for our key resources and activities?
VP How can our value proposition address the issue of exploding health costs?
CS What would a greater focus on emerging markets mean for the other building blocks in our model?
R$ How can we maintain earnings while addressing the public struggle to cope with skyrocketing healthcare costs?
What kind of new revenue opportunities might be created by the shift in emphasis from treatment to prevention?
Needs and demands
Outlines market needs and analyzes how well they are served
Main Qs
What do customers need? Where are the biggest unsatisfied customer needs? What do customers really want to get done? Where is demand increasing? Declining?
Pharmaceutical Industry Landscape
• Strong, with dispersed need for niche treatments
• Need to manage exploding cost of health care
• Large, unsatisfied health care needs in emerging markets and developing countries
• Consumers are better informed
Switching costs
Describes elements related to customers switching business to competitors
Main Qs
What binds customers to a company and its offer? What switching costs prevent customers from defecting to competitors? Is it easy for customers to find and purchase similar offers? How important is brand?
Pharmaceutical Industry Landscape
• Monopoly on patent-protected drugs
• Low switching costs for patent-expired drugs replaceable by generic versions
• Growing amount of quality information available online
• Deals with governments, large-scale healthcare providers increase switching costs
Revenue attractiveness
Identifies elements related to revenue attractiveness and pricing power
Main Qs
What are customers really willing to pay for? Where can the largest margins be achieved? Can customers easily find and purchase cheaper products and services?
Pharmaceutical Industry Landscape
• High margins on patent-protected drugs
• Low margins on generic drugs
• Healthcare providers, governments enjoy growing influence over prices
• Patients continue to have little influence over prices
Competitors (incumbents)
Identifies incumbent competitors and their relative strengths
Main Qs
Who are our competitors? Who are the dominant players in our particular sector? What are their competitive advantages or disadvantages? Describe their main offers. Which Customer Segments are they focusing on? What is their Cost Structure? How much influence do they exert on our Customer Segments, Revenue Streams, and margins?
Pharmaceutical Industry Landscape
• Several large and medium size players compete in pharma
• Most players are struggling with empty product pipelines and low R&D productivity
• Growing trend toward consolidation through mergers and acquisitions
• Major players acquire biotech, specialty drug developers to fill product pipeline
• Several players starting to build on open innovation processes
KP for which parts of the industry value chain should key partnerships be built as opposed to developing key resources and activities in-house?
could suppliers such as research contractors turn into competitors?
VP must the value proposition change to accommodate shifts in the industry (e.g. the growing importance of biotech firms)?
R$ Which part of the pharma industry offers the greatest earnings potential?
KR is it necessary to acquire smaller firms to fill product pipelines?
which of the key resources emerging among new actors in the value chain need to be developed in-house (e.g. bioinformatics)?
New entrants (insurgents)
Identifies new, insurgent players and determines whether they compete with a business model different from yours
Main Qs
Who are the new entrants in your market? How are they different? What competitive advantages or disadvantages do they have? Which barriers must they overcome? What are their Value Propositions? Which Customer Segments are they focused on? What is their Cost Structure? To what extent do they influence your Customer Segments, Revenue Streams, and margins?
Pharmaceutical Industry Landscape
• Little disruption of the pharmaceutical industry over the last decade
• Main new entrants are generic drug companies, particularly from India
Substitute products and services
Describes potential substitutes for your offers—including those from other markets and industries
Main Qs
Which products or services could replace ours? How much do they cost compared to ours? How easy it is for customers to switch to these substitutes? What business model traditions do these substitute products stem from (e.g. high-speed trains versus airplanes, mobile phones versus cameras, Skype versus long-distance telephone companies)?
Pharmaceutical Industry Landscape
• To a certain extent, prevention represents a substitution for treatment
• Patent-expired drugs replaced by low-cost generics
Suppliers and other value chain actors
Describes the key value chain incumbents in your market and spots new, emerging players
Main Qs
Who are the key players in your industry value chain? To what extent does your business model depend on other players? Are peripheral players emerging? Which are most profitable?
Pharmaceutical Industry Landscape
• Increasing use of research contractors
• Biotech firms and specialty drug developers as important new product generators
• Doctors and healthcare providers
• Insurance companies
• Bioinformatics providers growing in importance
• Laboratories
Stakeholders
Specifies which actors may influence your organization and business model
Main Qs
Which stakeholders might influence your business model? How influential are shareholders? Workers? The government? Lobbyists?
Pharmaceutical Industry Landscape
• Shareholder pressure forces drug companies to focus on short term (quarterly) financial results
• Governments/regulators have a strong stake in the actions of pharmaceutical companies because of their pivotal role in healthcare services
• Lobbyists, social enterprise groups and/or foundations, particularly those pursuing agendas such as low-cost treatments for developing countries
• Scientists, who represent the core talent of the drug manufacturing industry
Technology trends
Identifies technology trends that could threaten your business model—or enable it to evolve or improve
Main Qs
What are the major technology trends both inside and outside your market? Which technologies represent important opportunities or disruptive threats? Which emerging technologies are peripheral customers adopting?
