Transcript 

Sanjog Aul [00:00:23]:

Hello, and, welcome to CTN. To learn more about the show, please visit ciotalknetwork.com. Today’s topic is Road To Relevant, Profitable, And Future-ready Pharma  . So the topic that we have picked up today regarding the pharma companies, we know that they were already juggling multiple priorities. R&D, trying to establish a presence in global markets, investing in various digital transformation initiatives to move beyond the pill, find new revenue streams, and handle many changing expectations from the customers related to personalization. Some things changed because of the pandemic. It further complicated the issues with delayed product launches, reduced in-person sales visits, and supply chain disruptions also happened, and the delays that got created in the drug commercialization as well. So all of this happening, and if pharma was already working pre-COVID and the COVID-related disruptions that happen, what are the pharma industry players doing now to deal with this so called perfect storm? And then, if the agenda was to become relevant and profitable and future ready, what are the leaders doing now in these respective pharma organizations? So to discuss this, I have Minori Hara, who is the Chief Information Officer and Head Of Digital and IT Division at Santen Pharmaceutical. Hey, Minori. How are you?

Minori Hara [00:02:05]:

Hi. Sanjog Aul, this is Minori Hara. It’s nice to talk to you today.

Sanjog Aul [00:02:10]:

Thank you so much for joining us. So Minori, let’s dig in directly because I did set up the stage about what the pharmaceutical companies are trying to get to. So anytime any organization tries to get to a certain, in at a certain level in a given area, they have defined what that benchmark looks like. So let’s start with you sharing in your view, what is relevant and future-fit pharma company to you?

Minori Hara [00:02:44]:

Well, I think we should look at the environment surrounding the ecosystem of healthcare today to answer that question. Pharma companies and their surrounding environment are experiencing very difficult challenges actually, and some changes include, for example, changing healthcare needs. Medical expenditure costs continue to grow, and so, there is a pressure to reduce the cost, and   also, tightening of regulation that I see, and   we also received some expectation from the people that we should accelerate the care delivery in healthcare, and   to do that, there are a number of changes in our ecosystem, advancement in digitalization. Not only further efficiencies that we need to achieve, but also healthcare and pharmaceuticals try to go beyond the pill, beyond the traditional pharma, and then, in this ecosystem, I see there are a number of new players from different industries. So to be a relevant and future-fit pharma company, we have to define our company mid to long term strategy that, while capturing those environment changes that I just mentioned and having business models that not only respond to those changes, but also take advantage of them. So in my company, for example, in Santen, we recently announced a long term vision called Santen 2030 aiming at changing the company’s focus more people centric and looking at more relevance to those changes. That’s how I see how the pharma should be defining if they are fit for the future.

Sanjog Aul [00:05:05]:

So one question I have based on the response you gave is to start thinking mid to long term. That idea about thinking mid to long term did resonate if I were to look at 5 to 10 years ago, but the way people are thinking about business, the way things change, the marketplace changes. It’s changing way too fast for you to stay relevant if you were to just think mid to long term. So I’m in a way challenging what you just said, but what do you have to say to that? If you’re going to think mid to long term, not saying don’t do it, but would you not consider short term as well? Or at least put that as a priority because you do not know what’s going to happen next?

Minori Hara [00:05:47]:

The current activities or short-term activities definitely should be in line with the company’s new mid to long term strategy. So if what you are already delivering today is not in line with those long-term directions, then the company might be investing their efforts in something which will not be relevant to the future shape. So I would say that it’s very important that some of the short-term deliverables are sort of quick wins in line with the long-term directions and which should be relevant to the environmental changes that I just mentioned earlier.

Sanjog Aul [00:06:30]:

Now, what you mentioned is a benchmark. There is another thing called reality check. So if you were to become, say, an industry analyst watching this industry, and compared to where the world wants to go or all the people or all companies in the pharma industry want to go and where they truly are going, what is the current scenario? What’s the current state compared to the ideal state?

