The State Of Digital Excellence In The Pharmaceutical Industry In 2015: Capabilities

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April 2, 2015 THE STATE OF DIGITAL EXCELLENCE IN THE PHARMACEUTICAL INDUSTRY, 2015: CAPABILITIES Firms Require a More Disciplined Approach to Improving Digital Maturity by Tim van Tongeren and Dennis van Rooij

EXECUTIVE SUMMARY Pharmaceutical firms must adopt and consistently execute practices that lead to digital excellence and give them a competitive edge. Which of these firms are accelerating away from the rest of the marketplace? We found that only two—Merck and Bristol-Myers Squibb—are doing reasonably well and achieving excellence and maturity in their digital capability. Firms taking a disciplined approach to digital transformation achieved higher maturity in digital capability than their less-disciplined peers. To reach the next level of maturity, firms should invest in foundational digital capabilities, develop locally relevant plans, and bridge the gaps between marketing, digital, and IT.

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DT’s Digital Capability Maturity Benchmark Methodology Most Firms Report A Fair Level Of Digital Capability Maturity Take Your Firm To The Next Level Of Digital Excellence Maturity Digital Marketing Will Become Marketing Again

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Methodology Online survey of 78 digital professionals at global pharmaceutical companies Companies Surveyed For This Report AbbVie, Astellas Pharma, AstraZeneca, Baxter, Bayer Healthcare, Bristol-Myers Squibb, Boehringer Ingelheim, Eli Lilly, F. Hoffmann-La Roche, Ferring Pharmaceuticals, Genzyme, GlaxoSmithKline, Leo Pharma, Merck, Novartis, Novo Nordisk, Pfizer, Shire, Takeda Pharmaceutical Company, UCB Related Research and Endnotes

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DT’S DIGITAL CAPABILITY MATURITY BENCHMARK METHODOLOGY

As patients, prescribers, and payers increasingly turn to digital media and technology, pharmaceutical companies are making hefty investments to improve their ability to serve these customers there. But achieving digital excellence is difficult and hinges upon several factors, including four key ones: organizational readiness, a sense of urgency, existing knowledge, and technical capability. Our 2014 benchmark report looked at organizational readiness; this year’s edition focuses on digital capability.1 To find out how mature pharmaceutical firms’ digital capabilities are, we:

• Built a model to assess practices in thirteen digital capabilities. Our Digital Excellence Maturity Model evaluates firms’ efforts to strategize, plan, create, and manage customer relationships and experiences through digital channels (see Figure 1). All in all, we assessed thirteen key digital capabilities, including analytics, CRM, website (development), and tablet detailing. Each of these capabilities has a set of specific practices associated with it; in total, we evaluated 116 different practices, categorized into tiers of maturity. Higher-tier practices are more complex to perform consistently and typically depend upon prerequisite practices in the lower tiers. For example, implementing and performing analytics in a single channel is a core practice in digital analytics; merging multiple data sources into a data warehouse is an advanced practice (see Figure 2).

• Asked digital leaders to assess their own capabilities. Armed with the digital capability model, we fielded an online survey to seventy-eight professionals at sixteen large global pharmaceutical companies, selecting respondents based on the significance of their roles and responsibilities to building digital capabilities. Where we got more than one response from the same firm—due to factors like organizational structure or geographic coverage—we averaged those scores to determine a company’s overall score.

• Ranked companies, capabilities, and specific practices. For each of the thirteen key digital capabilities, we asked digital leaders to identify the practices that they see consistently and deliberately followed within their organizations. Each firm’s digital capability maturity score is determined by the percentage of practices that digital leaders identified their organizations using. A firm that uses half to three-quarters of these practices ranks as “good” in digital excellence. Anything above this means that a firm is doing an excellent job of using digital channels and technologies to execute its customer or commercial strategy.


