WHAT CAN THE BIOTECH INDUSTRY LEARN FROM A CONSUMER PRODUCTS GIANT?
More than you might suspect . . .
Innovation has been the lifeblood of Procter & Gamble's growth for nearly 170 years, and during the past decade, P&G has dramatically innovated how it innovates. Indeed, the company's "Connect & Develop" model has turbo-charged its growth. Since 2002, the net present value of P&G's innovation pipeline increased 300%, and the company's innovation success rate grew by more than 40%. In fact, three of the top five new consumer products introduced in the U.S. last year came from P&G. More than half of the top new products in the past decade came from P&G and Gillette.
Three critical factors drive P&G's success:
Its belief in consumer-driven, not technology-driven, innovation
The way it defines, manages, and commercializes innovation
How it embraces innovation found outside its four walls
This approach to innovation, and the resulting business success, isn't limited to just P&G's household care and beauty businesses; it's also at the heart of P&G Pharmaceuticals and its other healthcare businesses. In a recent interview, Mark Collar, President of Global Pharmaceuticals & Personal Health at P&G, explored P&G's innovation model.
THE CONSUMER IS BOSS
Consumer-driven innovation may sound obvious, but the latest technological discoveries are often what drive innovation in many companies (including P&G, in the past). Yet technology-driven innovation is only successful if it fulfills an unmet consumer need. So by starting with a clear understanding of what the consumer desires and allowing that understanding to guide your search for innovation, you increase your chance for success.
It's no surprise that, due to its parent company's unparalleled consumer expertise, P&G Pharmaceuticals looks at the sprawling healthcare industry through a somewhat different lens than that of most pharmaceutical companies. Its unique consumer insights guide every aspect of the business, from the selection of which therapeutic areas to pursue to how to best market its current portfolio of trusted brands. For example, P&G Pharmaceuticals focuses on three therapeutic areas where the patient plays a particularly active role in managing their health - Musculoskeletal, Gastrointestinal (GI), and Women's Health. "It takes more than focus groups and surveys to truly get in touch with patients," explains Collar. "We create opportunities for both the scientists leading our drug development efforts and the brand managers responsible for our current portfolio to literally 'walk in the patient's shoes' through home visits and complex patient immersion simulation exercises."
GETTING IN TOUCH WITH ULCERATIVE COLITIS PATIENTS
P&G Pharmaceuticals is committed to deeply understanding the people who benefit from its products. For example, the Asacol Team participated in a unique, seven-day simulation of what life is like for acute ulcerative colitis (UC) sufferers. This simulation occurred 24 hours a day, not just during work hours, and interfered with sleep and family time. The 25 cross-functional members (i.e., marketing, sales, R&D, market research, public relations, and others) of the extended Asacol Team took placebo tablets, kept diaries of their bathroom experiences, and wore pagers to interrupt their daily lives with ulcerative colitis "flares." When the beeper sounded 6 to 12 times throughout the day, they stopped whatever they were doing to locate a restroom. If they were in a meeting, they excused themselves. If they were driving, they pulled off the road to find the nearest public facility. While the team realized the simulation wasn't even close to what a UC patient deals with, they gained a much more personal appreciation of the disease's impact. These insights led to further improvements in P&G's patient support programs and guided clinical research in its continuing efforts to improve UC treatment.
WHAT IT IS: BETTER BRAND EXPERIENCES
P&G defines innovation far beyond traditional product innovation. The company focuses on the entire experience consumers have with its brands - from how they learn about products to the way they shop for and buy them, to the experience they have when they use them and their feelings when they tell friends and family about them.
"The discovery of more effective, safer therapies is critical innovation, but it's no longer sufficient," Collar explains. "Today's healthcare consumer is more demanding than ever, so it is equally important to rethink how we communicate with her and her healthcare providers, as well as what information and support services we can provide to enhance her overall healthcare experience." (Collar consistently refers to the healthcare consumer as female, noting that the vast majority of a family's healthcare decisions are made by Mom, who is now playing a much more active role in her healthcare and that of her extended family.)
This consumer mentality - the sense that healthcare is to be shopped for and compared just like any other purchase - is playing out across every aspect of the healthcare spectrum. Recognizing this, P&G Pharmaceuticals has become an industry leader in helping healthcare providers improve the overall experiences of their patients, building trust and loyalty.
WHO'S RESPONSIBLE FOR IT: EVERYBODY
At P&G, innovation is everyone's job. The company looks for innovation from R&D, of course, but also from marketing, engineering, manufacturing, distribution, and even finance. "Commercial innovation, innovation that doesn't involve any product reformulation or package change, plays an important role in the lifecycle management of our pharmaceutical products," Collar explains. "Implementing innovative marketing and patient support programs, in parallel with the clinical research programs to explore new indications and formulations, not only sustains but accelerates the growth of the brand." For example, the formulation, dosing, and indications of Asacol® - P&G's trusted treatment for ulcerative colitis - haven't changed in more than a decade. However, P&G has been able to sustain leading market share by using innovative marketing techniques to remind physicians why they trust Asacol and by improving patients' experiences through insightful patient education and meaningful support programs.
