Digital transformation of healthcare industry players KDI Conference 6. November 2014 Dr. Thilo Kaltenbach
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?
3 Digital Transformation
Agenda
1 Digitalization of healthcare offerings
2 Digitalization of operating models
3 Arthur D. Little’s view on digital transformation
4 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
Digital Health offerings
1
5 Digital Transformation
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
Digital Health offerings
1
6 Digital Transformation
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
Source: Arthur D. Little
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
Digital Health offerings
1
7 Digital Transformation
For traditional players following a sustaining path to innovation, Digital Health represents –at
the bare minimum– an opportunity to hedge against future disruptions
Source: Arthur D. Little
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
Digital Health offerings
1
8 Digital Transformation
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
Digital Health offerings
1
9 Digital Transformation
Agenda
1 Digitalization of healthcare offerings
2 Digitalization of operating models
3 Arthur D. Little’s view on digital transformation
10 Digital Transformation
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
11 Digital Transformation
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
12 Digital Transformation
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
Source: Arthur D. Little
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
Digital Transformation
Management
Digital Business Strategy
Management 1
2
3
4
5
6
eCompany 2
13 Digital Transformation
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
Source: Arthur D. Little
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
14 Digital Transformation
Agenda
1 Digitalization of healthcare offerings
2 Digitalization of operating models
3 Arthur D. Little’s view on digital transformation
15 Digital Transformation
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
Digital Transformation
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
Source: Arthur D. Little
A. B.
C.
3 ADL’s view on digital transformation – Need for transformation
Transformation 3
16 Digital Transformation
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
Source: Arthur D. Little
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
Digital Transformation
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
17 Digital Transformation
As the world’s first consultancy, Arthur D. Little
has been at the forefront of innovation for more
than 125 years. We are acknowledged as a
thought leader in linking strategy, technology
and innovation. Our consultants consistently
develop enduring next generation solutions to
master our clients' business complexity and to
deliver sustainable results suited to the
economic reality of each of our clients.
Arthur D. Little has offices in the most important
business cities around the world. We are proud
to serve many of the Fortune 500 companies
globally, in addition to other leading firms and
public sector organizations.
For further information please visit
www.adlittle.com
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