Keys to successful adjacency moves inside the healthcare sector
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Keys to successful adjacency moves inside the healthcare sector Document Transcript

  • 1. Keys to Successful Adjacency Moves Inside the Healthcare Sector Evaluating Market Attractiveness to Capture New Adjacent Opportunities
  • 2. Keys to Successful Adjacency Moves Inside the Healthcare Sector Contents 2 INTRODUCTION 3 I. WHAT TYPES OF ADJACENCIES EXIST? 3 4 II. EVALUATE THE ADJACENT OPPORTUNITY MARKET ATTRACTIVENESS 5 5 Market Statistics 5 Therapeutic Landscape 7 11 12 Competitive Insights 12 17 III. ADDRESS YOUR DATA GAPS AND EXPAND YOUR KNOWLEDGE BASE 18 Analytics and Data Triangulation 18 Using Market Assumptions 19 Tacit Insight and Critical Questioning 20 CONCLUSION 21 REFERENCES 22 ABOUT ORC INTERNATIONAL 23 ABOUT THE AUTHOR What’s Driving Healthcare Companies to Look At Market Adjacencies? A) Market Size, Growth & Landscape Market attractiveness – tackling new geographies B) Competitive Situation & Profit Pool Mapping Mapping Profit Pools
  • 3. Keys to Successful Adjacency Moves Inside the Healthcare Sector Introduction ORC International previously presented a webinar and white paper entitled “Developing a roadmap for identifying and tracking adjacent market opportunities” which described a number of successful research methodologies for developing a pipeline of adjacent market opportunities. In this next series of white papers, we focus on the For more information or to download healthcare sector and discuss how these opportunities can be evaluated to identify other ORC International whitepapers the right ones for your next strategic move. visit our website at Gravitating towards an adjacent opportunity simply because the market growth potential is high or customers really like your idea is simply not enough anymore and could lead to disastrous business consequences. Growth is hard and the landscape is littered with graves of failed attempts. The average success rate of business growth is only 25%, yet companies that have achieved successful growth in adjacencies have success rates as high as 60% to 80%. It is therefore very critical to develop a rigorous approach to evaluating adjacencies - an approach that requires asking and answering lots of questions so that you are looking at the opportunity from multiple angles and through multiple lenses to validate attractiveness. There are three main components to evaluating adjacencies: Understanding the market attractiveness Exploring the customer appeal and acceptance Relating the opportunity to core competencies In this whitepaper, we will focus on the first step and discuss approaches to determine the market attractiveness of opportunities in the healthcare sector. 2
  • 4. Keys to Successful Adjacency Moves Inside the Healthcare Sector I. What Types of Adjacencies Exist? There are of course many different ways to grow a business through adjacency moves – business diversification, accelerating R&D, launching new products, acquisitions, or, as Chris Zook described it in his 2004 book “Beyond the Core”, you can step up an “organization’s metabolism” to get it to work faster and therefore grow faster. Targeting market adjacencies is another business approach that can be employed to grow your business. Adjacencies can be close to your company’s core - such as the selling of existing products through new channels, as in the case of wanting to sell your nutraceutical products through a new channel such as health spas, or can be further away from the core and potentially riskier - for example, your company has expertise in neurostimulation devices for pain management, but now decides to venture into deep brain stimulation. Local Global Expansion New-to-World New Geographies Internet New Channels Distribution Indirect New Products Adjacency Moves New Models New Business New Customer Segments Micro-segmentation of Current Segments Unpenetrated Segments New Segments Value Chain Moves New to World Complements New Substitutes Sell Capability Outside Next Generation Forward Integration Backward Integration What’s Driving Healthcare Companies to Look At Market Adjacencies? The healthcare sector is in troubled times for a number of reasons. The Medical Device segment has been hit by the 2013 Medical Device Excise Tax, which is draining revenues. According to Forbes, companies have already paid $1BN in tax so far this year. Further, many companies are cutting jobs as a cost saving measure in order to pay for the tax – an action that often results in the loss of innovation as talent has to be let go. This stifles the opportunity to grow revenues from new breakthrough products. Global competition is also rising with the emergence of home grown companies particularly in emerging markets, that manufacture generic pharmaceuticals and low cost “simpler” versions of high end medical devices to meet the needs of local customers. Patent legislation proves to be another area of challenge, as demonstrated by the recent decision by the Supreme Court in India to reject Novartis’ patent on an improved cancer fighting molecule. Pharma companies have also been experiencing the patent cliff - the loss of patent protection on key blockbuster drugs. Exploring market adjacencies, especially those close to the core and therefore less risky, can be attractive to the healthcare sector, as this provides a means to more quickly regain lost revenue caused by these and other market challenges. 3