Minori Hara [00:06:59]:

Well, let’s see how far most of the pharma companies are from such an ideal state. Probably some of the newly established biotech companies, etcetera, are quite future fit in their narrow domain. However, we need to look at the large to mid-sized, full-fledged pharma companies. They are very different because they are at different stages. So some of them are just at an initiation stage, while the others are halfway through. They are all making an effort to renovate their business models, but actually, everybody’s looking at currently the changing environment and what are the gaps and what are the short-term and long-term actions to renovate their business models. So more or less, everybody’s doing that.

Sanjog Aul [00:08:00]:

Now with that said, when you are looking at the different ways a company like pharma can improve profitability, I’m not saying that your product is commoditized, but there is only so much you can get from innovation because your innovation is a long term investment. Right? A new drug identified etcetera. So if you were to strictly look at, profitability increase effort, what kind of a cost efficiency play or cost efficiency related tactics that you feel is most effective for pharma companies?

Minori Hara [00:08:43]:

By leveraging digital technologies, I believe a pharma company can improve profitability. There are many cost efficiency initiative domains that we can think of. For example, a commercial domain could be innovated by data-driven channel optimization. Healthcare professional and patient engagement could be enhanced through new digital services and advanced relationship management, and the other areas, the drug development process, should be improved through more tech-supported or even virtual clinical practices. Pharma companies are essentially manufacturing companies in their business model, and manufacturing and supply chain should not only be digitally optimized, but also become resilient to environment changes in the future. Like I just mentioned before, and we often refer to smart factory or supply chain transformation in this domain. And, of course, pharma companies’ internal processes and their supporting IT systems should be transformed, leveraging the power of cloud technologies and digital. So changes are, many initiatives require initial investments and the efficiency gain might come at a different speed. In order to achieve significant contribution to company profit, we require a well-defined digital transformation strategy.

Sanjog Aul [00:10:30]:

Let’s take a quick break. Listeners will be right back. And, Minori, what you’ve shared right now regarding the cost efficiency initiative, that’s quite a good list that someone can follow, but      then, when we come back, let’s talk about when these initiatives were kicked off or you went a little farther ahead working on these initiatives. What was the outcome? Did they actually help you cut costs the way you expected? Did these initiatives deliver as you thought they will? Please stay tuned, listeners. We’ll be right back.

Sanjog Aul [00:12:00]:

Welcome back. So, Minori, you spoke about cost efficiency initiatives, a big and impressive list that people can use, but      then when you started working on them, how were they working out for you? Were they delivering results? Were there challenges? What is the learning along the way?

Minori Hara [00:12:21]:

So, as I told you, all these initiatives have a different speed in terms of reaching the results and contribution to the profits, but some of the initiatives like internal business renovations and process efficiency gains could happen in the short term, and   then in my company, for example, some of the business systems have been renovated to modern technology and processes, and I can see some results, the efficiency gain. However, some of the long-term initiatives, for example, manufacturing renovation using a smart factory concept or new digital business offering models for our external customers, that takes some time, but for us to be able to invest in those mid to long term innovations, we definitely need to have some short-term quick results. So we often define quick wins in both externally offering our services, but also our internal process innovation. So some of the good example is that ERP project, for example. ERP systems are very core for many mid- to large-size companies, but we can actually define very clearly what the gain and return on investment would be in a relatively short time frame, several years from now.

Sanjog Aul [00:14:06]:

Okay. So when you’re talking about companies investing in the pharma industry, the ones which exist in the pharma industry, they’re investing in the various areas. You talk about process improvements, you talk about digital initiatives, supply chain, people, partnerships, you name it. Right? There are quite a few areas. What was the true impact? Yes. There must be some impact because of the pandemic. The whole world was shaken. Tell us what exactly, in detail, as much as possible, maybe with examples on where all the disruptions happened and what were their direct and indirect impacts?

