While outsourcing of marketing and sales activities is on the rise, healthcare companies across Asia are not using commercial outsourcing as effectively as they could. Based on our research “Growth in Asia: to make or to buy”, I believe that a more strategic approach is needed.
Within DKSH we define commercial outsourcing as the contracting of sales, marketing and other commercial services from an external partner for some or all of the organization’s product portfolios. Of the healthcare decision makers (in brand owning companies) who were surveyed, almost twice as many plan to increase (36%) versus decrease (20%) the outsourcing of commercial activities to a third party in the upcoming twelve months.
Businesses view outsourcing mainly as an opportunity to expand into new markets: 68% of the respondents stated they would consider a partner in such a situation, more-often if their company was ‘new to Asia’ (76%). Increasing pharmacy channel coverage for their product portfolio was the second most often stated reason (47%) for outsourcing.
In my view, these are indeed valid reasons to work with an outsourcing partner. However, there are other situations a general manager should consider. To maximize growth, we recommend companies to look at commercial outsourcing in terms of unlocking ‘white space’. leveraging a more cost-effective approach, namely based on geographic, channel and product portfolio considerations. For example, only four out of ten well-established companies in Asia even consider outsourcing mature products to a third party. Not taking full advantage of these un- or under-leveraged assets is a missed top-line opportunity, particularly as few global CEOs are giving Asian general managers sufficient resources to maximize their portfolio.
Consumers are demanding faster product information and better accessibility to brands. Meanwhile, general managers of healthcare companies are playing catch-up in a fast-changing Asian environment. More than ever, they need to assess their companies’ core strengths, determine which areas they need to focus their resources and where they would be better served leveraging a strategic business partner. To make or to buy, that is the question!
The research also shows that salesforce effectiveness is among the top-three challenges that hinders further growth in Asia. Driving an effective sales force across Asia’s fragmented pharmacy channel is clearly a need for many companies. Not even the largest pharmaceutical or OTC/Consumer Health companies can economically justify a full coverage field force in this channel outside the smallest markets, let alone an omni-channel approach.
So what stops companies from outsourcing more? A key barrier for decision makers to adopt commercial outsourcing is the fear of losing control and a lack of transparency over how their business is running.
Having had senior executive roles in two large multinational pharmaceutical companies myself, I can relate to this. It is important that outsourcing partners provide transparency throughout the relationship. Proper alliance management on both sides is key, as are regular business reviews, clear KPIs and reporting. It is up to the client how involved they want to be.
My observation is that it is vital to be very clear about the assumptions underlying the business performance. In Asia, these assumptions – competition, pricing, regulations – can change quickly, so it is critical to spell them out at the beginning.
What is your view on commercial outsourcing? When would you “make” versus “buy”? Please share your thoughts in the comment section below
The “Growth in Asia: to make or to buy?” research was conducted between April and July 2017 by Be Digital, a Bangkok-based research company, among DKSH’s database of 4,000 healthcare decision makers in Asia. The research consisted of an online survey and phone interviews. Two-thirds of the respondents are high-level decision makers responsible for commercial outsourcing decisions across multiple Asian markets. 59% of the respondents represented healthcare companies that are well-established in Asia with operations in five or more Asian markets.
This is an excerpt of an article that was published in Nicholas Hall’s OTC Insight Asia. To read the full article, click here (subscription required).
For the past two years, Bijay Singh has successfully been leading the Business Development function, a substantial growth driver of Business Unit Healthcare at DKSH. Since July 1, 2017, he is heading Business Unit Healthcare.