digital transformation of healthcare industry players

Digital transformation of

healthcare industry

players

KDI Conference

6. November 2014

Dr. Thilo Kaltenbach

2 Digital Transformation

Digitalization transforms Healthcare companies through new value propositions and changed

operating models – the result is the need for transformation

Status quo – Need for digital transformation

Source: Arthur D. Little

Digital Transformation

Digital Health hotbeds

Cross-industry trends

Transformation guidance

Need for digital transformation

Digital Health offerings

(Digital value proposition in healthcare)

eCompany

(Digitalization of operating models,

across all industries)

Transformation need (digital

transformation)

Weekly releases of new Digital Health products and/or

new Digital Health development alliances:

Same treatments apply to

several treatment areas at

once

Some treatment areas

become rapidly digitized

Competing innovation

approaches

1

2

3

Transformation process & governance:

Product innov ation

– Smart personalized

products

– Innovation of R&D

processes

Timeline:

– Framework adjustment

– Transformation

elements

– Implementation

Digital transformation

along the v alue chain of

pharmaceuticals

Customer Experience

– New digital

channels

– New customer

journeys

Operating model that

enables process and

technology efficiency

– New technologies

– Agilization

Digital transformation in healthcare:

Pursuing sustaining or

disruptiv e innov ations?


Agenda

1 Digitalization of healthcare offerings

2 Digitalization of operating models

3 Arthur D. Little’s view on digital transformation


Digital Health and the relation between key concepts

Digital Health harbors a variety of concepts and related applications – mobile technologies act

as a catalyst to ensure convenient connectivity for consumers and patients

Source: Mitchell, J. & Associates (1999) The cost effectiveness of telemedicine enhanced by embracing e-health. Pawar et al. (2012) A framework for the comparison of mobile patient monitoring systems. mHealthTalk.com (2013) mHealth — What does it mean and what’s included. Fasano, P. (2013) Transforming Health Care – The financial Impact of Technology. Sonnier , P. (2012) Definition of Digital Health. Pagliari et al. (2005) ‘What Is eHealth. Arthur D. Little

Smart reminders and

therapy control

systems

Video monitoring for

special needs

Vital signs collection

and remote reporting

Online health self-

education

Online patient-doctor

consultation

Online monitoring daily

routines

Sensor technologies

Genetics

Mobile technologies

acting as a catalyst to

connect and integrate

the chain of care

1 Digitalization of healthcare offerings – What is Digital Health?

Use Cases


1


The Digital Health market will increase significantly in the next years, which is mainly driven

by the mobile health market that triggers further growth of wireless technologies

1 Digitalization of healthcare offerings – Market projection

Source: Arthur D. Little, GSMA, Allied Market Research, Accenture, IHS, MarketsandMarkets Note: Other includes health telematics, informatics and further sub-segments with estimated additional 20% market volume

Digital Health market projection by segments

6.4 0.4 10.1

+21%

2017

135.9

59.7

24.8

24.2 4.5

22.6

2013

60.8

23.8

20.0

233.3

2020

38.9

6.3

55.9

29.1

103.2

Wireless health Mobile health

EHR / EMR Telehealth

Other

Digital Health market 2013 – 2020 (bn. USD)

CAGR

23%

6%

36%

46%

21%

Mobile health

■ Highly attractive market w ith strong grow th leverages full market potential

of other sub-markets

■ Mobile services are the main value driver

■ Mobile operators w ill be the key beneficiaries

■ Asia Pacif ic is expected to be the most important region in 2020

Telehealth

■ Medical devices and communication technology to monitor diseases

■ Small market w ith possible future grow th by monitoring entire populations

(Population health management)

EHR / EMR

■ Market of EHR/EMR systems and corresponding services is already w ell

established and mature w ith low grow th over the next years

■ Cloud-based solutions offer increasing applications of EHR

■ US market is leading w ith nearly 50% of total market size

Wireless health

■ Wireless netw ork technologies is the largest Digital Health segment

(WLAN, Bluetooth, RFID)

■ Market includes w ireless sensors and handheld devices

■ Wireless market w ill be driven by mhealth applications

Key take away


1


Beta-version available

DNA analyzer that

enables users to learn

about and explore their

DNA

Extrapolates ancestry

reports and raw data from

its database

Future use for health-

related genetic

information anticipated

Digital offerings are manifold and will change the way how people are treated tremendously –

no doubt that the Pharma’s offerings will be impacted

1 Digitalization of healthcare offerings – Digital Health examples


Apple Health Healbe calorie tracker 23 and me Proteus digital

Available in the USA

Marketed as an intelligent

medicine platform

integrating patients,

patients’ relatives and

treating doctors

Includes wearable and

ingestible sensors

Developed in cooperation

with Novartis and Otsuka

Pharmaceuticals

Currently focuses on

collection of health and

fitness information from

third-party apps

Glucose monitor in

development using non-

invasive sensors

Takes advantage of

pedometer, blood

pressure, hydration and

heart rate screening

Bayer BETACONNECT™

Prescribes injection

reminders, injection depth

and speed based on

patient preferences

Stores and shares

injection information

(date, speed, volume) and

symptoms and syncs live

with smartphone app

Shares the data with

healthcare providers via

an online dashboard


1


For traditional players following a sustaining path to innovation, Digital Health represents –at

the bare minimum– an opportunity to hedge against future disruptions


Driven by unmet patient need and existing target customer base

Follows traditional Pharma R&D model

Well understood and established risk assessment and cut-off points

1 Dominant technology pull 2 Dominant technology push 3 Potential technology hedge

Driven by technical ability and vision to change prevailing paradigm and target new/ broader customer base