Minori Hara [00:14:49]:

Yes. Impact of the pandemic was huge. Of course, compared to some companies in different industries who experienced a devastating impact that threatened even their existence, compared to that the pharma market demand remained high. However, the impact was, we consider, still disruptive. For example, patient engagement changed. The pandemic has disrupted many non-COVID-related clinical trials, making it difficult for many patients to access care, and   engagement with healthcare professionals has also been disrupted as the sales force cannot visit providers and must find new ways to build and maintain engagement. Supply chain was also disrupted, and as you know, the pandemic has fundamentally changed the way of working as well, not only for office workers but also sales force in the field, factory workers and laboratory workers. So this situation has driven us toward new and innovative models of collaboration and requiring flexibility and adaptability to ever-changing circumstances. So the current pandemic actually created an opportunity and even imperative to adapt to the new pharma operating models.

Sanjog Aul [00:16:34]:

So when you had that impact, what do you think the rest of the you are in technology, but then you had your business people. The business has to go on. What was your first reaction to it? That we have to fight against it, or you came up with some creative ways to keep the business going and minimize the impact? What did you do?

Minori Hara [00:17:01]:

So when the pandemic started, I’m also a part of the senior management of the company, and then our focus was to initially maintain the business continuity, and also, we treated it as the company’s emergency response. So instead of going into individual functions to see what the action items were, this had to be treated as a company-level event, and for the business continuity, we reacted relatively quickly to introduce a company-wide digital workplace concept to respond to the pandemic by accelerating infrastructure upgrades and digital tool deployments. So more digitally supported healthcare professional engagements were also necessary, and they were implemented, and we actually do not consider it as a temporary remote work arrangement. We intend to broaden the digital workplace model as a way to improve employee engagement, a new way of working, and more digitally fit business processes, which we probably could not do so much prior to the pandemic.

Sanjog Aul [00:18:37]:

So in a way, are you saying pandemic turned out to be a boon in disguise?

Minori Hara [00:18:42]:

Yes. We took advantage of it, and then we moved ahead quickly.

Sanjog Aul [00:18:48]:

So let’s talk about the type of profitability, and of course you don’t need to go into the numbers, but if you were to think about profitability of a pharma company and whether pre-COVID, during COVID, or now as you’re trying to come back, what are the factors that could erode profits for a company like yours?

Minori Hara [00:19:13]:

So, first of all, of course, the pandemic situation is just one element that we had to consider. It was obviously the top priority for last year and this year, but, like I mentioned at the beginning of our conversation, environment change surrounding healthcare and pharma are enormous. We need to consider different spectrums of the environment changes. So, if we keep defining ourselves as pharma product manufacturers and stick to the traditional model, we might become less and less relevant.

Minori Hara [00:20:03]:

Which could gradually erode profits. So I’m saying this because people’s expectations in healthcare are dramatically changing, which is greatly influenced by people’s behaviors. You can observe this in other consumer goods or service industries. So people expect to have a greater level of personalization, and the healthcare industry is not an exception. So, we see many new players are entering into the traditionally protected pharma ecosystem, and they are bringing many different elements of service models and technologies that are derived from different sectors. So existing pharma companies often try to incorporate such new features within the company boundaries or create new partnerships to quickly adapt to new business models. So in order to adapt to new business models, I believe that companies should not be afraid of organizational reform, where I believe digital and IT departments have some leading roles to drive a business transformation.

Sanjog Aul [00:21:21]:

And so whatever you try to do, some are innovations, others are ways to dodge the erosion, but are you trying to look at the things as they come and trying to fix those, or are you becoming proactive and resilient so these things really don’t hurt you every time something like this happens, like a disruption or things of that nature. So let’s take a quick break listeners, you gave a great input on how organizations in pharma industry are looking for ways to prevent profit erosion, but then let’s dig a little deeper and say that are we supposed to be reactive that when a disruption happens, then you figure out a way to crack that problem and then prevent that erosion? Or is there a fundamental resilience and or a shield, if you will, that you create so that erosion doesn’t happen because of an instance? Yes. There is a systemic change in the environment, the marketplace. That’s what could be causing erosion, but any disruption-centric erosion, can we safeguard against? That’s the question I’d like to ask, but please stay tuned listeners. We’ll be right back and let Minori respond.