  • 5. Keys to Successful Adjacency Moves Inside the Healthcare Sector II. Evaluate the Adjacent Opportunity Market Attractiveness Evaluating market attractiveness has three core elements. Market Size, Growth & Forecast 1 2 3 Competitive Situation Value Chain & Profit Pools Market Size, Growth & Landscape Is the market sizeable enough and growing? Competitive Situation What is the pricing and cost structure of the leaders? Will we have to give up margin to compete on price? Can we step in and grab needed market share? Value Chain & Profit Pools What are the firm-level, value-adding steps in the chain of activities required to deliver the product/ service? Which steps are most profitable? 4
  • 6. Keys to Successful Adjacency Moves Inside the Healthcare Sector A) Market Size, Growth & Landscape Market Statistics With any adjacent market opportunity, the first action item is to understand how big the market is and what its future looks like – is it growing, shrinking or stagnant? Desk-based secondary research is the best starting point for gathering key market statistics and developing an initial market characterization. There are a number of database aggregators and subscription sources that provide access to market data in the form of syndicated and open access market research and analyst reports, business publications, government statistics and industry sector reports. These can be tapped into to develop an initial characterization of the market in terms of its segments, size, forecasts, key players, market share, and trends. Market Characterization • • • • • Market size and segments Trends & forecasts Patient demographics Key players & market share Landscape – static or evolving? Therapeutic Landscape It’s also important to profile the medical condition or disease state if your adjacency move involves a new therapeutic approach or treatment modality. You need to uncover what’s on the horizon in terms of new drugs, procedure types, or medical technology that might change the market landscape and potentially erode the market size if it’s truly disruptive. Is the disease management profile changing - for example, is the incidence of common age-related ophthalmic diseases coming down because more people are taking ocular vitamin products? If you are contemplating a surgical device that can be used in single incision surgeries, you need to understand how many procedures are being conducted this way versus traditional laparoscopy and what the barriers to adoption might be. Is it surgeon skill level-and if so when might that change? Is the adjunct technology expensive-and if so, when might the costs come down and become less cost prohibitive? 5
  • 7. Keys to Successful Adjacency Moves Inside the Healthcare Sector There are a range of sources for helping to profile the therapeutic landscape - these include clinical literature databases, disease association websites and statistical data sources that report on disease incidence and prevalence. Government reports can provide detailed insights particularly in areas where there are ongoing healthcare initiatives. Reviewing publications focused on emerging technologies, treatment innovations and clinical practices is a great way to develop some initial insights into the therapeutic landscape and how it’s changing. This approach should also be coupled with qualitative interviews with healthcare professionals, clinical and financial stakeholders and KOLs to garner more tacit or practical insights that you do not always find in the published domain. You can always conduct a more comprehensive quantitative study with these audiences later on if the opportunity continues to look good; but in the early stages of assessment, a few qualitative interviews will be sufficient to garner the external perspective you need. Therapeutic Landscape • • • • • Disease profile Treatment modalities Emerging therapies Patient journey Unmet needs – for patients, HCP, providers and payers ORC Case Study ORC’s client in the pharmaceutical sector was considering entering into an adjacent therapy area and needed a comprehensive understanding of the market dynamics to make a decision to move forward. ORC searched and analyzed data from drug pipeline databases, clinical literature, investment analyst commentary and pharmaceutical trade literature. This research was further supplemented by primary research in the form of interviews with KOLs and high prescribing physicians to understand clinical practices and treatment trends. We were able to provide our client with a detailed description of the market in terms of its size, growth trends, key market players and market share, product pricing, and current reimbursement landscape. We also articulated the current and future treatment paradigms and unmet clinical needs. This helped our client to develop a strong understanding of the overall market landscape from which to determine next steps. 6
