“Digital Transformation” has been bandied about as a panacea to cure all business ills. But, reportedly, upwards of 70 % of digital initiative fails. Why so?
This article outlines a major reason why they fail and how to mitigate the risks connected with it.
The life sciences’ landscape is now disrupted by digital health, with big data creating digital promises to lower costs of drug development, to accelerate time to market and to make treatments more personalized. Simultaneously, there are huge concerns about data coherence operated by complex and interdependent legacy information systems that prevent established market players from rapidly and adeptly capitalizing on this data.
So, what is really under the hood of digital transformation? Why does so-called “legacy” prevent the industry from making it a long-game opportunity? How can technological trends help understand and anticipate these changes?
It’s become clear that the post-pandemic world poses new challenges. We have already learned that businesses have to be prepared to quickly adjust to sudden market changes. Companies that adopt technology, processes, application architectures and infrastructures that anticipate emerging customer’s needs and abrupt changes in the market, will be able to adapt to the possible risks and lead the way. Digital transformation is the solution right in front of us.
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Pharma 4.0 hitting the roadblocks
The pharmaceutical industry was officially originated with the synthesis of aspirin in 1897 by a chemist at Bayer. It was the beginning of commercial drug manufacturing.
Since then, Pharma and Biotech companies have been under pressure to accelerate innovation. If we look at the ecosystem today, there are lean and agile new entrants that are free of cumbersome data system infrastructures. They have prompted players to rethink traditional methods of designing and manufacturing medications in order to catalyze distribution, and on top of that, to maintain regulatory compliance without disrupting ongoing business.
The meaning of pharma digital transformation is often flattened to moving off of paper to computers. Obviously, it’s much more than that. With the worldwide pharmaceutical market valued at about 1.25 trillion U.S. dollars, according to Statista, there seems to be no other way but to adopt new strategies in order to move forward at lightning speed. Pharma, biotech, and CROs alongside tech giants like Google or IBM do invest in innovation throughout all stages of business, including drug discovery, development, and therapy commercialization.
Still, life sciences are somehow slow to adapt fast enough to take advantage. Many organizations are still stuck with legacy infrastructures, incapable software solutions and processes that are too rigid to respond to the current market climate. For companies with years of unchanged systems and workflows, tech challenges are a matter of strategic changes implying massive alterations and a hefty investment. However, those who have started to implement new technologies like artificial intelligence (AI) , blockchain, machine learning ML), Internet of Things (IoT), and predictive analytics that make use of their big data potential are quickly gaining an edge on the market.
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A huge shift from treatment to prevention in the healthcare chain is vexing the pharma status quo, pressing for cheaper and more value-added therapies. Currently the pharma market is fighting hard to operate in new ways. So it brings challenges and obstacles that organizations can’t overcome without a serious upgrade to their existing infrastructure. Outdated legacy systems negatively influence the overall success and functioning of organizations in several key areas.
Global healthcare spending for 2020 is projected to be at a mind-blowing $8.7 trillion and the average cost of developing and launching a new drug at around $1.4 billion, while the ROI is expected to be below 4%. It’s obvious that there’s plenty of room for improvement and expenditure optimization. A big part of these costs occur due to the outdated legacy infrastructure in the life sciences industry, which hurts the overall value of companies.
In order to generate the maximum value for its money, the industry needs to enhance its organization, both internally and in how its customers are served. Reliance on outdated software and hardware leads to productivity decreases. The output in the life sciences industry has been pretty stable over the last 10 or so years, but without a productivity boost and the reduction of expenses, the value of companies will continue to stagnate or decline.
The main obstacle towards achieving greater organizational efficiency is a siloed legacy infrastructure. Within a company, when you run a number of disconnected and incompatible processes, cooperation and execution are slow and difficult. The array of legacy systems usually contains disparate data recorded in different formats. Implementing a clean way to link and analyze this data will allow for more insight, as well as add more value to the existing records. Bringing together these siloed processes and unifying the legacy systems is key to opening communication channels and creating a more economic and lean product life cycle.
Integration and data management issues, caused by the legacy infrastructure, have only been aggravated by the continuing global mergers and acquisition trends. R&D and clinical trial departments face large blocks of inaccessible data impeding more efficient drug discovery and development. At the same time, supply chain and drug distribution lack visibility and monitoring, which eventually leads to a more expensive and longer route for a drug to reach its final customer.