Pharmaceutical Industry Landscape
• Emergence of pharmacogenomics, declining cost of gene sequencing, and the immenent rise of personalized medicine
• Major advances in diagnostics
• Use of pervasive computing and nanotechnology for the injection/delivery of drugs
KP Which partnerships will become essential when pharmacogenomics is an integral part of the industry landscape?
KA Which new key resources and activities will prove advantageous when personalized drugs and diagnostics area widely used?
VP Which technologies are likely to improve value proposition competitiveness in the evolving pharma landscape?
CS How are customers reacting to new technological developments in the pharmaceutical industry?
C$ How will technology such as pharmacogenomics, pervasive computing, and nanotechnology affect the cost structure of a drug maker’s business model?
R$ Do advances in pharmacogenomics, diagnostics, pervasive computing, or nanotechnology offer new revenue opportunities?
Regulatory trends
Describes regulations and regulatory trends that influence your business model
Main Qs
Which regulatory trends influence your market? What rules may affect your business model? Which regulations and taxes affect customer demand?
Pharmaceutical Industry Landscape
• Heterogeneous global regulatory landscape in the pharmaceutical industry
• Many countries prohibit drug companies from marketing directly to consumers
• Regulatory agency pressure to publish data on unsuccessful clinical trials
Societal and cultural trends
Identifies major societal trends that may influence your business model
Main Qs
Describe key societal trends. Which shifts in cultural or societal values affect your business model? Which trends might influence buyer behavior?
Pharmaceutical Industry Landscape
• Generally unfavorable image of big drug makers
• Growing social consciousness among consumers
• Customers increasingly conscious of global warming, sustainability issues, prefer “green” purchases
• Customers are better informed about drug maker activity in developing countries (e.g. HIV/AIDS drugs)
Socioeconomic trends
Outlines major socioeconomic trends relevant to your business model
Main Qs
What are the key demographic trends? How would you characterize income and wealth distribution in your market? How high are disposable incomes? Describe spending patterns in your market (e.g. housing, healthcare, entertainment, etc.). What portion of the population lives in urban areas as opposed to rural settings?
Pharmaceutical Industry Landscape
• Aging society in many mature markets
• Good but costly healthcare infrastructure in mature markets
• Growing middle class in emerging markets
• Large, unsatisfied healthcare needs in developing countries
Global market conditions
Outlines current overall conditions from a macroeconomic perspective
Main Qs
Is the economy in a boom or bust phase? Describe general market sentiment. What is the GDP growth rate? How high is the unemployment rate?
Pharmaceutical Industry Landscape
• Global recession
• Negative GDP growth in Europe, Japan, and the United States
• Slower growth rates in China and India
• Uncertainty as to when recovery will occur
KA Does the economic infrastructure adequately support key activities?
KR Do universities and other educational institutions furnish a sufficient amount of qualified talent?
CH Does the infrastructure and trade environment adequately support channels?
C$ How will local and national taxes affect the business model?
Capital markets
Describes current capital market conditions as they relate to your capital needs
Main Qs
What is the state of the capital markets? How easy is it to obtain funding in your particular market? Is seed capital, venture capital, public funding, market capital, or credit readily available? How costly is it to procure funds?
Pharmaceutical Industry Landscape
• Tight capital markets
• Credit availability restricted due to banking crisis
• Little venture capital available
• Risk capital availability extremely limited
Commodities and other resources
Highlights current prices and price trends for resources required for your business model
Main Qs
Describe the current status of markets for commodi- ties and other resources essential to your business (e.g. oil prices and labor costs). How easy is it to obtain the resources needed to execute your business model (e.g. attract prime talent)? How costly are they? Where are prices headed?
Pharmaceutical Industry Landscape
• Fierce “battles” for prime talent
• Employees seek to join pharmaceutical companies with positive public image
• Commodity prices rising from recent lows
• Demand for natural resources likely to pick up with economic recovery
• Oil prices continue to fluctuate
Economic infrastructure
Describes the economic infrastructure of the market in which your business operates
Main Qs
How good is the (public) infrastructure in your market? How would you characterize transportation, trade, school quality, and access to suppliers and customers? How high are individual and corporate taxes? How good are public services for organizations? How would you rate the quality of life?
Pharmaceutical Industry Landscape
• Specific to the region in which a company operates
HOW SHOULD YOUR BUSINESS MODEL EVOLVE IN LIGHT OF A CHANGING ENVIRONMENT?
A competitive business model that makes sense in today’s environment might be outdated or even obsolete tomorrow. We all have to improve our understanding of a model’s environment and how it might evolve. Of course we can’t be certain about the future, because of the complexities, uncertainties, and potential disruptions inherent in the evolving business environment. We can, however, develop a number of hypotheses about the future to serve as guidelines for designing tomorrow’s business models. Assumptions about how market forces, industry forces, key trends, and macroeconomic forces unfold give us the “design space” to develop potential business model options or prototypes (see Prototyping) for the future. The role of business model scenarios (see Future Scenarios) in forecasting should also be evident by now. Painting pictures of the future makes it much easier to generate potential business models. Depending on your own criteria (e.g. acceptable level of risk, growth potential sought, etc.) you may then select one option over another.
