Simon-Kucher Study: Healthcare Industry Lost in the Digitalization Jungle
Companies in the healthcare sector have big ambitions when it comes to digitalization, but they often fail with implementation. This was one of the findings of the Digital Health Trend Study 2019* conducted by Simon-Kucher & Partners.
November 20, 2019 – Digitalization is spreading to more and more areas of the healthcare industry, and revenue expectations are high. However, the latest Digital Health Trend Study published by the global strategy and marketing consultancy Simon-Kucher & Partners shows that digital transformation is progressing slowly, and firms are often unsure which direction to move in. Fifty-nine percent of pharma, medtech, and consumer healthcare companies still lack a fully defined digital strategy. It is also remarkable that such a high number of approaches exist for implementing company-wide digital strategies. Chosen investment areas and methods to define strategies are the aspects that vary most.
Healthcare companies define their strategies using different models. In 56 percent of cases, a dedicated digital team defines the strategy, while in another 42 percent, a new or existing commercial team takes on this role.
Typically, digital health strategies are initiated by companies’ headquarters; only in rare cases do individual countries or business units act independently. Almost 90 percent of those surveyed say their company’s headquarters defines the strategy for all business units, and 66 percent report that the headquarters takes over planning for all geographic levels. However, the case that a strategy is applied at both geographical and organizational levels, only occurs to 14 percent of respondents who already have a defined strategy. Over half of the companies in this category see themselves as digital front runners in the industry.
Most healthcare companies with dedicated digital teams are satisfied with their defined strategies. However, they often fail to implement and apply them effectively due to a lack of resources and insufficient staffing capacity. In contrast, when integrated commercial teams take care of the issue, only five percent of the companies surveyed said they were dissatisfied.
Jan Bordon, Senior Director and digital health expert at Simon-Kucher & Partners, explains, “There is no one-size-fits-all solution for implementing digital strategies. It doesn’t matter whether a digital or a commercial team is responsible. In the end, the parties involved must be clear about the commercial options that new digital solutions provide. The company must ensure it has expertise on commercial market access in the digital context and make the necessary resources available with support from every department.”
No consistent investment focus
Companies in the healthcare industry have clear ambitions, with 70 percent wanting to improve their portfolios by introducing digital add-on services, and 38 percent with standalone digital offers. A further goal for half of those surveyed is the collection of customer data to expand their portfolios. A third of the survey participants don’t concentrate on a single topic; they allocate investments evenly between different departments, such as digital marketing, products and services, and sales.
Digital products and services were cited as the main focus of investment by all participants. The reason for this is clear: Companies in the life sciences industry expect profitable outcomes from their direct and indirect products, services and solutions. Survey participants predict that 32 percent of their revenues will be generated through digital solutions by 2030. In the short time, this figure is expected to be 13 percent.
The study also shows that companies in the industry have a range of different focus points. Pharma and biotech companies make almost 14 percent of their investments in digital research opportunities and studies; the consumer healthcare industry allocates about one fifth of its investment budget in digital marketing; and the medtech sector’s highest priority is digital products, investing 20 percent in this area.
Lack of monetization approaches
In their efforts to implement digital strategies, most companies fail to successfully monetize their solutions. 76 percent have difficulties defining a suitable pricing and revenue model, while over 80 percent lack resources. To ensure successful market entry with digital solutions, monetization models need to be drawn up in advance; however, this isn’t being done. “By passing the so-called Digital Supply Act [Digitale-Versorgung-Gesetz - DVG], Germany has taken an important step and may take the global lead in 2020,” says Christian Schuler, Senior Partner at Simon-Kucher & Partners. “Digital strategies only work when their offer design is customer-focused and has a clearly defined service promise supported by clinical evidence. With a well-functioning internal setup and a digital strategy that is integrated into the company’s existing portfolio, the chances of a successful market entry with long-lasting impact are particularly high.”
*About the study: Within the “Digital Health Trend Study” by Simon-Kucher & Partners, more than 120 managers from the pharma and medtech industries were surveyed worldwide in August and September 2019. The study was conducted by Jan Bordon and Kay Schultze.
Simon-Kucher & Partners, Strategy & Marketing Consultants: Simon-Kucher & Partners is a global consulting firm with more than 1,400 professionals in 39 offices worldwide focusing on TopLine Power®. Founded in 1985, the company has more than 30 years of experience providing strategy and marketing consulting and is regarded as the world’s leading pricing advisor.