Figure 1: Thirteen capabilities of digital excellence

Figure 2: Tiered practices define a capability: digital analytics


MOST FIRMS REPORT A FAIR LEVEL OF DIGITAL CAPABILITY MATURITY

For digital leaders, it’s clear: taking a disciplined approach to achieving digital excellence will pay off. Firms that are disciplined about digital transformation have higher maturity in digital capability than their less-disciplined peers (see Figure 3). Overall, pharma’s digital leaders don’t rate their companies’ digital maturity very highly (see Figure 4). And the gap between the most and least mature firm in our ranking is a whopping forty percent, indicating strong contrasts in firms’ progress on their digital transformation journeys. Overall, we found that:

• Bristol-Myers Squibb and Merck earn the top spots. Just four firms have mature digital capabilities (see Figure 5). With sixty-five and sixty-one percent, respectively, Bristol-Myers Squibb and Merck lead their peers in our 2015 Digital Excellence Benchmark, although neither performed strongly across all capabilities. With an average maturity score of forty-one percent, the pharmaceutical industry still has a long journey ahead; even the top firms have not achieved a state where digital excellence is creating differentiated customer experiences.

• Six other firms have achieved excellence in individual capabilities. Founded just two years ago, AbbVie has already taken the lead in two capabilities: website and mobile applications (see Figures 6-1). When it comes to CRM capabilities, UCB leads the pack, followed closely by Janssen Pharmaceuticals (see Figures 6-2).

• Foundational capabilities are the most mature. Unsurprisingly, firms report higher maturity in core marketing practices and digital capabilities than in the more advanced ones (see Figure 7). Bristol-Myers Squibb is the exception: it achieved six percent more maturity in tier 2 capabilities than in tier 1 capabilities. At twenty-six percent, Mylan is the firm with the lowest tier 1 capability maturity.


Figure 3: The greater the discipline, the more mature the capability

Figure 4: Just four firms report “good” digital maturity


Figure 5: The state of digital excellence: digital capabilities in 2015


Figure 6-1: Ranking pharmaceutical firms’ website capabilities


Figure 6-2: Ranking pharmaceutical firms’ CRM capabilities


Figure 7: Firms follow core practices more often than advanced practices

Firms Struggle Most With Behind-The-Scenes Capabilities

For the purposes of our analysis, we divided the thirteen individual capabilities into two broad categories. “On-stage” capabilities are mostly channels that enable marketers to interact directly with potential customers; “behind-the-scenes” capabilities manage the systems and processes that support on-stage capabilities. At the industry level, on-stage capabilities are just as developed as behind-the-scenes capabilities (see Figure 8). But this isn’t true for individual firms: for example, Takeda’s behind-the-scenes capability is twenty-one percent more mature than its on-stage capability—in contrast to AstraZeneca, with an on-stage capability that’s fourteen percent more mature than behind-the-scenes capability.

• Most mature: digital compliance, web, and tablet detailing. Pharmaceutical firms face a plethora of medical and legal requirements, so it’s no surprise that digital compliance, with eighty-five percent, tops our capability ranking (Figure 9). Five of the sixteen firms—including Eli Lilly and Janssen—scored the maximum number of points for digital compliance. A strong gap of twenty-six percent separates the front-runners from the next cluster (tablet detailing, websites, and email—all on-stage capabilities).

• Most challenging: social media, MCM strategy and planning, and SEO. While website development ranks among the most mature capabilities in pharma, its sister capability SEO languishes among the bottom three, indicating that launching websites is more of a priority than optimizing them. Our data also suggests that marketing and digital teams need to further mature their strategy and planning before they fully understand how to reach customers with the right message, at the right time, in the right location. Finally, six firms have social media maturity ratings of ten percent or lower, making social media the pharma industry’s weakest capability.

• Most concerning: customer experience management. These are the practices where teams repeatedly go out of their way to meet customer needs. Worryingly, customer experience is only the tenth most mature practice, with thirty-eight percent. AbbVie and Lilly provide a glimmer of hope; they obsess more about their customers than anyone else. The least customer experience-savvy firms are GSK and Sanofi, with nine and eight percent maturity, respectively.


