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Continued from Previous……
We continue our discussion on tired organizations, which are those who have been left behind in time for various reasons, who now move slowly and painfully, and who appear to have lost hope also.
The pace of change is fast and furious; individuals or organizations who do not move at the same pace keep falling behind. We take up the next reason which is so critical that it became the undoing of many huge businesses.
Failure to See the Coming Change
Blackberry at its height had over 50% market share in the US and was considered a status symbol all over the world. They had a multibillion-dollar business, and they flaunted it as well. They held a get together extravaganza every year in Orlando, Florida. I also attended it in 2008 as their guest. It was business class travel, five star stay, and great hosting.
BB’s business model was tied to mobile carriers which affected pricing and availability of phone sets and services. In 2007, the first iPhone was launched. Their business model was independent of carriers. Apple already had dazzled the market with iPod and iPad, and iPhone was taken up instantly. In addition, it offered freedom from the carriers, wide availability, and prices set by Apple. Blackberry saw it but did not make any move to counter the impact of this change. In less than five years, Blackberry’s share plummeted to 5% and then it became history. Mind it, I attended their gala event in 2008 when iPhone had been on the market for a year already, but BB was too proud to launch their new model ‘Blackberry Bold’ and didn’t care too hoots about iPhone. The launch of Android phones in late 2008 was the last nail in their coffin.
By 1998, Nokia had overtaken Motorola to become the largest phone maker of the world. At their prime in 2007, it had 51% of world mobile phone sets market. They made two errors of judgment: one, they opted not to use Android operating system and insisted on upgrading their own Symbian OS; two, they did not consider making touch-screen phones and brushed the idea as unnecessary. Both errors cost them heavily; by 2012 they had lost all but 5% share. In 2013, Microsoft acquired Nokia, killed the brand ‘Nokia’ and launched its Windows-based Lumia phone. The acquisition was a huge failure, Microsoft wrote off $7.6 billion, and Nokia bought back its phone business in 2016 together with HMD Global Oy and is back in business as one of the many ordinary brands.
There are several other cases across many industries. The common thread is that the organizations’ owners/managers failed to see the major changes coming in their trade and were run over.
In the Pharma Industry, the biggest change was launch of generic versions of new products. Hilton Pharma was among the early starters. They had the advantage of having a sister concern, Progressive Agencies, which dealt with the indenting of pharmaceutical raw materials. They knew which new generic materials were becoming available, from where, and at what price. They leveraged this advantage fully and launched several early generics and built good business. The success of these brands varied with the effort behind. Couple of other pharma companies also had sister concerns in Pharma indenting business, but they did not visualize the change that was coming in the market and suffered. Later, every company joined the bandwagon and launched scores of new generics and the trend continues; the number of registered drugs had crossed the 100,000 mark long ago. During 2022, over 350 new products were launched, over 95% were generic products.
Another trend in pharma marketing/selling started in mid 1990s; it was investment on customers to get more/guaranteed business. Everyone saw it coming but most companies kept busy in criticizing it, rather than trying to gauge its impact. The early adapters reaped huge business with less investment; the laggards invested more and got less. Couple of companies who did investments in consistent, specialized, liberal ways, were rewarded with outstanding results; those who were inconsistent got nothing or very little.
Three reasons run as common factors in all these cases.
One, the organization is more inside-out. They live within themselves, are their own standards, and believe that the world should also share their views. These are fault lines. Monopolies do control the lives of people but even that is changing. Previously, monopolies kept their hold for very long time, but now it is not so. The buzzword today is ‘DISRUPTION’. Disruptive ideas, innovations, and technologies have caused the death of decades/centuries old establishments, and the inexorable process continues. Today, we can do almost anything without stepping out of home, which was unthinkable even 10 years ago. The inside-out approach is counterintuitive and damaging, they need to adopt outside-in approach.
Two, the organization feels insecure about the change. What if it does not work out, what if it goes wrong altogether, what if we lose this and don’t gain that, are genuine concerns. The organizations, therefore, choose to stay in the familiar territory which is their comfort zone also. Comfort zones mostly lead to professional death for individuals and organizations. A better approach would be to go for innovation with a reasonable risk protection for the existing one. In this way, both ends shall be secured.
Three, organizations, like people, carry some blind spots. Blind spots are areas which they cannot see themselves, but others can see. Blind spots affect decision making very seriously and can lead to disastrous results. External input in some situations is therefore vital. However, in Pakistan, we do not work with external resources like consultants. This industry never flourished in Pakistan.
Andy Grove, co-founder of Intel® wrote a book titled ‘Only the Paranoids Survive’ which was published in 1988. The events that Blackberry or Nokia faced much later, were termed by him as ‘Strategic Inflection Points’ or SIPs. SIPs are those critical moments in the life of a company when its entire strategy needs to be brought into question. In scores of strategy meetings, although ‘strategy’ is the main subject, but ‘strategy change’ is not the subject. So, the participants keep moving in the same circle without ever questioning the existing strategy. In effect, status quo is maintained. An SIP can wipe out the company, but it can also make a company great if they are able to exploit it. COVID19 was an SIP and those services that adapted themselves quickly made fortunes.
To be Concluded……
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