WHERE IT COMES FROM: FROM R&D TO C&D
For more than a century, P&G was a very traditional, vertically integrated R&D company, but within the last decade it dramatically opened its doors to much more innovation from outside. "Shortly after A.G. Lafley became CEO in 2000, he called on the entire company to reinvent our innovation model. Specifically, he challenged us to acquire 50% of our innovations outside of P&G," Collar recalls. "We call this strategy Connect & Develop (C&D) to underscore the fact that we view it as a strategic evolution from R&D. The strategy is not about replacing the capabilities of our researchers, but to better leverage them by connecting them with millions of talented scientists and entrepreneurs outside of P&G."
Most pharmaceutical companies at least dabble in alliances or in-licensing, but P&G Pharmaceuticals has raised the ante by moving to a 100% C&D model. It sources all of its new drug development projects via a network of biotech, pharmaceutical, and academic partnerships. Given the success of the broad C&D strategy for P&G and the proliferation of innovation coming from thousands of biotech companies around the world, it's logical that P&G chooses to in-license new compounds instead of trying to invent them internally. Many pharmaceutical companies are moving in this direction, but only a few have gone as far as P&G.
"We've integrated our R&D and commercial organizations into Category Teams aligned to our three therapeutic focus areas," Collar explains. "This structure better enables us to identify, evaluate, and in-license compounds and then manage the resulting long-term, mutually beneficial partnerships. We've worked hard at understanding what makes a good partner and building that into the DNA of our organization."
The breadth of its portfolio enables P&G to connect technology and consumer understanding in unexpected ways. For example, P&G applied its understanding of the role of calcium and bisphosphonates in laundry detergents, first to oral care and then to bone health, to eventually develop Actonel for the prevention and treatment of osteoporosis - P&G's first billion-dollar pharmaceutical brand. The company is currently exploring synergies between its Pharmaceuticals and Feminine Care businesses and also investigating the potential synergies between prescription and over-the-counter GI treatments.
"Our Connect & Develop strategy enables our 600+ scientists to focus on what they do best - design and execute clinical trial programs guided by unique consumer insights," Collar explains. "Our deep understanding of patients and the impact of their diseases allows us to identify more compelling clinical study endpoints. Besides increasing the likelihood of success in our clinical programs, these novel endpoints translate into commercial claims that are more relevant to both patients and healthcare providers."
LESSONS LEARNED FROM P&G
Yesterday's passive patient is today's engaged consumer: Don't underestimate the importance of consumer-driven innovation in an environment where healthcare consumers are better informed and more demanding.
Start with a consumer-driven product profile: Identify a winning product profile from the very start. Even when screening compounds or looking at receptors and molecules, have a clear vision of the consumer experience you want to create.
Select a partner that can enhance your technical innovation and deliver differentiating commercial innovation: Your partner should help you get the greatest consumer and commercial value from your innovation throughout its lifecycle. Choose someone with a proven track record of building holistic brand experiences that differentiate each product's value.
HOW IT'S COMMERCIALIZED: INVENTION IS NOT INNOVATION
Under A.G. Lafley's leadership, P&G has drawn a clear distinction between invention and innovation. While it has been granted 29,000 patents globally and currently has more than 200 proprietary technologies in the market, P&G doesn't consider an invention a success until it's successfully commercialized. There's no doubt the company knows how to successfully bring innovative products to market. It has the #1 or #2 selling brand in more than 20 different categories, and 99% of U.S. households purchased at least one of its products in 2006.
"It all comes back to first deeply understanding the target consumer and then connecting with her when and where she's most receptive," explains Collar. "The fact that physicians and patients are receiving more and more of their information through channels once reserved for consumer goods marketing - like TV advertising and the Internet - plays to our strengths. Today's healthcare consumer is better informed, more engaged, and more value-driven than ever before."
P&G Pharmaceuticals' ability to apply the marketing expertise and unique insights of the world's largest consumer company to build healthcare brands has enabled it to deliver strong growth during the past decade. Collar is clearly confident that its Connect & Develop innovation strategy will sustain that growth long-term. "I look forward to continuing to grow, but I never want to lose our approachable, eager-to-learn attitude," he explains. "Our relatively small size and the fact that we've been in several alliances with much larger pharma companies helps us relate to smaller biotech companies. It's personal for them. We understand they have blood, sweat, and tears invested in their work, and they want to partner with someone with whom they can have a relationship. We're happy to give them a seat at the table and to give their 'baby' the attention it deserves."
