Is A Customer-Centric Strategy A Fit For Pharmaceutical Manufacturing?
By Trisha Gladd, Editor, Life Science Connect
In July 2012, Lay’s potato chip company launched their Do Us A Flavor campaign. They offered America the chance to come up with their own potato chip flavor, with the creator of the winning flavor receiving $1 million. According to the Brand Activation Association (BAA), an almost 13% decline in market penetration over a six-year period ignited a goal within the chip giant to revive the brand and create an emotional connection with their customers, specifically those ages 18-34.
The marketing agency hired to do this, The Marketing Arm, felt appealing to this age group, known as the Millennials, would help “age down” the brand and boost sales; therefore, they built a strategy around what they knew about this type of consumer. From their research, they knew that Millennials have a strong desire for self-expression, and the one-size-fits-all approach does not work with them, which is how the Do Us A Flavor campaign was born. Utilizing Facebook, the original social media goal was to increase Lay’s fan base by 500,000 with over half of their app users falling within the Millennial age range. The results were groundbreaking—over the course of the 12-week campaign and 3.8 million flavor submissions, over 2.7 million people installed the Lay’s app; 951,777 of those were in the 18-34 age group. By simply getting to know their customers and engaging them, the struggling brand far exceeded their social media goals, as well as increased sales by 8% and raked in $40 million in additional revenue. Oh, and not to mention the ongoing sales they continue to receive from the winning flavor, Cheesy Garlic Bread.
So in an industry such as pharmaceutical manufacturing, which typically focuses on improving operational excellence or coming up with the next big drug, is a business strategy with a customer-first focus the right fit?
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| Michael James, Plant Manager for SAFC’s Lenexa operations |
The Three Paths To Market Leadership
Up until the last few years, blockbuster drugs crowned the kings of pharma, but with the patent cliff causing a stir in the industry, pharmaceutical companies are now looking for ways to stand out in an increasingly competitive industry. Investments in implementing Lean Six Sigma to avoid manufacturing problems is one way to get ahead of the curve; spending more on R&D to have the most innovative product or services on the market is another. However, with advances in personalized medicine, innovation in drug development, and changes in global demographics offering new routes for companies to find their niche, the need for flexibility in pharmaceutical manufacturing in order to adapt to these trends has increased.
“If we look at the successful biopharmaceutical companies out there, that success is often on the back of a blockbuster drug,” says Michael James, plant manager for SAFC’s Lenexa operations. “The manufacturing process for that drug was built into a dedicated facility. Now these same companies are trying to identify a way to drive more flexibility into their existing operations’ footprint so they can produce multiple drugs with different production processes under one roof.”
So in 2007, SAFC, the custom manufacturing business unit of Sigma Aldrich Corporation, decided to launch a new strategy within their cell culture media division. The customer-centric strategy echoes the sentiment of one described in the New York Times best seller, The Discipline of Market Leaders. In the book, authors Michael Treacy and Fred Wiersema discuss the benefits for companies who focus less on shareholder profits, and more on customer satisfaction. Like Lays’ and their Do Us A Flavor campaign, the goal was get to know your customers, engage them, and build a product based on what they want in order to create financial success.
Overall, Treacy and Wierserma believe there are three paths to market leadership: operational excellence, product leadership, and customer intimacy. The goal of those seeking operational excellence is to excel in their industry by leading in price and convenience when it comes to the delivery and production of their products and service. GE’s application of Lean Six Sigma that is central to their business strategy makes them a great example of a company who uses this path to lead in their market. Companies like Apple and Google walk the path of product leadership by constantly striving to innovate and produce state-of-the-art products and services.
The customer-centric strategy, however, is about being highly flexible and understanding the client at an intimate level. Amazon is probably the most well-known customer-centric company. When a customer visits Amazon.com, the site utilizes a system that records each buyers’ behaviors and interests and recommends products based on the history of their clicks. The result is a customized visit every time. Using this data, Amazon has created an experience customers can rely on, which as a result, has built loyalty into their brand.
Applying A Customer-Centric Approach To Pharmaceutical Manufacturing
When it comes to pharmaceutical manufacturing, the industry does not have the benefit of looking at Internet use, like Amazon. Therefore, applying a customer-centric strategy to this business requires getting to know the customer at a deeper level than is most often done. The theme of customization, or personalization, is growing strong in the industry—particularly with the future of personalized medicine. The major benefits of this movement are reduced healthcare costs and medical expenditures, with increased drug efficacy and a reduction in the time and cost it takes to get a drug to market. So while personalized medicine is ultimately about the patient, a customer-centric strategy is about the relationship among the suppliers and partners who deliver the drugs to the patient.
