Friday, March 2, 2012

Pharma learnings from Kingfisher and Indigo

In the above picture we see that the organization is an entity that creates an output (satisfying customer requirements). An organization refers to a group of people working towards a common goal. The output created by an organization is in line with the firm's vision and mission. The identity of the firm, it's survival, growth and image, and the destiny of the firm - all depend on the output. It is important to constantly understand what the output of a firm is from the customer or prospect's point of view. It could be a -

"value-for-money preposition", or it could be the
"services in exchange for prescriptions" or it could be
"hi-quality product preposition" or it could be
"R & D or intellectual image of a company" or
"ingenious products like patented electrolyte energy drinks in Tetra Pak technology or patented sterile haemocoagulase topical solution etc"

- the output of a firm is both TANGIBLE AND INTANGIBLE.

Understanding these aspects, shapes future activities of the firm. Finally, it is the output which is responsible for the financial picture of the organization.

In the above, we see marketing as a function that provides value addition and creates brand identity, brand image, brand equity, communication, and facilitates value delivery.

Marketing deals with the 4 Ps: product, price, promotion, and placement (distribution and availability). Marketing also deals with the communication mix which include: sales promotion (bonus offers), personal selling (MR efforts), packaging, advertisements (eg., in medical journals), and publicity (activities which result in word-of-mouth particularly in target doctor or target pharmacist circles).

Marketing includes the physical evidence, process and people too. Finally, marketing helps increase throughput, market penetration, facilitates sales, stimulates and catalyzes the exchange process, helps retain current customer base and nets in more customers through conversion of prospects into customers and strengthens brand equity.

There are many other dimensions of marketing: such as product positioning, developing an emotional bond of trust, modifying the lifestyle or prescribing behaviour or even the therapeutic style or approach and ensuring improved quality of life for society and patients (ie., reducing morbidity and mortality).

Operations is an all encompassing function that envisages creation of value added outputs that satisfy all stakeholders including customers. Operations includes sourcing (of raw materials, outsourcing or own manufacturing), processing, marketing and other operations in providing the output. It is a wider perspective of things.

Operational focus varies from firm to firm. For instance, Mankind did not devote energies to set up a US FDA manufacturing facility (as was the trend), its operations was to focus on improving market share and brand sales. The operational focus makes the difference.

Many a times, firms do not know what output they are actually creating or what they are supposed to create (as per customer requirements) - they are going by the established LEGACY OPERATIONS. For eg., a firm like say, Indoco or Franco Indian has its legacy - and operations are embedded in this legacy. Now are the operations in tune with the contemporary market reality? Or are the operations having some unidentified strengths (parts that are not exploited) that can help bring in more revenues? If the analysis is done not just from the marketing angle also from the operational perspective, this will provide more insights to firms.

Akums is an interesting business plan, this firm offers latest formulations on contract manufacturing basis. The output of Akums is about helping pharma marketers create better outputs - Akums is aiming at this synergy and this is Akum's operational focus.

There are several ways to introduce a new product. The most common way, is to look into the IMS market reports (for promising markets, where there are market gaps) and see the 'best-fit new me-too product'. This product should fit into the company operations or company marketing coverage and style. The idea is to introduce the new brand hoping to hit a gold mine in the marketplace.

This approach does work and has worked - but one should analyze if the new brand is the best fit from the marketing angle or operations angle of the firm? This is the call that one has to take through analysis.

Investors, futurists, product developers, marketers, entrepreneurs, customers, prospects, intermediaries ... all have one question on their mind - which is the next big thing round the corner? From where will my next big growth come from?

Everyone instinctively knows, although they may not like it, there is no product or service (or for that matter - organization or human being) that is permanent - things will not continue to be the way it is now. The fact is, there are changes happening continuously which will rewrite the future and people want to know the future before it swamps them! Now this curiosity is OK after all it is a part of the survival instinct!

20 years back no one thought that the typewriter would get obsolete. I remember how my sister went for early morning typing classes when she was in pre-university. Today, the keyboard has replaced even the electric typewriter which was considered a durable invention. Things are getting smarter and even smarter!