  • 8. Keys to Successful Adjacency Moves Inside the Healthcare Sector Market attractiveness – tackling new geographies The healthcare sector is continuing to focus on BRIC markets but is also now turning its attention towards the second tier, beyond BRIC markets, such as Mexico or Turkey, as part of adjacency moves to achieve business growth. To successfully enter and succeed in these new markets you need to address an additional series of key questions. What does the healthcare infrastructure look like? You will firstly need to become intimately familiar with how healthcare is organized and how it operates. Throw aside your U.S. or E.U. view of the world and even in some cases, your BRIC market perspective, as it could mislead you if the new markets operate very differently to BRIC. Take for example a healthcare product that might be designed for utility in a nursing home environment in the U.S. where elderly patients reside. In India, a nursing home is defined as a healthcare facility with at least 15 in-patient beds, an operating theater, and qualified physician and nursing staff available around the clock. Therefore, talking to nursing staff in both countries to get their opinions on your products will lead to very different and potentially conflicting views. Hence you can clearly see the importance of understanding the native infrastructure and what each type of healthcare facility does in each country to correctly evaluate market attractiveness. How is medical care funded? Going hand in hand with developing an understanding of the healthcare infrastructure is the need to define how medical care is funded in the adjacent market. This will help you determine who to target when you assess customer appeal in the adjacent market space - we will focus on this topic in our next whitepaper. Remember that “reimbursement” is a very meaningful term in the U.S., but less so elsewhere. As such you need to use the right terminology such as “financial market access,” “patient fees,” “physician compensation,” “medical service cost structure,” etc., when asking questions about market access and reimbursement in order to gain the financial picture. Healthcare Infrastructure & Funding • • • • • • Health system organization Types of healthcare facilities, locations, volume Care continuum Market access Funding, subsidization & insurance Patient out-of-pocket costs Published sources of relevant information can range from formal sources such as websites belonging to government health ministries or organizations such as the WHO and their position or white papers, industry analyst reports focusing on specific aspects of healthcare in particular countries or regions, to less formal sources such as websites designed for Ex-Pats, which can contain surprising detail on how the health system in a particular country works and provides a valuable patient perspective. 7
  • 9. Keys to Successful Adjacency Moves Inside the Healthcare Sector ORC Case Study ORC’s client was interested in several adjacent markets including Turkey, but had little insight into the country’s healthcare infrastructure. We consulted standard published databases as well as government websites and industry publications to develop a detailed profile of Turkey’s healthcare system, key management bodies, types of institutions, and their numbers / size. The Turkish Grand National Assembly is the main policy-making body at the national level Private providers operate within the health care system, providing services on a contractual basis for the beneficiaries of social health insurance and directly to patients Private facilities include Private hospitals Foundation hospitals Independent general practitioners/ specialists Out-patient treatment clinics Labratories and diagnostic centers Pharmacies Ministry of Health is the agency responsible for the provision of health care services Provincial directorates of the Ministry of Health within each province implement health policies at the operational level The Ministry of National Defense and universities own health care facilities in the public sector Social Security Institution (SSI) includes the five main social security funds, which cover social health insurance SSK Bag-Kur GERF Active Civil Servants Scheme Green Card Scheme Municipalities have some health-related roles and responsibilities but these are generally restricted to public health measures 8
  • 10. Keys to Successful Adjacency Moves Inside the Healthcare Sector What does regulatory environment look like? Regulations are constantly changing and may even vary from one province, state, or other geographic boundary within a given country. You may need to employ multiple methodologies to keep track of requirements and remember that in the early stages of an assessment, you are not necessarily looking for a comprehensive map of how to gain approval and sell in the market, but rather you need to identify the red flags that can stall market entry. These questions can initially be addressed by reviewing the websites of country-specific regulatory bodies and government agencies. You may need to enlist the help of native language experts to help you initially cull published sources if they are written in foreign languages. However, as you probably well know, there are always nuances and exceptions to the stated information and plenty of “grey areas” that needs to be unclouded. This is where it becomes imperative to tap into the knowledge and insight of regulatory experts and in-country specialists who can guide you and indicate potential pitfalls and challenges. Regulatory Environment • • • • • • • Relevant regulatory bodies Product classification Approval process and timelines Local clinical study or testing requirements Labeling requirements Licenses, duration, fees Patent protection laws 9
