Competitive intelligence (CI) seeks to provide competitive advantages to companies. It is one of the myriads of tools prevalent in the pharma and healthcare industry for making informed decisions and has numerous applications in almost all facets of businesses. In this article, we assess the role of competitive intelligence and its value proposition using a strategic management framework – we evaluate raison d’etre for pharma competitive intelligence and whether it can be a source of competitive advantage in the industry.
Is competitive intelligence valuable to pharmaceutical companies?
Most CI executives from pharmaceutical companies are of the view that CI functions and exercises are of value to pharma companies, and this value increases when secondary intelligence is combined with primary research or intelligence. One can argue they will agree – after all, this value proposition is the basis of their employment. Irrespective of this, in order to objectively assess the role of competitive intelligence, we have quantified the value of CI in a multitude of business cases using a corporate finance framework which factor-ins the NPV added with respect to the investment and the cost of capital. The results of such assessments unequivocally reveal that competitive intelligence is value-creating. However, there is a spectrum of value i.e., the value-addition is higher for innovative companies and marginal for generic companies for the investment made, hence it is critical for healthcare companies to maximize the ROI of their competitive intelligence engagements.
Is pharma competitive intelligence inimitable?
If a resource can not be imitated, then it acts as a source of competitive advantage. Biopharma competitive intelligence is not inimitable. Imitability is principally due to the flux and circulation of human resources both on the demand side (pharma companies) and the supply-side (pharma CI vendors). Competitive intelligence executives in the pharma and healthcare sector move from one company to another as part of their career progression leading to a passive flow of expertise across various companies in the industry. Likewise, job changes of the employees on the vendors lead to the passive transfer of skills across the various supplier organizations. Furthermore, there is also a trans flow of skills when a vendor-side employee joins the client side and vice-versa.
Is competitive intelligence scarce enough to be a source of competitive advantage?
Fundamentally, the scarcity of a valuable resource is a source of competitive advantage. Can we say extend this axiom to biopharma competitive intelligence? Probably not. Even though pharmaceutical CI collection is highly sophisticated and requires specific skills, there are numerous providers of CI – some specialize in secondary research, others in primary research, and several in both. The pharma CI suppliers market is fragmented, and to a certain degree, barbell-shaped. At the one end, there are large pharmaceutical CI vendors (who are continually seeking to evolve into consulting firms), and, at the other end, there are several contractors who provide specialist or disease-area-specific CI services. The cost of procuring pharma CI has gone down materially in the last decade due to the entry of new players and the expansion of services of data providers and traditional consulting firms. In general, competitive intelligence in the pharma and healthcare industry is not scarce enough to endow any material competitive advantage. However, not having a CI function is detrimental – a pharma company will lag behind its peers and competitors. Consequently, the business case for CI always exists from a loss-minimization strategy, i.e., the role of competitive intelligence in the pharma and healthcare sector is to minimize damages and losses, and thus it is crucial for organizations to institute at least an elementary level of competitive intelligence programs.
Are pharmaceutical companies ready to use CI to capture value?
The ability to efficiently and effectively utilize intelligence is one of the critical factors that make competitive intelligence a source of competitive advantage. Internally, pharma companies have or need to have appropriate systems, practices, and infrastructure to make CI accessible, usable, and valuable which is especially important when competitive intelligence spans many business functions – some companies excel in this area while others are working on it. Consequently, it is worth benchmarking oneself with respect to the sophistication of competitive intelligence in the pharma industry and diagnosing and addressing the issues which are likely to make competitive intelligence less effective.
BiopharmaVantage is a specialist consulting firm that specializes in providing premium quality competitive intelligence services and wider decision-making services to pharmaceutical and biotechnology companies. If you would like to discuss how we can assist you, then please contact us.