Smart trend is to stay

The future bet is on continuously creating smart products and smart working - here smart chiefly means intelligent or thoughtfully done: Apple has done it - Google has done it, Microsoft has been trying to do it, but it goes by LEGACY OPERATIONS this is their handicap!

There should be a sense of ingenuity in the output that appeals to the prescriber and/or patient. This will create the winning horse (CLASSIC EXAMPLE: ELECTROLYTE ENERGY DRINK FOR Rx MARKET IN TETRA PAK PACKAGES). And the smart product ought to smartly fit into the overall operational paradigm of the company. The me-too market is big in pharma but very crowded and fierce-some. Smart products may or may not be in the me-too product market.

Hypothetical example

Let us say, Sun Pharma is strong in the OBG and neuropsychiatry segments - and presume they have two options: (a) let us say Sun Pharma has a product for the mass GP market and (b) the have one more product for the critical care segment (which is also a specialty market).

Which product will Sun Pharma invest in (in the current market scenario)?

From the marketing angle the GP oriented product is definitely attractive, however, from the operational angle it is probably more sagacious for Sun Pharma to invest in the critical care segment oriented product. Chances of making it big in the critical care segment is better for Sun Pharma.

The above hypothetical discussion differentiates between operations and marketing based approaches.

Consider another hypothetical example:

Imagine Himalaya Drug Company, which has a powerful herbal based company image, now, what if they deviate from this herbal active based business and launch into allopathic anticancer range? After all the company has money, requisite pharma experience, good brand image, and the market too is attractive. Perhaps there is also marketing sense in this approach, however, is there operational wisdom in this move? That is the point between being marketing oriented and operations oriented.


Today Kingfisher airlines is in deep deep debt and really in red. Whether this is management blunder or an artificially created crisis - one will never know. However, was it a great idea for Kingfisher beer brand to fly as the Kingfisher airlines - now this is easy to analyze and comment - since it is hindsight wisdom (!), but probably the top management mindset of Kingfisher airlines was not operationally tuned to succeed in the airline market.

Mr. Mallya is a good marketer but operations probably, was not his tastiest cup of tea, now this is just loud thinking - and hindsight wisdom (which is the easiest form of wisdom!).

On the other hand Indigo seems to have its operations recipe just right! INDIGO IS GREAT FOOD FOR THOUGHT: Is the success of Indigo a marketing success or operations success? Probably both (but mainly operational excellence at work!).

What about Kingfisher? The answer: a great marketing success, but A WORRISOME OPERATIONAL DISASTER.

Operations management is a very interesting discipline encompassing planning, product selection, product design, service design (since all product companies also have associated services), organizing, control and conversion process. Excellence in operations management, ensures organizational outputs that meet customer requirements at the lowest cost.

There was a time of hefty margins in the pharma business. One could launch me-too brands of generics with the maximum growth in the market without looking too much into operational aspects, the operational framework would develop according to the marketing requirements and results. However, now, creating operational infrastructure is costlier, competition is hot and margins are thinner. Price undercutting, competitive clutter, freebies, cash incentives and very aggressive bonus offers ... all these make the concept of marketability just one of the considerations. Operational rationale of a new product launch is critical and operational excellence is very important.

The roots of the operations structure of a company is in the DNA of the firm. For eg., Mankind played with a new operational structure, Mankind focused on outsourcing (rather than own manufacturing), processing, providing the product along with impelling services to the prospect prescribers - the value of the output was such that the output value helped create maximum market share and brand growth for Mankind. Zuventus, Mcleods, and Eris Lifesciences are also in this game.

The challenge ahead in pharma India is relooking at LEGACY OPERATIONS (which could be the Achilles heel) and creating OPERATIONAL EXCELLENCE ALONG WITH BEING MARKETING SAVVY. Operational aspects are as vital as marketing in the current scenario.

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1 comment:

Sunil S Chiplunkar said...

It is gratifying to note the following in Economic Times 5.3.2012 page no. 7, on World Marketing Congress, where Mr. Aditya Ghosh, President of Indigo Airlines, has said:'Marketing doesn't define the business strategy of an organization or brand or product but it helps push it. Marketing plays an important role in supporting business strategy'.