Figure 8: Firms’ behind-the-scenes and on-stage capabilities have similar maturity levels

Figure 9: Firms are investing strongly in compliance; other capabilities trail at a distance


The Best and Worst of Pharma’s Digital Excellence Practices

Pharmaceutical firms’ implementation of the 116 individual practices we assessed encompasses the good, the bad, and the ugly (see Figure 10):

• Best practices shine through. In digital analytics, four out of five firms perform single-channel analysis; three-quarters consistently set up measurement frameworks that take KPI definitions all the way into periodic reporting or dashboards. CRM is another blossoming field: while CRM capability maturity across the industry rates as “fair”, seventy-eight percent of firms consistently group customers into segments and seventy-three percent manage their own contacts and distribution lists instead of renting them. But contrasts in a capability are strong: just fifteen percent of firms use these two CRM practices to optimize campaigns with personalized messaging.

• Traditional, non-digital marketing practices are not always followed. While personal technologies and social networking are new, the key marketing principles underlying them—like setting objectives and creating a plan—remain unchanged. So when we see that only seventeen percent of firms do research into their competitive differentiators and just twenty-two percent try to understand customer behavior throughout the customer life cycle, it becomes clear that some people in the marketing organization need a refresher course.

• More complex practices are taking off. While some firms continue to struggle with the basics, others are starting to dip their toes into more complex digital activities. Sixty-one percent of firms consistently design and launch responsive websites that accommodate different screen formats, and fifty-six percent pursue a form of social listening. Even more impressive: the fifty-four percent that use a digital asset management tool to store, retrieve, and distribute content.


Figure 10: The best and worst digital excellence practices


RECOMMENDATIONS

TAKE YOUR FIRM TO THE NEXT LEVEL OF DIGITAL EXCELLENCE MATURITY

Firms looking to achieve competitive advantage via digital excellence should ask themselves two questions: “Who can build a capability that will enable our organization to deliver compelling cross-touchpoint customer experiences?” and “Who can shift our organizational mindset so that it naturally views all available media and technologies as ways to delight customers and capitalize on commercial opportunities?” While answering these questions will give your firms a strategic plan, smart digital leaders won’t wait for it—they’ll embark on the journey tomorrow. To put your firm on the path to digital excellence maturity, you should:

• Solidify your core capabilities before moving on to fancier things. Investing in capabilities that enable the organization to become more customer-centric in digital channels is a no-risk proposition. Content management, customer experience management, and analytics will remain part of firms’ core competencies for the rest of the twenty-first century. And their charters are clear: better systems integration, increased data usage, and improved content coordination. So while the marketing organizations fiddle with their identities, digital organizations should be actively preparing themselves for when the digital marketing floodgates open.

• Prioritize the measurement of digital activity. When bringing your least-adopted practices into line with the rest of your capabilities, put any practice that deals with measuring channel performance at the top of the list. Measurement does much good: it provides a baseline to demonstrate progress, reassures executives who allocate funds, and allays the doubts of fence-sitters.

• Benchmark internal capabilities across business units and geographies. Assessing digital maturity country by country or division by division will uncover best practices that other groups can benefit from via a sharing model. One firm that applied our benchmark methodology found two countries in which the conditions for rapid digital experimentation are right. Another firm realized the crucial role of benchmarks in laying out the structure and content of its new Digital Academy, a company-wide initiative to increase the level of knowledge on digital subjects.

• Work from locally relevant intervention plans. DT Associates research indicates that digital directors are often stuck in the middle: on one hand, their job is to scale up their capability to a larger geography for the sake of efficiency and consistency; on the other hand, they have to please country GMs who want a specific digital road map that satisfies their local commercial teams. While it won’t satisfy all GMs, creating one digital capability road map based on all countries’ current and ideal states gives digital leaders corporate-wide consistency in technology and process. To please unhappy GMs who want capabilities faster, create an innovation fund they can tap into or steer the discussion to other digital excellence gaps, such as their affiliate’s current digital knowledge level or sense of urgency.

