Glenn Thomas, former CMO of GE Healthcare.
Courtesy of Glenn Thomas.
Over the past several months, there has been a run up on several pharma stocks and the Wall Street Journal recently reported over $9.4 billion raised by U.S.-based biotech companies so far this year (eclipsing the $6.5 billion for the full year of 2019). So does this mean our new normal translates to future prosperity for the healthcare industry?
Not necessarily.
This month I sat down with Glenn Thomas, former CMO of GE Healthcare to discuss the brand health of those in the business of improving our health. He shares key insights on the complexity of this sector and how a monolithic view may be overly simplistic.
Soon Yu: What’s been happening with healthcare brands in the current crisis?
Glenn Thomas: Clearly, a global pandemic puts healthcare to the top of everyone’s minds, and as a result, the sector has been broadly outperforming in the stock market. However the healthcare sector is a complex global ecosystem made up of distinct sub-sectors, so it’s worth taking a moment to understand the landscape.
There are different definitions out there, but there are essentially 5 sub-sectors within the healthcare industry. We have (1) the care delivery side which includes hospitals, clinics, and care facilities, (2) hardware and software medical technology companies and their distributors, (3) the biotech and pharma companies developing and manufacturing medicines, (4) the pharmacies and related services like benefit managers that distribute those medicines, and finally (5) the payers, which are typically your insurance company, the government, or your own pocket. What concerns me is that some players in this ecosystem are facing very significant market and structural challenges… and at a time when society needs them to be at their strongest.
Yu: So which sectors are struggling?
Thomas: Perversely, despite unprecedented demand, care providers like hospital systems are struggling with significant revenue losses. Often the Operating Room is the largest profit center in a hospital, but the pandemic has resulted in record lows for elective procedures. Worryingly we’ve also seen significantly reduced diagnosis of cancers and heart disease as people stayed away, even when experiencing symptoms. As we go thru the inevitable recession, people will reduce personal spending and governments will struggle to sustain funding for public health systems, and so many hospital systems have to cut costs and consolidate.
The U.S. has already seen record numbers of healthcare workers made redundant or furloughed – 1.4 million in April alone – so inevitably there’s a big risk of weakening of service capacity and delivery.
It all has a knock-on effect.
Following an initial surge for Intensive Care Unit and Coronavirus diagnostic needs, demand for all other technologies will continue to be significantly reduced. Many medical technology companies will come under significant revenue pressure resulting in cost-out actions and reduced R&D spend.
Pharma, both drug development and retail pharmacies, will come under fresh price pressure from payers and government regulators looking to reduce the cost of care.
Yu: Where are some of the bright spots?
Thomas: I’m actually very optimistic about the future. Major disruptions accelerate much-needed change and create new business model opportunities. As an example, this crisis has driven a level of collaboration and digital advances never seen before in Healthcare such as the opening up of intellectual property and new cross-sector collaborations such as GE Healthcare’s partnership with Ford to produce ventilators. Digital and telehealth is having a massive boost, both enforced by social distancing and enabled by the relaxation of regulation and improved reimbursement. I mentioned pharma will come under price pressure, but obviously, there is the massive opportunity given their key role in developing new diagnostics and vaccines, not to mention the broader trend toward highly effective but expensive precision medicines.
Yu: What advice would you have for building brands and businesses in this climate?
Thomas: Marketing spend is nearly always first on the “cost-out list” during times of recession.
However as CEOs and CMOs look at cost actions, I would strongly advise against fully pulling back on brand-building efforts. Trust, credibility, and affinity with brands really matter during times of uncertainty, and brand becomes an even bigger driver of purchase decisions and price. Companies should look to sharpen their brand attributes based on the rapidly moving customer needs and expectations and invest to establish and consolidate brand loyalty.
Obviously, any investment in brand development needs to be smart and efficient. As an example, the “all employees are marketers” concept is a massively under-used opportunity, and employees can be your secret weapon in the role they play activating, advocating, and personifying the brand. This is tapping into a very live trend, with employees becoming more activist, resulting in some really positive and, (as Google, Amazon and many others have found), negative brand perception. Even just from a marketing effectively standpoint, my experience is that leads generated through employee activation convert considerably better, up to 10X vs than other tactics. Add to that the benefits for brand authenticity, talent retention, and positive customer experience – well, it’s a no brainer, and CMOs should play a must more central role with employee activation.
CMOs need to lean into the reality of the cost pressures and do their bit. But rather than simply cutting costs, I recommend that CMOs should go deeper… restructure their functions to invest in capabilities to future proof strategies, even if it means cutting deeper to fund it. For example, creating agile integrated marketing and sales teams, establishing customer data platforms, and building digital sales and customer experience capabilities.
Thinking more broadly, I believe companies can lever the crisis as an imperative for change and competitor differentiation. Now is the time to take a fresh look at your business models.
If you are a tech business that relies on capital spend, accelerating the shift to operating cost models and digital solutions offerings will be key. Companies should lever customer insights, market forecasting, and, importantly, scenario planning, as the foundation of product management and supply chain strategies, and take a hard-nosed look at product and service portfolios. Price sensitivity will increase and discretionary purchases will decrease for a number of years, so do the profit pool analysis, cut the deadwood, and make sure you have the right “value” offerings in place.
Finally, now is the time to consolidate digital gains enforced by the pandemic. As an example, B2B selling has long been a “digital hold out,” but this crisis has forced modernization. We’ve had some digital selling in simpler medical technology for a few years now, but the current crisis has really driven up digital volumes and opened up more complex technology and solutions selling, albeit at low volumes. There’s a real opportunity to build on recent digital gains, reduce selling costs, and move digital customer engagement more seamlessly across the purchase journey.
This is truly “business not as usual,” and presents an opportunity for real differentiation for those bold enough to take it.