  • 11. Keys to Successful Adjacency Moves Inside the Healthcare Sector Here at ORC, we maintain a proprietary network of experts through our Intota Expert Network, including many that cover the healthcare sector from several different angles - pharmaceuticals, devices, biologics etc. Some are healthcare professionals, service delivery or healthcare IT specialists, regulatory experts and more. ORC’s network also includes experts based outside of the U.S. These can all be engaged to help provide insight into adjacent markets, and even help evaluate adjacent opportunities. Below is a profile of one of several ORC experts we consulted on behalf of a client in the healthcare consumer products segment who was branching out into antibacterial consumer products in Asia. ORC Case Study ORC Expert A is the CEO of a consulting firm that specializes in import registration requirements and regulatory advice to companies wanting to bring new pharmaceutical, device and IVD products to India. Expert previously worked as a Medical Devices Reviewer for the Central Drugs Standards Control Organisation (CDSCO), and was also an Assistant Director with the Food Safety and Standards Authority of INDIA from 2009-2010. Another way in which ORC can help clients is through our global offices and network of research partners. For example, our offices in China recently worked in collaboration with our US Healthcare Team to provide insight into the how China’s new community based healthcare initiatives were being perceived from an in-country perspective while in another situation, one of our regional research partners helped us to identify leading medical schools where certain surgical procedures were being conducted on behalf of a client looking to bring a new surgical approach to the market place. ORC’s Intota Expert Network includes over 13,000 rigorously screened peer-recommended experts in over 30,000 areas of knowledge. To learn more about ORC’s Intota Expert Network or to request an expert today, please visit 10
  • 12. Keys to Successful Adjacency Moves Inside the Healthcare Sector What does the healthcare product distribution network look like? Uncovering how a country operates in terms of getting products to customers can be a complex matter. In some countries, you may have your own pre-existing network that you can rely upon, but in others, you may have to forge ahead to build new relationships with distributors and partners. Some may have national presence while others may be more regionally focused. Talking to a few distributors and customers in different types of healthcare facilities will help you to understand the logistical challenges you may face making your products available to healthcare professionals, patients and consumers. Distribution Network • • • • • Channels for product or service access Distributor types and layers Level of market reach Relationships with healthcare facilities Fee structure B) Competitive Situation & Profit Pool Mapping When evaluating the attractiveness of adjacent markets, you also need to analyze the competitive situation, explore their value chains, and understand if and where they are making profit. When coupled with a mapping of the profit pool, this becomes an invaluable foundation from which to evaluate your own company’s ability to differentiate and target these profit pools to achieve market success. 11
  • 13. Keys to Successful Adjacency Moves Inside the Healthcare Sector Uncovering the Competitive Situation Identifying competitors is generally not a challenge. Published market sources such as those we mentioned previously will readily point to market players, or you may already be familiar with them if they belong to the same industry sector as you. The key, however, lies in understanding their position in the adjacent market space you are targeting. Competitive Situation • • • • • • • Type of competitors Market position Go-to-market strategy Market share and evolution Infrastructure to support market presence Customer segments served New players – market fragmentation We will introduce profit pool mapping at this point as there is some definite overlap in the questions and research approaches used to address this area and the competitive situation. Mapping Profit Pools Before we dive into talking about mapping profit pools, let’s briefly step back and discuss this activity within the framework of value chain analysis – a process originally defined by Michael Porter in the 1980s which describes the examination of every step a business goes through, from raw materials to the eventual end user to determine where and how resources are being utilized with the ultimate goal of getting to a process that delivers maximum value for the least possible total cost. Value chain analysis is complex and detailed, but for the purposes of this white paper, we are going to direct our attention to identifying where the profit pools lie within the adjacent market, which competitors are tapping into them, and where the untapped pools might lie so that you can potentially grab them with your adjacency move. 12