Sanjog Aul [00:23:38]:

Welcome back. So, Minori, you gave a good set of ways by which companies in the pharma industry are trying to figure out how to undo and fix any erosion, but my question is, can we be proactive? Can we create a profit erosion shield, if you will, so it becomes a prevention versus a cure or a response?

Minori Hara [00:24:07]:

So I think the pharma companies actually need to move ahead to a different stage, not just defending the current status quo from whatever disruptions are coming in. So I think the pharma companies have a greater innovation potential if they can define their future business models beyond the traditional boundaries, and   if we could think about our business model around people centricity. So as I mentioned earlier, general expectations on healthcare are more on personalization, which means needs of differentiated services. Traditional pharma products were primarily used for treatment of diagnosed diseases, but more differentiated and personalized services could be provided at much earlier stages of the patient journey. So the services around patient awareness and engagement, improved diagnosis or disease prevention could become more core business streams for even large pharma companies, I believe. So, while many companies are rushing to adopt AI, machine learning, robotics, IoT, and other additional technologies, both for their external digital services and internal process transformation, it is important that the new business models and organizational capabilities are transformed to be able to truly leverage the power of such technologies. They should not be disconnected from the benefit of our customers. So, by doing this kind of transformation, I think companies will be more resilient to the new environment, but also, I believe the companies can find themselves in a different state and different positioning in the market, and they become more relevant.

Sanjog Aul [00:26:22]:

So when you are looking at the overall innovation potential, right, sky’s the limit, if you think about it, and   people may have tried different things. How far is your imagination going? How fundamentally disruptive is the tone or the propensity of players in this industry when it comes to innovation? How crazy are we getting with our ideas?

Minori Hara [00:26:50]:

Actually, the innovation should not be limited within the boundary of one company, because we are talking about, in our case, it’s a healthcare ecosystem. Right? And then, players within the healthcare ecosystems are not limited to pharma companies. Actually, there are many players like healthcare professionals, hospitals and pharmacies. And, of course, the patients and the general people who are conscious about their health conditions. They are also important players and insurance companies, and   these days, more and more tech companies and digital service companies are kicking in who are traditionally not part of the healthcare ecosystem, but they are now important players. So when we talk about innovations, I think innovation definitely needs to happen within the company so that the company will become relevant, but also we need to capture ecosystem-level change innovations so that the complete healthcare environment around people is different, and then in many parts of that ecosystem, innovation should be happening so that the scale of innovation could be more scalable. And, coming back to the relevance of a pharma company, if a pharma company itself innovates, then it can become an important element of an even farther innovative, bigger ecosystem, I think.

Sanjog Aul [00:28:36]:

And if you were to think about the different experiments that different companies did, and I’m just trying to have you wear the hat of an analyst, someone who’s watching trends and saying, okay, this is how the different companies innovated, what worked, what did not work, what smaller things made a big impact, or where other larger initiatives did not do as well. What do you see as the pattern? What truly is a way forward if you are to advise anyone else trying to get into this whole innovation bandwagon? Where should they focus their energies?

Minori Hara [00:29:11]:

Definitely existing players like full-fledged pharma companies should leverage the existing strengths. Those strengths will be the core and then see what’s missing when they look at the ecosystem, and then, to fill the gap, whether we develop those capabilities within the company by innovating the company itself or not be afraid to obtain it from outside through strategic partnership with the new players. I think a combination of strategic partnership and internal innovation could accelerate the innovation of their own services relevant to patients and the general public, and I think that’s a way to go. So the leadership of any company, I believe, should consider those paths to follow.

Sanjog Aul [00:30:20]:

So your answer is well taken, and to some extent, you gave me the how of how they should innovate, right, or how they should partner with other companies to bring the value. Let’s talk about what a little bit. So if I were to say, if pharma were to reinvent itself or had to significantly innovate as an industry, which all are the top candidate areas where innovation must happen?

