The Future of Biosciences: Implications for the Bio-pharmaceutical Industry

By V. Michael Mavaddat, Managing Director, Consulting Services, DSI and
     Jim Austin, Director, Life Sciences Practice, DSI

Two years ago, members of the Mack Center for Technological Innovation at the Wharton School and Decision Strategies International, Inc. (DSI) embarked upon an ambitious program to develop a range of plausible futures for the rapidly changing field of biosciences. With findings recently published, our joint report argues that “in the coming years, the convergence of genomics, proteomics, stem cell research, regenerative medicine, bioinformatics, nanotechnology and other life science technologies will pose significant opportunities and challenges in every sector of society.”¹ Through four scenarios (stories of the future) designed to explain the ways in which life science technologies might influence human healthcare between 2006 and 2020, the report identifies the major trends, uncertainties, and stakeholder groups expected to play significant roles in shaping the future of biosciences and the bio-pharmaceutical industry.

The report itself emerged from an extended research project sponsored by the BioSciences Crossroads Initiative, an undertaking launched at Wharton’s Mack Center for Technological Innovation. Long-term, as the report indicates, we hope “to provide decision makers in various industries with the strategic insights required to develop, commercialize, and deploy emerging life science technologies.”²

Scenario planning allows decision makers to explore the impact of multiple external forces that may jointly create vastly different futures. It offers a disciplined framework for identifying trends, uncertainties, stakeholders, drivers, and other factors that may influence the future. Combining these factors in diverse ways can also help decision makers to develop alternative perspectives about how the future might unfold and how one might respond to different futures. Employing this process in The Future of BioSciences, we hope to assist executives in the bio-pharmaceutical industry to deal with the changes ahead—not only among those already underway, but also into newer trends that promise to expand over the next 15 years.

Once we determined the scope of the scenario effort, we first separated predictable trends from key uncertainties. We then projected possible outcomes of, as well as interactions between, those trends and uncertainties into a limited number of plausible scenarios. Following a series of thought-leader interviews, workshops, and conferences held at Wharton and at DSI, we identified the following long-term trends and key uncertainties for The Future of BioSciences.

Using these long-term trends and key uncertainties, we then developed four alternative scenarios based upon two “meta-uncertainties”: one, the capacity of science to deliver solutions; and the other, the public’s acceptance of bio-pharma industry changes. The following Biosciences Scenario Matrix summarizes the four possibilities:

Figure 1 – 2x2 Biosciences Scenario Matrix

Rather than attempting to describe every conceivable alternative, scenario planners bound the range of future possibilities by depicting a limited number of scenarios in detail. As diagrammed below, these scenarios define a “cone of uncertainty” within which the future will likely evolve.

Figure 2 – Scenario Planning Cone Matrix

If organizations develop strategies to survive, or ideally thrive, in the boundary cases depicted in the scenarios (S1, S2, etc.), they can also handle intermediate, or the “more likely” scenarios they will encounter.

Implications of The Future of BioSciences Report for the Bio-pharmaceutical Industry

Bio-pharmaceutical companies not only need to make some hard choices about their future business models; they must also master the capabilities needed for future success. Over the next 10 to 15 years, success in the bio-pharma industry will likely rest upon very different strategies than those that worked well over the past two decades. Depending upon the scenario that actually unfolds, profits from different parts of the industry value chain may shift significantly, and this may well require new organizational capabilities to compete effectively. For example, under certain conditions, bio-pharma firms might have to develop new expertise in transgenic medicine to reduce the manufacturing costs of biologics. They may also have to battle against negative public perceptions or unforeseen catastrophes.

Developing successful strategies requires a clear understanding of strategic segments and the organizational capabilities required to win in each one of them, whether today or in the future. Events in the recent past highlight that both industry segmentation and underlying success factors can change in significant and unanticipated ways. For example, during the “golden era” of the 1980s, industry success seemed to flow simply from “being there,” in an environment where state-of-the-art technologies easily addressed the demands of most therapeutic areas. Additionally, the industry profited from the support of uniform demand among consumers and payers, a somewhat friendly regulatory environment, the ability to harvest "low hanging fruit" in drug discovery and development, and, of course, luck.