  • 14. Keys to Successful Adjacency Moves Inside the Healthcare Sector In a 1998 paper published in the Harvard Business Review, Gadiesh and Gilbert describe profit pools as follows: “ A profit pool can be defined as the total profits earned in an industry at all points along the industry’s value chain… A profit pool map opens a window into the underlying structure of the industry, helping managers see the economic and competitive forces that are determining the distribution of the profits ” They describe a detailed four step process to mapping profit pools br0ken down by tasks, guidelines, and outputs. In the table below – we highlight some of the key activities to mapping profit pools that require data gathering. Step 1 Define the Pool Step 2 Determine the Size of the pool Step 3 Determine the Distribution of Profits Step 4 Reconcile the Estimates Step 1 Define the Pool • Examine your industry from three perspectives, your own company’s other players’ and other customers’ • Talk to industry players and analysts to uncover new or emerging business models Step 2 Determine the Size of the Pool • Seek a rough but accurate estimate • Take the easiest analytical routes available: go where the data are Step 4 Reconcile the Estimates • Collect additional data if necessary Step 3 Determine the Distribution of Profits • Look at your own economics first, then look at large pure players, then at large mixed players, then at sample smaller players • If relevant company data are unavailable , use proxies such as product-level or channel-level sales 13
  • 15. Keys to Successful Adjacency Moves Inside the Healthcare Sector Profit Pools • • • • • • • • Source of profit pools Market cost structure Competitor and market participants • Pricing • Margins and profitability • Value chain • Unique characteristics to support profit Untapped profit pools So how can you go about understanding the competitive situation and mapping profit pools? The starting point should always be utilizing published sources to help develop the initial knowledgebase. Secondary research in the form of interrogating business & financial data sources such as annual reports, 10-K filings, Dun & Bradstreet profiles, analyst reports, industry and trade publications, as well as company websites will get you started on the path addressing some of the questions you need answered about your competitors and the industry segment from a financial perspective. There may also be published data on the overall industry profit pool with future estimates, such as the one published for the healthcare sector by Bain and Co in 2010 and depicted below. According to Bain, the global profit pool for healthcare will increase over the next 10 years at a CAGR of 4% to grow from $520BN in 2010 to $740BN by 2020 and that new business models will need to be developed to win profit in the future. For example, they predict that growth in the global profit pool is likely to come from innovation in the delivery of care or from small service sectors like contract research or manufacturing, which is experiencing significant growth, especially in emerging markets. “ Providers of care worldwide will see the largest volume gain but not necessarily any increase in their margins. These volume increases will drive 30% of the overall profit pool growth but profitability will be flat or will decline ” 14
  • 16. Keys to Successful Adjacency Moves Inside the Healthcare Sector Global Healthcare Profit Pool (Revenue) 4000 KEY 3500 (billions) 2500 2010 Revenue ($B) 3000 2020 Revenue ($B) 2000 1500 1000 500 0 Pharma Pharma Pharma Medtech IVD RX GX OTC CXO Distribution Retail Hospital Other Care Pharma Providers PBM Insurance Insurance US Non-US HC IT Nutrition Adapted from Bain and Co, Healthcare 2020, published 2012 CXO – contract research, manufacturing and sales organizations. Charts like this provide some broad directional indicators of areas to focus adjacency moves and which ones to avoid but you really need to get to the more discrete profit pools within the adjacent market and how they are distributed to truly understand whether your opportunity has any financial legs. 15