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The nature of consumer demands has changed significantly over the last decade. Patients are no longer just passive users of pharmaceutical products. They are smarter, more educated, and more informed about the drugs they want and need. A customer-centric ecosystem and a more simplified access to medications are now a necessary prerequisite for a successful pharma-oriented business. Digital supply networks and distribution networks provide more control, visibility, and insight into a patient’s needs. The slower outdated system and user interface also mean slower request processing, which ultimately leads to an unsatisfied customer; the same goes for the company’s own employees.
The outdated system also affects the company’s readiness to compete. New devices, platforms, and software appear within the industry almost daily. Failure to keep up with the latest technological advances significantly reduces performance in the market, especially if competitors are already using the new systems.
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Sticking with the legacy infrastructure not only impacts the company’s performance and productivity, but due to enhanced technical risks, puts the very functioning of the organization in jeopardy. Poor performance, data loss, and below-par connectivity can have serious negative effects on the day-to-day and long-term operation.
The use of a legacy software system is often accompanied by obsolete hardware. With most) successful businesses taking more and more of their operations to the cloud, having on-premise hardware induces large administrative costs and endangers the security of data stored on that hardware. Going with modernized solutions also helps prevent the risk of outages and system failures. Even short downtimes can prove to be very costly. They make your services unavailable which results in unsatisfied customers, the loss of sales profits, a decrease in productivity, and causes damage to the brand.
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Today, outdated software and operational systems usually are no longer supported by their original vendors who are ready to move forward with innovation. Because of this, the company may not be able to make use of some of the latest technology breakthroughs or integrate new solutions. Also, perhaps more importantly, they likely won’t receive updated security patches, leaving them vulnerable to cyber-attacks. According to Juniper Research, business costs related to data breaches will rise to over $5 trillion in 2024, so it’s easy to see the benefits of upgrading software and hardware security. A dated system certainly can’t deal with modern viruses and attacks. Malicious hacking of the company’s database, that houses volumes of private information and confidential drug development data, can put the very core of the business in danger.
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Companies sticking with a legacy infrastructure generally accrue a large technical debt. This is mostly due to the high costs of maintaining such an infrastructure. Whenever an issue arises, developers are forced to spend a lot of time dealing with it. Old codes are often messy and unstructured, and diagnosing the problem can take days, often putting the company in a situation to pay quite a few overtime hours. The same goes for ancient hardware; replacement parts are difficult to find and expensive to buy.
Legacy systems are more often than not, large and monolithic in their nature, meaning that typically it is very problematic to alter just one system module or implement minor updates. Any tinkering with the code in these systems in an effort to implement smaller changes takes time and hard work, not to mention increased costs. Organizations still operating with an outdated infrastructure often see the majority of their IT budget spent solely on maintenance; the money would certainly be better spent on innovations and the introduction of new technologies.
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The nature of the life sciences industry forces companies to constantly adapt and grow. If an organization changes its operational model or simply increases its business scope and reach, it will want the supporting infrastructure to be able to follow. Legacy systems usually lack the flexibility to handle the growth of the company. They become bottlenecks and the enterprise ends up having to adapt its operation to an infrastructure instead of the other way around. Due to their outdated architecture, legacy systems are hardly upgradable, making it difficult to add any new features or expand their capabilities.
Software professionals that created the many-year-old infrastructure still in use, have by now mostly moved on to other newer platforms, tech stacks or may have even retired. Additionally, these outdated systems are generally anything but simple and intuitive. Maintaining such systems requires a specific knowledge and set of skills, which usually are not taught anymore, so the talent pool from which you can recruit employees, to take care of such a system, is extremely shallow. Furthermore, training someone to be an expert in maintaining this kind of software and hardware could take a very long time, leading to another hit to the budget. Besides, not many potential candidates are motivated to gain skills that are not appreciated in today’s job market.
These are some of the most painful issues our clients have been facing over the last few years. As our experience shows, when strategizing on digital transformation, it’s vital not to miss the very point of transformation. The pharmaceutical industry is striving to reimagine its future and is catalyzed by a whole range of new technologies. Digital health, with its main epitomes like Cloud, AI, IoT, and more to come, is already shaping the pharma landscape. Empowering patients with their health data and putting them in the central point of care modifies the traditional functioning of the drug industry.
Real-life technology application by both industry whales and pharmatech startups move innovation forward, be it transitioning to the cloud or wielding big data’s muscle to intelligent drug discovery that’s powered by AI.
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Are pharmaceuticals and biotechs ready to leave behind the well-established legacy to step up into the hype of changes and new buzzwords? Probably not right at this moment. A magic pill has not been discovered yet. Transformation is about the ways that strategies use technology to build a business ecosystem, which in turn drives growth, accelerates results and improves customer experience.
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