But that was the 1980s; and many of those conditions no longer exist, evidenced by the many trends and uncertainties highlighted in the Wharton-DSI report. Moreover, as the above list reveals, long-term trends and key uncertainties promise to change the ways in which future generations will discover, develop, and market drugs. The confluence of these factors can, and no doubt will, create the conditions under which industry structures and success factors will also change. For example, the advent and proliferation of genomics and the identification of more and different targets dramatically changed fundamental approaches to discovery and development. Recent advances have led to more biological products, all with different developmental and administrative costs attached to them. The next two decades will prompt more change, not only in discovery and development, but also in markets and among societies that support the industry.

How Will the Industry Respond to These Changes?

Firms in the biosciences field need to develop new capabilities to profit from ongoing changes and underlying uncertainties. The trajectory of the industry’s evolution and growth will not only "raise the bar" in terms of the level of mastery required to succeed. It will also create the need to identify new success factors. Automobiles, semiconductors, utilities, and personal computers represent just a few of the industries where shifting dynamics created the context for the emergence of new “winners” (and new “losers”). Similar dynamics will ultimately influence the fortunes of bio-pharma companies as well.

At this juncture, we cannot predict who, among the many industry players, will emerge triumphant in the future. For example, will the winners include big-pharma companies currently driven by the quest for scale? Will they appear among current start-ups with unique platform technologies? Or will they emerge from different quarters? To determine and profit from investment options, prudent leaders will know that they need to examine current strategies and organizational capabilities. As the Wharton-DSI study reveals, the decision to embrace uncertainty and to craft several plausible futures will ultimately lead to the development of more robust strategies for the future as well, no matter what that future brings.

Illustrative Uses of the DSI-Wharton Report in Client Settings

In our work with several clients over the past several months, DSI has employed the scenario planning framework, as well as some specific content from The Future of BioSciences report. This work helped company strategists seeking to make the best use of the report’s methodological approach, data, and findings to focus first upon three key areas:

• First, they assessed the effect of each scenario on their firm or business unit, and on their current strategies and business model(s).
• They then used that information to understand more fully the key decision-points or indicators of market evolution.
• Finally, they began to develop business processes to collect, assess, and then integrate what emerged as future industry drivers.

With the aid of the four scenarios explored in the Report, our clients found that they could pose and answer important strategic questions, including: What would a winning business model look like for a particular industry segment?; and how might the adoption of patient-centric medicine, based upon individual genotypes, determine a pharmaceutical company’s planned R&D efforts? While company strategists may want to start with the trends and uncertainties outlined in the report, they will typically want to modify the list to make it relevant to their particular firm or business unit. For example, members of a large pharmaceutical company assessing a new vaccine recently indicated to us that any list of uncertainties germane to their business would also include FDA actions, specific competitor launch strategies, and age-related acceptance rates over time. Exploring these issues allowed us to identify additional uncertainties and to develop a more specific set of scenarios for planning purposes. As a result, the client has pulled together both specific as well as robust strategies for several possible futures.³

Once planning participants agree upon a robust strategic vision, the work does not end. Planning requires vigilance, and strategists must continue to monitor the future as it unfolds, and to make appropriate changes when necessary. As outlined in their recent article, “Scanning the Periphery” George Day and Paul Schoemaker have identified the critical questions that should guide all planning decisions.⁴ To ensure that the firm can respond to changing trends and uncertainties, Day and Schoemaker remind company principals that they must ask themselves questions centered on who has specific responsibility for scanning the periphery. Their article also forces decision makers to think about whether or not those with peripheral vision have support from the top, or if they must scan at a more clandestine—and therefore unseen—level. In both their scholarly and academic work, Day and Schoemaker have found that peripheral scanners can envision new and different futures, because they ask questions about the surprises that could hurt or help the firm, about the emerging technologies that could change the game, and about those unthinkable scenarios (like 9/11, for example). Executives need to identify and nurture such people, no matter where they find them within the firm’s hierarchy.

The content of The Future of BioSciences has direct relevance for life science companies, stimulating both the formulation of, as well as some of the answers, to a broad range of strategic questions. One particular client asked us how he and his firm could play a more significant role in the biosciences’ space. Representing a global company with a strong presence in several upstream areas related to R&D, he wants to engage, more broadly, the R&D value chain, as well as newly emerging industry segments. Starting with the Report, we dissected more than opportunities. We also addressed the client’s current and future capabilities to assist in ranking strategic investment areas. Once done, the client cited The Future of BioSciences as the primary tool used in helping the firm's strategists to grapple with where and how to proceed. We invite you to do the same.