“It’s not about focusing inward; it is about looking well beyond your organization, right into the client’s organization on a site-by-site basis and department-by-department basis,” says James, who presented on SAFC’s use of the customer-centric strategy at PharmaEXPO 2014. “It is defined by an intimate knowledge level of the client’s workflows and key challenges across multiple departments. Those departments have a variety of different challenges and needs to suffice. If you’re going to be customer-centric, you have to be able to have a much more intimate level of understanding when it comes to what they’re trying to achieve and what their challenges are, so you can develop solutions that are meaningful to them and will ultimately help them overcome those challenges.”
As a supplier, working with raw material suppliers and biologics companies, SAFC can source thousands of chemicals and components in order to support the need of the biologics industry. It is SAFC’s goal to align their quality systems with the biologics industry in order to be a bridge for those biopharmaceutical companies who need the raw materials that typically come from industries not focused on the biopharmaceutical market. To do this effectively, they have to be able to understand and address their customers’ quality and regulatory challenges at their level. “Safety is a significant driver for the biopharmaceutical market and something we are keenly aware of,” says James. “It is our quality systems that ensure layers of protection are built into our supply chain so that we help enable the market’s priority of drug safety.” If achieving this level of understanding is left only on the shoulders of the sales team, James says the level of effectiveness in terms of creating solutions can be limited.
While plant managers are not typically focused on the customer, James says he and other operations employees often travel for face-to-face client meetings. Because of the various groups across the organization who are involved in client strategy, he says it doesn’t fall on just one department to understand the market. “We are all responsible for listening, learning and connecting with our clients. This is a very important part of our jobs. There needs to be a lot of touch points, and a lot of connectivity between a customer organization and ours. So when it’s time to agree on what and how to deliver, we understand that challenge at every level possible in order to ensure the solution really does what the client is looking to achieve.”
The biggest change James has seen since implementing this strategy is that the conversations with clients has gone from, “We’ll tell you what we think you need to know when we’re ready,” to “What do we need to share with you that will help us?” James explains, “That's a big paradigm shift for us and an important customer-centric metric for us to meet, because that breaks down so many barriers. It makes so much more information available to us so that we can then look back within our own ranks and toolboxes to identify what we have or what we need to establish or create, in order to help that client do more with their existing footprint. It influences where and how we invest, how we prioritize, how we staff, our technology investments, as well as our hardware and software investments. Your strategy is where you invest and where you choose not to invest. We're seeing this really pay off.”
How Does Your Company Decide Which Path To Take?
When SAFC considered a change in their strategy eight years ago, they took an analytical approach to determine if they wanted to focus on operational excellence, product leadership, or being customer centric. First, they looked outward at the market—at where the growth was at that time, what the key challenges were at that time, and anticipated what they thought they’d be in the future. In addition, they talked to their clients about market direction, the client’s organizational direction, and then tried to perceive any challenges there. Finally, they had to look at their capabilities inward, which was everything from human capital and knowledge to assets and strengths and weaknesses.
James says when SAFC made their final decision, it came down to what the synergy was between market direction, unmet needs, and core competence within the organization. With all this in consideration, they decided the customer-centric model was the best path for them, and their entire operating model is now structured to serve this one value discipline. By each unit making decisions based on what works best for the customer, there is an organic return of success to SAFC.
Why not focus on all three paths to market leadership? James explains that in The Discipline of Market Leaders, the message is to not dilute your offer by trying to become the best at every path, because this is nearly impossible. Instead recognize your strengths and develop a plan based on those. And if you were going to try to achieve a different strength, determine what the size of your investment would need to be. “The priority, in our decision, came down to value creation and where we would really be able to deliver the most meaningful value to the client,” he explains. “At that time, we weren’t differentiating ourselves in the operational excellence or technology race, and in order to become market leaders in those areas, it was going to require a significant investment and more or less reorganization. However, what we were really doing well was customization and providing flexible solutions to clients and connecting with clients at a level that was unique to them. The customization approach of the customer-centric strategy made the most sense for our business, and we haven’t looked back since.”