  • 17. Keys to Successful Adjacency Moves Inside the Healthcare Sector Further, the competitive insights that you seek may not be readily available or the data may be aggregated and hard to segment. For example, the industry competitors may be engaged in several interconnected activities in the value chain and data for each activity may not be clearly segmented for you to clearly see where they are potentially making profit. In these situations, a useful approach to garner a more comprehensive understanding of the competitive situation and uncover profit pools is by engaging in primary intelligence research – an approach that ORC has utilized for over 20 years following strict ethical research guidelines. We seek out knowledgeable sources like company watchers (consultants, analysts, business partners) and also speak with current and former employees in a variety of functions (marketing, R&D, manufacturing, supply chain, sales, and business development) to help us build a holistic picture of the competitor, including their financials. Public Primary Intelligence Gathering Unobtainable True Public “Hidden Industry Company Competitor General Media Common Databases Public” Participants & Watchers Current & Former recognized as Obscure databases Subscription websites Partners Business Decision Makers Customers Consultants Analysts Employees proprietary and Marketing R&D Sales Business Development actively protected SEC & Gov’t Filings Distributors Suppliers Trade Associations Competitive Situation Profit Pool Insights Target Data and Market Insights Information We systematically hone in on the people who have the competitive insights that we are seeking and use an iterative research process to build our competitor knowledgebase, validate our findings, and often uncover some surprises along the way. Primary intelligence research can be an effective tool to uncover more insight into a company’s financials, including its revenues, margins, and profitable areas. It can also be used to describe a company’s assets and expenditures, channel partner relationships, and processes that may make it lean or agile in the adjacent market, which in turn might be its key to tapping into profit pools. You don’t need to investigate every competitor in the adjacent space – you can start by investigating the top players and then extrapolate your findings to the smaller companies in the sector. 16
  • 18. Keys to Successful Adjacency Moves Inside the Healthcare Sector ORC Case Study ORC’s healthcare consumer client already had a presence in a few Asian countries and was now looking to enter adjacent markets, specifically China, India, and the Philippines, and wanted to understand how competitors were approaching these markets in order to devise their own market entry strategy. They needed to understand the competitor’s financial metrics, such as COGS and margin, as well as manufacturing capabilities, assets, distribution network, and partnerships. We embarked on a comprehensive strategic intelligence program engaging a wide variety of targets including sales, marketing, manufacturing and distribution channel employees and partners to garner the desired insights. Desk research was conducted to develop foundational knowledge prior to execution of primary research. We found that competitors were achieving efficiencies and costs savings and profit through a range of different approaches including: equipment which was then built locally 4In-house design of manufacturingestablished but high cost international rather than purchasing equipment from manufacturers than utilizing 4Negotiating daily transportation rates with distributors ratherfrequently pre-negotiated rates – useful when fuel prices are fluctuating brand name 4Capitalizing on be charged instrength particularly in rural markets allowing a higher price to these areas compared to competitor products 4Changing the shape of their product, which reduced its mass, but still allowed it to be sold at its former price These and other findings allowed our client to make the determination that they would not be able to compete and be profitable in one of the three markets – as such they made strategic plans to enter the remaining two markets. III. Address Your Data Gaps and Expand Your Knowledge Base We all know that there is an abundance of syndicated market research reports published on a variety of topics ranging from disease treatment modalities to device types to healthcare IT and much more. However, they may not be that helpful for you if your adjacent opportunity is in a niche segment or in a country that is not covered by these reports. Further, you may not be able to purchase all of these reports. Even if you can, their methodologies make it hard to compare apples to apples, as you try and piece information together from different sources. And finally, there is that inherent market know-how that is not readily garnered from published literature and comes only from direct experience or from talking to those with the requisite experience. So how can you fill your data gaps and expand your knowledgebase? Well, there are a number of different approaches you can use as part of any market evaluation exercise – we will discuss a few below: 17
