Although everyone connected to the industry agrees that we’re in the midst of massive, generational change, no-one has yet painted the big, over-arching picture of how pharma will look in, say 10 or 20 years. If we want to do this with any sort of scientific basis, as opposed to merely speculating, we need a robust explanation of how industries change over time. Fortunately, Darwin gave us that explanation 150 years ago. We’re all familiar with it as a tool biologists use to explain how ecosystems change, but evolution is in fact a general theory for describing the behaviour of any complex, adaptive system. Ecosystems and industries differ only in details; the general principles are the same.
Apply evolutionary theory to pharma and it predicts that business models will adapt to fit the changes in the market environment. More specifically it predicts that the three present ‘species’ of pharma company – big pharma, speciality pharma and generics – will become extinct and be succeeded by seven new species of business model, each one superbly adapted to a particular sub-habitat of the pharma market. So that’s the speciation part.
The biological comparison goes a lot further. Those companies that survive (and most won’t, the research suggests), will do so by acquiring new DNA and new traits or, in corporate terms, new capabilities. Some of these will be obvious – building economic value propositions, for example – whilst others are less so – such as working in a virtual network structure. Firms will acquire these new capabilities from other firms, sometimes by acquisition and merger, sometimes via consultants and business schools. This swapping of DNA is of course the business equivalent of sex.
And the death part? Well, most pharma companies are poor at acquiring capabilities from outside of the industry. By and large, they prefer to swap genes within the industry pool. Academics have a term for this – mimetic isomorphism – and it is the equivalent of having sex with your cousin, with similar results. Firms that fail to acquire new capability ‘genes’ will fail to adapt to the market changes wrought by technology, demographics, globalisation, economics and politics. And as Darwin famously said, it is not the strongest of the species that survives, nor the most intelligent. It is the one that is the most adaptable to change.