Often by new industry entrants

Not well understood by incumbents

Traditional risk assessment not applicable

Gives incumbents access to new technology and treatment paradigms

Externalized and independent from traditional/ core business

New approach to innovation and metrics to measure success needed

Price

More targeted (niche) Broader

E.g. Specialty

1 2

3

Digital Health

Customer base

Higher

Lower

E.g. Orphan

Cell therapy

Biological therapies

1 Digitalization of healthcare offerings – Sustaining Vs. disruptive innovation


1


Flatiron Health

“Oncology Cloud”

platform providing

decision support to

practitioners

“Big Data” database

recording cancer patients’

journeys

Aggregates and

transforms clinical and

financial data from EMR

and billing systems in

real-time

Beta version available

Biological print

manufacturing

Artificial heart made from

e.g. fat cells and collagen

Put together from several

separate pieces that can

and have to be replaced

individually

Currently only functioning

muscle tissue can be

created, while research

on working valves and

arteries is ongoing

Market entry in ~5yrs

Ekso Bionics/ ReWalk

Robotics

Wearable bionic suit

assisting/ facilitating

movement of extremities

Steered via the wearer’s

deliberate shifting of their

weight

Software analyzes the

patient’s movement

patterns and applies the

pattern when executing

the moves

Marketed

University of Tokyo

Flexible, disposable

sensor for diapers

Detects moisture,

humidity and pressure

Infant & adult applications

Battery-powered and

wireless transmission

Manufactured by print on

plastic film, inject 3D-

printing in development

Market entry <2yrs

Select case studies of current innovations reveal both break-through innovations and

disruption across therapeutic areas

1 Digitalization of healthcare offerings – Growth opportunities for Medtech companies, examples

Source: Corporate websites; Arthur D. Little

Oncology Cardiology Orthopedics Nephrology


1


Agenda





Digital transformation affects the value chain regarding value proposition, revenue model and

value chain architecture

2 Digitalization of operating models – Transformation Need

Source: Arthur D. Little Analysis value chain architecture

(how is the offering generated)

value proposition

(what is being offered)

revenue model

(how does the company charge for its products)

Digital Health

offerings

Operations

changes Digitally enhanced

research (in-sil ico)

Methodology/

Algorithm

development

Translate patient

input & data “from

bed to bench”

Order automation/

RFID-integration/

interface

E-Detail ing

Restructure/

retrain sales

reps

Provide access/

transfer tech.

platform

Develop/

decide tech.

standard

Technology

competence

Technology

evangelists

Integrate

patient

f.-back

Personalized Medicine

Customer Experience Omni & Channel Marketing

Digital elements in the offering: chip in pil l; closed loop

Impact on

Business Model Drug

packaging

redesign

Small unit

dose batches

Value-add for

platform

subscribers

R&D unit for digital offerings

Open

Innovation Partnering Venturing

Subscription pricing

Disease

management

User/

patient

accounts

Social

Media

guideline

Licence

revenue Tech. scouting capability

Decision making governance

Life cycle management

COGS

increase

Main

challenge

How to use Big Data in a

predictive way?

How to increase

effectiveness in R&D?

How to organize

development and innovation

for digital products?

How to reduce assets and

automate CMO

correspondence while

maintaining quality control?

How to reduce order-lead

times and increase contact

to patient?

How to define a service

model?

How to design and promote

digital solutions?

How to price products?

How to define a vision for the

target portfolio?

How to align development

cycles of Pharma, Medtech

and ICT?

How to define platform for

future solutions?

How to ensure FDA

requirements in Digital

Health are being met?

How to assign

responsibil ities?

Internal or external user-

account administration?

Clinic

Phase I

Clinic

Phase II

Clinic

Phase III

Development

Clinical Batches

Commercial Batches

Scale up

Manufacturing

Filing Distribution Product Launch

Market Access

Sales force Service Communi-

cation

Marketing & Sales

Basic Research

Pre-clinical Discovery

Research Strategy & Portfolio

formulation

Areas of impact along the pharma value chain

Pay-per-use

eCompany 2


E-principles are applied across all industry and will lead a more efficient, more versatile and

flexible organization in healthcare, too

2 Digitalization of operating models – e-Company framework

Construct e-governance in a way,

that customer excellence and agility is ensured

Redesign IT architecture to be fully online

compatible Harmonize applications across channels

Digitize existing products

Connect stages of care Create close loop systems and digital

services Define business models the company

would like to run

Define operating model for Digital

Health Re-define processes, organization,

governance Ensure customer focus

Integrate online and offline channels –

Closed Loop CRM Emphasize e-care and e-sales through e-reps

Initiate change to adapt the

culture to the e-company operating model

Develop future workplace that

fosters collaboration, mobility and access to knowledge, heavily

supported by technology

e-Company framework

5

Culture

7

Governance/ agility

4

Process landscape

3

Product portfolio

2

Customer Engagement

1

6

Workplace 2.0

e-company IT architec-

ture

eCompany 2


Digital companies today manage six types of capabilities simultaneously to deliver high

performance to their customers and partners

2 Digitalization of operating models – Digital Capability Framework


Ability to “Listen to our customer” to drive co-innovation and co-product design, as well as

embed intelligence into the products to make them “smart”