  • 19. Keys to Successful Adjacency Moves Inside the Healthcare Sector Analytics and Data Triangulation When we say “triangulation,” we mean coming at the problem from more than one angle or point-of-view. For example, in the case of market potential or market size, you may want to approach the evaluation in several ways: first. if you’re looking the market for [new 4A “top down” approach that takes the bigger picture into account knownFor example,[medical device orattreatment superset]. medical device or treatment x], you might start by evaluating the market for takes the opposite approach and looks at data in 4A “bottom up” approachofthat essentially new treatment would start with the number withsuccessive steps. For example, a bottom up assessment potential for a the candidate condition, then evaluate access, availability, and appeal to arrive at a potential market size. expert views viewpoints. either of the 4Syndicated material orother sourcesoffer additionaland points ofThey may be based onparticipants. previous approaches, or may take into account of information view such as industry Once the various data points have been assembled, an assessment can be conducted to evaluate convergence or divergence. In general, a robust evaluation can provide best case/worst case views that enable more confident management decision-making about opportunity appeal. To learn more about one bottom-up approach we developed for estimating market sizing, please refer to our white paper called “Utilizing an Alternative Method to Effectively Estimate Market Size”. Using Market Assumptions Where no data exists, consider using your own assumptions and hypotheses about the market as a starting point and conduct primary research to validate them. McGrath and MacMillan wrote an excellent article in the Harvard Business Review in 1995 called “Discovery Drive Planning” that discusses the importance of validating assumptions as part of strategic decision making. While the article was written nearly two decades ago and focuses on new ventures, its tenants still hold true and can be applied to evaluating adjacent market spaces. “ A company can test the initial assumptions against experience with similar situations, the advice of experts in the industry or published information sources… Consultants to the industry – bankers, suppliers, potential customers and distributors often can provide lost cost and surprisingly accurate information. ” 18
  • 20. Keys to Successful Adjacency Moves Inside the Healthcare Sector While modern ethical research guidelines prohibits the use of payment for information pertaining to competitive intelligence research – guidelines which ORC strongly abides by – we have successfully used the research approaches advocated by these authors to help clients validate assumptions and hypotheses about adjacent market spaces on a regular basis using our intelligence gathering capabilities as described above. Tacit Insight and Critical Questioning Adjacent opportunities, particularly if they are organically identified, tend to have internal champions that may find it challenging to see the obstacles surrounding their opportunity. Bringing in a few external industry or subject matter experts to assess the opportunity can help not only to fill data gaps and provide insight into profit pools, they can also help inject that much needed “fresh perspective” – and because it’s from individuals with subject matter expertise, your team is more likely to value their opinions. Experts can be engaged as part of one-on-one telephone or face-to-face conversations, forums, and workshops, or even online message boards where they have the opportunity, to not only provide commentary on your opportunity but also ask those hard questions that challenge you to think about your opportunity in different ways and may need further investigation and consideration. Your own project team can become part of the research process and interact with experts to ask new critical business questions that emerge as a result of the discussions. Whatever method you select to engage experts, the net result is that the adjacent opportunity can be assessed, challenged, and improved through the rich conversations with external subject matter contributors. ORC Case Study We engaged two experts from our ORC Intota Expert Network and recruited an additional two to work with our healthcare client who was interested in identifying and evaluating adjacent market opportunities in women’s healthcare. The opportunities had originally been identified through a Lead User research process that we had previously completed. The rich discussions that we moderated during a workshop session helped to assess the opportunities from multiple angles, including technical feasibility, clinical applicability, and financial adoption metrics. Further, the workshop discussions helped generate additional ideas to fuel our client’s product development engine. 19
