Strategy & Management

Camelot’s Pharma Management Radar

07.10.2015 -

The Internet of Things (IoT), where smart devices, machines and people communicate and exchange information with each other, has the power to revolutionize the life sciences industry. What has begun with wearables such as fitness trackers or blood pressure monitors might eventually lead to connected patients, who provide real-time feedback on drug effects, and to a large new market of health-conscious individuals expecting “intelligent” treatments and completely new services.

Backed by a rather optimistic general business outlook, many industry players are currently in the process of planning or piloting IoT-related projects. Though some technologies already play an important role, it would be too early to call IoT the current megatrend of the industry. Rather, life sciences executives may not see IoT everywhere now, but they definitely see it coming.

This is the picture that emerges from the sixth Camelot Management Consultants Pharma Management Radar, a biannual survey that examines the general climate in the life sciences industry and additionally takes an in-depth look at a varying current management topic. In July and August, 30 executives from globally active life sciences companies based in 16 countries and spread over four continents participated in the online survey. The focus topic of the sixth Pharma Management Radar is the Internet of Things.

Positive Business Climate Continues

The executives’ view of the business climate for the life sciences industry has further brightened since the Pharma Management Radar Survey half a year earlier. In accordance with their general industry outlook, most respondents are optimistic with regard to their own business development. Only 7% of them expect their global sales performance to deteriorate, while more than 90% anticipate revenue growth. When it comes to where this growth is expected to take place, China and North America hold the top positions. And Russia shows clear signs of recovery.

Most Important Markets for Investment: North America and China

These expectations are also reflected in many of the life sciences industry’s regional investment plans for the next 12 months. North America has caught up with China as the most important market for investments. Southern Europe and the UK, which used to be considered quite attractive regions for investment, have obviously lost this status. Russia, on the other hand, seems to have regained some of the attractiveness lost during the political crisis.

Growing Employment Figures

In contrast to past developments, the will to invest and the general economic optimism are now accompanied by an expected growth in employment figures. More than three in four participants expect to keep their employment figures constant or to even increase staff. This development must not, however, be misinterpreted as a sign of lowered cost awareness regarding human resources. The contrary is true, which can be seen when asking for the evolvement of external sourcing volume. With more than 80%, the share of respondents planning to increase external sourcing has grown considerably since the previous survey (66%) conducted only six months ago.

The Industry’s Fears: Price Decrease and Political Risks in Growth Markets

The fear of revenue decrease due to patent expiry remains the major topic (48%) when it comes to the respondents’ risk assessment — which clearly implies that for these respondents there will be important patents becoming obsolete in the near future. The second major risk has to do with the political and economic developments in various regions of the world: Further gaining relevance since the last survey (44%), political risks in growth markets are now sharing the top position with price decrease.

Industry Trends: Cost Reduction, Product Innovation, Offerings Beyond the Pill

In accordance with these results, cost reduction is considered the most important industry trend by three-quarters of respondents. Product innovation through research collaboration has also gained relevance among the respondents (1/2015: 26% vs. 2/2015: 44%). Another major trend reflected in the survey is offerings beyond the pill including e-connected devices. The relevance of these offerings has grown considerably since the last survey (13% vs. 44%) — which hints at the growing importance of the so-called Internet of Things.

Internet of Things Gaining Relevance — Slowly But Surely

The Internet of Things is definitely on the executives’ radar, as can be seen from various questions dealing with the IoT. When asking for the functional area most strongly influenced by IoT within the next five years, most executives (60%) name supply chain and logistics. Sales and marketing comes second (45%), while figures are surprisingly low with regard to research. These near-term expectations are more or less in line with the current status of IoT in the industry where nearly 40% of respondents have IoT projects implemented in supply chain and logistics. Regarding sales and marketing, surprisingly just around 10% have realized IoT projects, though 50% have already planned or piloted IoT in this area — which allows for the interpretation that most companies are still in a trial-and-error phase.

IoT Expected to Gain Significance in the Next 15 Years

This assessment is backed by the fact that respondents are much more positive about IoT in all areas when extending the timeframe to 15 years. A similar phenomenon can be observed with regard to the individual technologies that are part of the IoT. While it is mainly sensor and communication technologies like NFC that stand out in terms of relevance for the near to medium-term future, two-thirds expect that other technologies such as nanotechnology, e.g., smart pills, and connected robotics will strongly influence the industry in 2030.

IoT in SCM and Logistics

Taking a closer look at the field of Supply-Chain Management (SCM) and logistics, more than 40% expect Track & Trace to be highly affected by IoT within five years. Environmental control ranks quite high as well, mainly among innovators. This might relate to the increasing share of biotechnology products, which require tougher environmental controls, in their portfolio. Consequently, these two areas of application show the highest shares of implemented IoT projects in the respondents’ companies now. In other fields such as new services and reverse logistics, the general trend still swings between total reservation and first steps in the form of planned or piloted IoT projects. In the 15 years perspective, however, virtually all areas achieve high shares of strong or even very strong IoT influence expectations.

Main Push for IoT Technologies in SCM in Three to Five Years

The executives’ high expectations for the longer-term future do not mean, however, that IoT will remain a lame duck until 2030. On the contrary, most respondents — especially those representing innovators — expect the main push for new IoT technologies in pharmaceutical SCM to happen in three to five years. Despite their rather distinct belief in progress, executives are also aware that an extensive range of hurdles and challenges will have to be overcome before IoT’s complete breakthrough. While technological maturity and the question of the business case are two of the top answers, most other major hurdles require a lot of effort from the global life sciences industry and legislators: Immaturity of standards and lack of global legislation are considered particularly challenging when it comes to implementing IoT solutions.

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