Example: open innovation, crowd sourcing, agile development, product smartization

Ability to deliver seamless customer experience on all channels and devices

Example: e-Care, e-Sales, seamless X-channel experience on- and offline

Ability to change organizational structure to deliver digital performance

Example: Digital ownership, organizational governance e.g. digital officer / BU

Ability to reduce complexity of IT architecture and processes to maximize

flexibility

Example: Agile/Scrum, SOA paradigms, Enterprise Architecture, Cloud, Analytics

Ability to manage transformation complexity to achieve value driven results

Example: Think big start small, Management alignment, change &

communication

Ability to craft digital business strategy and models to identify new value

sources

Example: e-Mobility, 3D printing

Digital Product

Innovation & Mgmt.

Digital Interaction

Management

Organization &

Governance

Process & Technology

Management


Management

Digital Business Strategy

Management 1

2

3

4

5

6

eCompany 2


Initial symptom/ concern

Online research

& ask family/ friends

Consultation with physician

Prescription issued

Share experience online/ further

research

Visit to GP to address concerns

Recommendation to friend/ social

media

Need for treatment (acute or general)

Advertisements, Reference look-up/ consultation

with peers

Seek detailed information

from manufacturer

Commitment/ prescription to

patients

Feedback from patients/ concerns

Additional information from manufacturer/ expert peers

Stop prescription of drug

Patient Physician

2 Digitalization of operating models – Customer experience: Multichannel Management


Example: E-reps have the potential to inform, consult, and influence patients on several steps

along the customer journey

Concerns Resolved/ unresolved

Continue prescription

E-reps: Potential touch-points along the customer journeys

Consult patients and provide further

information on products

Get in touch with patients and provide

first information on products and

solutions

Provide information via online channels on products and

consult if necessary

Simplification of information

process, prepare physician for

physical sales reps

Presence in and consultation via

social media

Gather necessary information online with

possibility to contact e-reps

Example

eCompany 2


Agenda





The transformation process for every digital product always involves three dimensions:

Product innovation, customer experience and process-/ technology-efficiency

Product innovation Customer experience

Operating model that enables process and technology efficiency


Smart and personalized

products demand new customer

facing and internal processes, as

well as new technologies

Innovation of R&D processes

involves customers and other

internal stakeholders in a new way

New digital channels

require a new set of

governance and processes

New customer journeys

need to be supported by

new business processes

Introduce of new technologies

for existing processes for more

efficiency

Process agilization to improve

flexibility

More efficient decision-making

with real-time data from existing

and new sources

Coke Sound Up – QR-Code Music Download

Crowd innovation - EMC Innovation Labs

Social Media Marketing & Services of CAT

Online reservation & in-store collect by OBI

UPS is using real-time routing based on Big Data technology to save costs and time

KLM deployed Service Cloud of Salesforce.com


A. B.

C.

3 ADL’s view on digital transformation – Need for transformation

Transformation 3


The Digital Playground:

Digital Speedboats, Innovation Pilots, …

The Digitalization Journey should follow a strategic approach to reach increasing maturity

level

3 ADL’s view on digital transformation – The Digitalization Journey


1

2

3

4

5

6

Digitalization Journey

Fully Digital

Company

Digital Channel

Integrator

Co-innovation & agile development

established

Digital Product Innovation Management

Digital

Operator

Digital channels fully integrated in

sales & care

Seamless customer experience across

all channels

Digital Interaction Management

Digital Tech.

Manager

Digital operating & governance model

conceptualized

X-Channel steering established

Org. structure adapted to deliver

digital performance

Organization, Governance & the Human Factor

Digital

Transformer Active Technology

evaluation

Processes improved using

digital tech.

New digital channel supported by new

technology

Agility & Efficiency supported by digital

technology

Process & Technology Management

Digital

Pioneer


planned

Technology roadmap defined

Internal processes and organization

adapted

Customer facing unites & processes

transformed Fully transformed

Digital Transformation Management

Digital Vision formulated

Strategic directions defined

Digital business & technology strategy

crafted

Strategy for overall efficiency & new biz implemented

Strategy for digital channels

implemented

Digital culture impressed

Digital Business Strategy Management

Transformation 3


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Copyright © Arthur D. Little 2014. All rights

reserved.

Contact details

Contact:

Dr. Thilo Kaltenbach

Partner

Arthur D. Little GmbH

Nymphenburger Höfe

Nymphenburger Str. 4.

80335 Munich

T: +49 89 38088 781

M: +49 175 5806 177

E: [email protected]

digital transformation of healthcare industry players

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