Building a strategy in a digital world

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Recent studies point to digital as the primary force driving the business and societal changes that are affecting company operations across industries. Because retail and health care are facing the most disruption, North American pharmacies can no longer afford to watch from the sidelines.

While leading players are making fundamental changes to their entire organizations — an essential move for building and implementing a successful business strategy in a digital world — many pharmacies are hesitant to undertake a digital transformation. Although this uncertainty is understandable given the perceived complexity of developing a digital strategy, our experience shows that all companies can succeed with the right strategy.

cdr-filler-opinion-750Companies can examine their business vis à vis the digital world by thinking through a strategy that encompasses their corporate environment, the components that make up the company’s operations and the business model.

Four factors set the environmental context — regulatory requirements and consumer behaviors, disruptive technologies, competitive environment, and market development. Seven operating model components focus on the “how” of bringing digital to life within an organization and for its partners.

However, the most essential components lie within the digital business model: customer interaction, connected products and services, insights and analytics, and the economic model. In today’s digital world, a successful business strategy requires, especially, getting these four elements right.

Customer interaction

Customer interaction is the most important part of the digital business model. From here flow all the considerations a company must take into account before addressing the other elements. In today’s digital world, customers’ behaviors are changing. And, like all companies, pharmacies must understand their customers if they are to offer the right products and services and effective communications. Customers and companies are now more willing to share information in exchange for value. These changes are driving a significant shift in the customer interaction paradigm.

Before digital, the focus was on business-to-business and business-to-consumer interactions. Now, we are seeing the rise of consumer-to-business and consumer-to-consumer interactions. People often interact with companies to express what they like and don’t like, and they are communicating with each other in ways that were previously not possible. These interactions can either enhance or undermine marketing efforts. Players that are prepared for these customer-initiated interactions can capture huge value.

Nearly all of today’s customers are online and using connectivity to communicate and improve their sense of control. Pharmacies can tap into this connectivity to improve their customer interactions:

• Gain insights from sharing. Patients can volunteer information about their health to learn more about how their drugs and other products are used by people with similar needs.

• Improve the allocation of labor and services. Patients can let their pharmacy track their location to ensure prescriptions are ready when they arrive and to avoid early dispensing and return-to-stock situations.

• Help patients help pharmacies. Pharmacies can display wait times to allow patients to choose from nearby pharmacies, which also helps pharmacies level the workload.

Connected products, services

As pharmacies consider new products and services, they strive to deliver items that consumers want. This now means making sure each item has a digital component. Although not every product will be digitally enabled, companies can publish information and provide promotions and discounts online.

Pharmacies that go one step further by wrapping digital services around products will gain an edge. Many successful players are contacting customers by phone, text or email when their prescriptions are ready to be picked up. Later, they reach out again to remind them to renew their prescriptions. Some even make it possible for customers to engage medical professionals through telemedicine or connect with other patients to share their experiences about drug side effects and benefits.

Looking to other industries, companies are using a variety of concepts that pharmacies can adapt:

• Consultation videos with information about drugs and health conditions, available 24/7.

• Gamification concepts to improve health, giving patients points for adherence or for learning about their conditions.

• “Edutainment” concepts at the drive-through to improve the customer experience.

Insights and analytics

Online activities provide a huge amount of data about how customers browse, buy and use products and services. Companies must be able to make sense of all this data: what it is, how to obtain it, what parts are useful and how to turn the useful data into practical insights that can improve operational decisions.

For example, data might show that customers who buy pharmaceutical product A also often buy front-store product B. This information enables companies to predict and make more effective product suggestions to customers. However, without an effective digital analytics strategy, companies miss out on these insights.

Economic model

The economic model of the digital world still dictates profits by subtracting costs from revenue (quantity multiplied by price). However, it can be easier for a company in the digital world to influence these components — increasing quantity through strategies such as the more common subscription models.

It is also easier to adjust pricing online, and nimble companies use digital data such as location and computer platform to tailor pricing schemes for different customers. However, quantity and price changes should not be made without first working through the other three components of the digital business model. As those elements change, they often trigger changes to the economic model.

Examining these four components of the digital business model is an essential step in any digital transformation. In today’s business world, every company must embark on this journey — no matter how difficult it may appear.

The journey begins with two steps: First, understand that a digital business strategy is more than technology tacked onto an existing strategy. And then, acknowledge that this strategy is meaningful only when it is viewed as a business strategy for a digital world, and developed with the knowledge that customers already live in this new world and expect companies to meet them there.

Todd Huseby (todd.huseby@atkearney.com) is a partner with A.T. Kearney’s Health and Retail Practices, and leader of digital business efforts in the Americas. Jay Dombi (jay.dombi@atkearney.com) is a principal with A.T. Kearney’s Health Practice.


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