• Collaborate with IT on organizational alignment. It’s not just the marketing organization that faces challenges in attaining digital maturity—so does the IT/business technology group. Enterprise architecture, data, and systems integration have already filled up technology leaders’ already busy agendas, so adding an inefficient digital capability delivery model to the mix will jeopardize the speed of your progress toward digital maturity. Specifically, digital leaders must work with technology leaders to develop funding models, central service catalogues, and governance structures that make digital capabilities easy to access and simple to execute.


OUTLOOK

DIGITAL MARKETING WILL BECOME MARKETING AGAIN

As we see digital capabilities develop over time, one factor will trump all others: best practices will evolve where marketing teams put the needs of the customer front and center. The transition to customer-centric marketing requires the marketing organization to make a cultural shift: attracting customers with relevant content will replace pushing product-centric messages. Digital marketing will be marketing again and will emerge more customer-centric than ever—but this process will take time. As a result, in the next few years we will see:

• Digital strategy and marketing departments fade away. We’re seeing the first signs that the days of digital teams as unique, isolated centers of excellence are waning. In 2014, one firm renamed its central digital team a “multichannel” team and changed its reporting lines to various global therapy area teams. Multichannel will be the intermediate step between digital and marketing for those firms that can’t make the leap all at once.

• “The marketer is dead—long live the marketer.” Senior marketing leaders at one of the largest pharmaceutical firms were told that eighty percent of their staffs’ activities no longer add value. Among other trends, we will primarily see headquarters-based commercial and marketing excellence teams not only take a more disciplined approach to capturing the digital opportunity, but also gain new recruits from firms outside the pharmaceutical industry where some of the “new marketing” is already happening.

• Digital agencies evolve their offerings as digital mandates grow. Recent DT Associates research shows that more than half of all brand marketers still don’t leverage internal resources to create campaign material but immediately engage an external agency.2 This is okay when digital maturity is poor or nonexistent, but headquarters will intervene with stronger mandates as digital capabilities mature. One of the world’s largest CPG firms told us that its global CMO’s mandate to allocate a minimum of forty percent of budgets to digital accelerated the maturity of its internal digital capability. As pharmaceutical firms do more work internally—predominantly build and development projects—digital agencies will generate an even larger proportion of their revenues from design and creative services.

• Pharma IT organizations swallow up almost all technology owned by the business. Advanced practices such as multichannel analytics, website security, and privacy management either rest on the organizations’ technology backbone and/or require application or data integration, so digital teams can’t—and shouldn’t—build digital capabilities on their own. In the next few years, many digital teams’ roles will evolve, becoming interpreters of the CMO’s agenda and working with IT teams to define, clarify, and communicate digital capability road maps.


METHODOLOGY

DT Associates fielded its Q1 2015 Global Digital Excellence in the Pharmaceutical Industry survey to seventy-eight digital professionals who demonstrated interest in and familiarity with digital excellence as part of their role in a pharmaceutical organization. We excluded thirty-seven respondents from our final sample to include only those who have significant digital responsibility, budget, or oversight of current digital capability (e.g. VPs/heads of digital, digital directors, and digital leads).

We fielded the survey from January 2014 to February 2014. Respondent incentives included an Amazon voucher or a donation to a charity, as well as a copy of a report containing the collected survey data.

Our sample is not guaranteed to be representative of the population. Responses do not convert directly into precise maturity scores for respondents’ respective companies. Unless otherwise noted, data is intended for descriptive purposes. DT Associates fielded its survey to using an online survey tool plus a personal invitation by email. We fielded the survey from November 2014 to December 2014.

RELATED CASE STUDIES

• “Accelerate Your Pharma Digital Marketing Transformation Program”, DT Associates case study.

• “Benchmark Your Pharma Digital Services and Platform Organization”, DT Associates case study.

• “Revamp Your Pharma Digital Marketing Agency Roster to Improve the Customer Experience”, DT Associates case study.