  • 21. Keys to Successful Adjacency Moves Inside the Healthcare Sector Conclusion Your pipeline building efforts may have identified many new opportunities for consideration and everyone wants solutions and products with broad market appeal and global applicability. Profit Pools Competitive Situation Market Size Market Attractiveness Therapeutic Landscape Healthcare Infrastructure & Funding Distribution Channels Regulatory Environment There are many questions that need to be addressed and as such, there may be a temptation or desire to conduct a full blown market investigation with detailed competitor research to derive a comprehensive set of data and analyses from which to evaluate the adjacent move. However, this can easily spiral into a large, multi-faceted or multi-country study with many permutations that can stall the process of a quick and efficient move into an adjacent market. Rather than looking for every data point for every opportunity to help you make business decisions – consider using discrete research approaches, such as the ones we have described that are focused around characterizing the market and competitive landscape and understanding where the profit pools and margins lie. You could take a phased approach of culling published literature sources and speaking with a few subject matter experts to learn as much as you can about the adjacent space and address as many of the core questions as possible. If the opportunity continues to look good – then you can consider investing additional resources to develop a more robust understanding of the adjacent opportunity and address your remaining questions in more depth by conducting additional primary intelligence research, investigating value chains, and mapping profit pools. In the next two white papers – we will look at other components of evaluating adjacent moves in the healthcare sector from the perspective of: 4 Customer appeal and acceptance 4 Relatedness to the core In aggregate, you will learn how to evaluate opportunities and develop the market facts that you need to develop a business case for the opportunities that filter to top through the evaluation process. For more information or to download other ORC International whitepapers visit our website at 20
  • 22. Keys to Successful Adjacency Moves Inside the Healthcare Sector References • • • • • • • • Beyond the Core , Chris Zook, 2004, Bain & Company Inc Growth Outside the Core, Zook C & Allen J, Harvard Business Review, December 2003 U.S. Medical Device Industry in Critical Condition, July 2013, India’s Novartis Decision, New York Times, April 4, 2013 Beyond the patent cliff, Mullin R, Chemical & Engineering News, 2010, 90(50): 15-20 Profit Pools: A Fresh Look at Strategy, Orit Gadiesh and James L Gilbert, Harvard Business Review, May- June 1998 Healthcare 2020 Bain & Company, 2012 Discover Driven Planning, McGrath RG and MacMillan IC, Harvard Business Review, 1995, July-August, 4-12 How to map your industry’s profit pool, Orit Gadiesh and James L Gilbert, Harvard Business Review, May-June 1998 21
  • 23. Keys to Successful Adjacency Moves Inside the Healthcare Sector ORC International is a leading global research firm with specialty in the Healthcare, Medical Device and Pharmaceutical sectors. We offer a platform of integrated intelligence that combines traditional and forward-thinking methodologies, technology, industry expertise, and skilled research professionals to provide clients with the most comprehensive foundation for providing actionable insight to solve their most pressing business challenges worldwide. Multi-sourced insights and synthesis, including primary and secondary research, competitive intelligence, social analytics and omnibus services. We can help you: • Understand and segment your market to identify your highest opportunity segments and identify new market opportunities • Develop new products to address unmet needs in the category • Understand product preferences and purchase behaviors and intentions • Understand awareness, trial, usage, and perceptions of your brands as well as those of key competitors • Identify product line extensions and enhancements • Evaluate packaging options • Examine pricing sensitivity • Tests concepts, claims, and messages • Understand health related behaviors and types of treatments used among target groups For more information, please visit our website at or contact: Princeton Ÿ Boston Ÿ Chicago Ÿ Cincinnati Ÿ Maumee Ÿ Minneapolis Ÿ New York Ÿ Reno Ÿ Seattle Ÿ London Ÿ Manchester Ÿ Melbourne Ÿ Hong Kong Ÿ Shanghai Ÿ Singapore Ÿ Sydney 22
  • 24. Keys to Successful Adjacency Moves Inside the Healthcare Sector About the Author Bijel Dholakia MSc Vice President - Healthcare Practice, ORC International Bijel has over 17 years’ experience conducting global market research and providing strategic insights to clients in the Healthcare sector with a specific focus on the Medical Device segment. She is currently Vice President at ORC International where she applies her expertise in innovation and new product development to clients as they investigate new technologies and concepts as part of the NPD/Stage-Gate and Product Lifecycle management processes. This includes conducting ideation and concept filtering, technology and market assessments, IP landscaping and VOC research around unmet needs, concept adoption dynamics and the purchasing / reimbursement environment. Bijel’s expertise also includes conducting global market research to provide client’s insight on adjacent and emerging markets. She is also actively involved with company relations with AdvaMed. Bijel earned a Bachelor in Science in Human Sciences from University College, London and a Master of Science in Information Science from the City University, London. 23