Minori Hara [00:30:47]:

Definitely, the fundamental part of the value that a pharma company provides to society is the treatment and drug development. That part definitely needs to be innovated so that the pharma industry can deliver solutions to diseases that may not have treatments at the moment. So unmet needs could be resolved by new solutions and innovations and new development definitely needs to be accelerated in this domain. However, to improve the ecosystem, focusing only on research and development is not enough. So that’s why I, as I mentioned earlier, manufacturing innovation, supply chain, company structure, internal process innovation, and the ecosystem looking at the people who are in the society and how they are interacting with medical services that part definitely needs to be innovated. So I think we need to have systems thinking.

Sanjog Aul [00:32:11]:

So what you just suggested is a great way forward. So which of these approaches did you try in your organization and what happened?

Minori Hara [00:32:24]:

At Santen, we considered the innovations reside mainly in 2 domains. 1 is externally facing new digital offerings, which is essentially going beyond the boundary of the traditional pharma. So potentially new digital offering services to support people’s life and happiness, but the second component is the transformation of the existing pharma value chain starting from R&D through manufacturing and quality assurance and supply chain to marketing and commercialization. Those value chain elements also need to be transformed, leveraging the power of digital, and that’s what we have already been working on. A number of small and large projects have been kicked off, and we have been delivering small and large outcomes out of them.

Sanjog Aul [00:33:36]:

So I heard you say digital quite a few times. So how about we take a break now? And when we come back, Minori, how about you dig in a little bit on this quote-unquote digital that you mentioned whether IoT, AI, and machine learning, you name it deconstruct digital, which in your view is a digital toolset or technology set or a mindset, a combination of these which you utilize actually already or you’re thinking of utilizing to bring innovation and to move pharma from a traditional pharma to a future-ready pharma to a relevant and a profitable pharma. So since we are CIO Talk Network, we cannot go without talking technology, cannot go without talking digital. So please stay tuned, listeners. We’ll be right back, and let Minori share what he means by digital, what he did with digital, and his team worked with digital to create value. Please stay tuned. We’ll be right back.

Sanjog Aul [00:35:37]:

Welcome back. So, Minori, the keyword here is digital. Let’s deconstruct it. Tell us people, process, technology, culture, leadership, politics not sure what all flavors of digital that you can share, which you applied, leveraged, exploited to make pharma what it can be, which is relevant, profitable, and future ready.

Minori Hara [00:36:02]:

Yes. So, when we talk about digital, especially around pharma, people might just think about new drug discovery process using data science and artificial intelligence and so on, and also probably another area that easily comes to people’s mind could be a new device that could be utilized by a patient either at home or the clinic so that that could produce a better result for treatment. Definitely those are important areas, but for pharma to be a fully digitally fit company, there are many different areas that we should actually leverage digital technologies. For example, during the development of medical products and drugs, the clinical trial process itself could be more digitalized virtual clinical trials and processes. Also, pharma industries are strictly regulated by standards, and safety information needs to be recorded and reported. Those processes, traditionally, could have been quite manual, but there is room for innovation in that process, and   supply chain and production and also logistics this area definitely has many opportunities for digitalization. For example, we could use cloud-based network optimization to connect smart factories and automate analytics and digitalized operations, finishing and packaging processes, and visualization of the logistics processes. There are many rooms for improvement by digital and data utilization. In the area of supply chain, data-driven decision making should kick in. In the service areas, database, field force planning and deployment we could actually digitally assist sales representatives’ activities in the field, and   for marketing, campaign activation, planning and content creation and consumer insights, patient experience, and healthcare professional consultation processes could all be digitalized. So we could actually emit many digital services, not only the tools, but services to renovate many of the pharma companies’ value chain processes, and   then to support any of those processes being digitalized, the company’s basic ability to operate also needs to be renovated. So companies’ administrative functions like HR, finance, legal, procurement, and IT itself there are many rooms for improvement leveraging digital technologies. So data-driven talent management, talent skill mapping, improved financial forecasting or compliance and risk management leveraging data management, etcetera. So by doing this, the company will fundamentally become digitally fit, which will allow the company to modernize any of the value chain processes, as I mentioned, from R&D to commercial, and   then that will also support externally facing new digital offerings, new services, new business models.