• “Organize Your Global Digital Marketing Master-Class Program”, DT Associates case study.

• “Embed Digital Marketing Capabilities into a Strategic Brand Plan”, DT Associates case study.

• “Use Brand Reviews to Optimize Your Digital Investments”, DT Associates case study.

COMPANIES SURVEYED FOR THIS REPORT

AbbVie Astellas Pharma AstraZeneca Baxter Bayer Boehringer Ingelheim Bristol-Myers Squibb Eli Lilly F. Hoffmann-La Roche Ferring Pharmaceuticals

Genzyme GlaxoSmithKline Leo Pharma Merck Novartis Novo Nordisk Pfizer Shire Takeda Pharmaceutical Company UCB


ABOUT THE AUTHORS

Tim van Tongeren

For more than ten years, Tim has specialized in helping commercial and marketing leaders navigate the strategy and operational transformations required to deal with technology change. In his current role as Managing Partner, Tim spends most of his time managing our international associate network alongside his work with leading global pharmaceutical companies to improve their digital excellence.

Tim’s primary achievements include developing digital capabilities for marketing managers, setting a long-term digital strategy, and adjusting the brand planning process for digital excellence, all for Tier 1 pharmaceutical companies. Most recently, he has guided business leaders in formulating and implementing their digital road maps, making sure that they don’t overlook the necessary change management elements of marketing organization digital transformation.

Tim has an extensive background in management consulting across a number of industries, which supports his digital excellence work for healthcare companies. As a senior strategy consultant at global marketing agency SapientNitro, he worked with clients across industries to develop and execute digital marketing strategies. Prior to that, Tim was an analyst at Forrester Research, where he produced thought-provoking research on technology innovation and customer experience management when it was still a relatively new discipline.

Dennis van Rooij

Dennis is a recognized expert on how pharmaceutical executives can take full advantage of new digital technologies to bolster their commercial objectives. He brings a strategic yet pragmatic perspective on digital channels for the healthcare vertical in general and the pharmaceutical industry in particular to every engagement. In his current role as Managing Partner, Dennis is responsible for managing client relationships with a number of leading global pharmaceutical companies and spends a significant amount of his time working directly with clients.

Dennis was the Global Head of Digital Transformation and Acceleration at Novartis pharmaceutical based in Switzerland. He also served as an interim advisor for an innovative pharmaceutical company, supporting its global digital capabilities and engagement team. Prior to that, Dennis led the digital marketing strategy for Asia Pacific, Japan, and emerging markets for GlaxoSmithKline, where he earned the prestigious President’s Award for innovative marketing in emerging markets. Dennis also has seven years of commercial and digital strategy experience outside the global pharmaceutical industry as a senior consultant at MetrixLab and Forrester Research, where he worked with many of the world’s top companies.


ABOUT DT ASSOCIATES

DT Associates is a specialist management consultancy that enables pharmaceutical companies to achieve digital excellence—an essential component of continued business success in an age of digital disruption. We help leading innovators in the pharmaceutical industry successfully assess, launch, accelerate, and optimize digital transformation initiatives. DT Associates addresses firms’ digital business challenges in ways that no other consultancy can. Our clients face complex marketing and technology questions every day; we help them make the right decisions. DT Associates’ bespoke consulting services have a strong focus on digital marketing, strategy, and capabilities and our consultants bring deep digital and pharmaceutical knowledge and expertise to the table. Over the past ten years, we’ve helped dozens of executives and teams at leading pharmaceutical firms achieve digital success. Discover how we can partner with you to achieve digital excellence at www.dt-associates.com.


ENDNOTES

1 See the February 2014 DT Associates report “The State of Digital Excellence in the Pharmaceutical Industry in 2014”. 2 See the December 2014 DT Associates report “How Pharma Marketers Find and Select Digital Marketing Agencies”.

The State Of Digital Excellence In The Pharmaceutical Industry In 2015: Capabilities

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