Sanjog Aul [00:40:52]:

Well that’s a pretty rich list. Thank you so much Minori. So talking about digital, that’s great, you’ve done innovation, built business cases, changed the processes, fundamentally relooked at how the business works, but all of that cannot happen if you do not have people supporting it and a culture as the foundation. So did you, in this whole process of fundamentally shifting and or moving to a more progressive approach on how you will make pharma future ready and profitable and relevant, what changes did you have to make? And before that, what fundamental objections or pushbacks did you have and the challenges you had on the people and culture front, which you had to overcome?

Minori Hara [00:41:44]:

Right. That’s a very good question, and   the cultural aspect is very important. Actually when we talk about digital or future-fit companies, we might just think about something new which could be coming from a small number of people within the company, but actually this whole strategy development requires a lot of internal engagement of the people, not only at the company’s top management level. So the strategy development process should already involve different parts of the company, and by doing this, company employees also feel the ownership of the future strategy. To do that, while discussing the environment change of the company and potential innovation opportunities and the priorities, if company employees can participate and have an opportunity to contribute to that outcome, at the end the published official company strategy will be jointly owned not only by the company president or CEO, but also by the employees. That kind of joint ownership by the entire company is very important. Another cultural aspect is that any drastic changes of the company’s future direction will also face some resistance. People don’t feel comfortable when they have to do things differently, away from what they have been doing, because doing the same way might be more comfortable for many people. So any drastic change for the company’s direction, if it’s not really understood why it’s needed, then it’s just a burden. Naturally, this burden would create a lot of resistance. So for that, again, involvement of the employees in the strategy development is one way of alleviating those burdens and resistance, but also very patient explanatory communication about the company’s direction and strategy to employees is very important so that they actually understand why this strategy is necessary and what’s the purpose of it, and   lastly, in order to cultivate a culture that’s required for a company’s innovation, talent management is necessary. We often see gaps between the skill sets and mindsets of existing employees and the future skill sets that the company needs. Those gaps could be filled either by reskilling existing people, but also by bringing in new talent from outside. So I don’t think that the company should just focus on hiring new talent from outside only. That will not actually work well for internal people. So I think a combination of reskilling internal people and bringing in new talent is important. New talent coming from outside would actually stimulate the mindsets of internal people, which will definitely contribute to the cultural change that the company needs to go through. So in a nutshell, I think I introduced 3 important points: strategy development and ownership, managing resistance to change, and strategic talent management. Those 3 points are the key to tackle the cultural challenges.

Sanjog Aul [00:46:29]:

Alright. We just have a minute. What about leadership? What kind of shifts in leadership approaches and mindsets do you suggest people take?

Minori Hara [00:46:39]:

Okay. I think the leaders of a company who want to innovate the company’s business model should not just implement incremental improvement or a patchwork approach to strategy development. I think we should all think about an outside-in mentality. We should learn from the external environment changes and opportunities where a potential new business model could fit in, and   then internal company strategies should be built based on those external elements, outside-in, and then the leaders should definitely convey the true meaning of the company strategy to the employees so that all people involved would understand the real purpose easily, and that will become the strength of the company.

Sanjog Aul [00:47:45]:

Once again, thank you so much, Minori, for sharing your thoughts and insights about how organizations in pharma industry can really work looking inside, looking within, and also working with their partners and customers, become an inclusive organization, and let that become the road and the plan to become relevant, profitable, and future ready pharma. Thank you so much again, Minori.

Minori Hara [00:48:13]:

Thank you, Sanjog Aul. It was great to talk with you today.

Sanjog Aul [00:48:19]:

Thanks again, and listeners, please join us on various social media platforms we are on, and also subscribe to our podcast on multiple platforms around the world. Once again, thank you for listening to CTN. This is Sanjog Aul, your host, signing off. Till next week, take care, and God bless.