20
May
2020

Pharma’s Digital Champions Should Focus On Solving One Problem Well

David Shaywitz

Come for the tech, stay for the culture. 

That seems to be the hope of most digital champions inside large pharma companies. These executives hope to instill in their organizations not only important new capabilities, but also a “Silicon Valley” mindset, an innovative spirit characteristically associated with tech entrepreneurs.

The reality, of course, is more complicated; pharma executives – and to some degree, all of us, perhaps – tend to imagine ourselves as more audacious, more creative, more risk-embracing than in the end we actually are. 

It’s not just a big pharma phenomenon; when I was in venture capital, I saw the same tendency emerge whenever a startup on whose board I served conducted a search for a new executive. Typically, the headhunter would be asked to think expansively, and identify a broad range of talent, including less traditional candidates. Yet in the end, the consensus generally landed on someone who felt comfortable and familiar, a leader who was perhaps less interesting than some candidates, but also viewed as less risky, and more of a known quantity. Flirt with risk, marry stability.

The challenge facing innovators who want to bring change to pharma was captured nicely by Craig Lipset, a digital health pioneer at Pfizer. On a recent Tech Tonics episode, Lipset told Lisa Suennen and me that the three unofficial rules for anyone pitching digital health inside the company was that it needed to be safe for patients (of course); not threaten anyone’s job; and not threaten to land the company in court.

Venture capitalist Josh Kopelman of First Round Capital (early investors in Uber, Square, Flatiron Health) captured this tendency perfectly on an April episode of Patrick O’Shaugnessy’s always excellent podcast, noting that one of the best opportunities for startups is to leverage (arbitrage) the intrinsic risk aversion of large corporations. 

Kopelman described an experience he had early in his career, after he sold a company he started to eBay, and he got to know the big online marketplace. eBay, he said, noticed that payments on its platform were being consummated by the startup, PayPal, and eBay wanted to handle those transactions itself, so that PayPal wouldn’t be able to take a cut.  

So eBay set up a joint venture with Wells Fargo called Billpoint, in theory a formidable partnership between a top bank and the top online market. But the reality, Kopelman said, was that at the initial product meetings there were nearly as many lawyers in the room as there were product managers. Digital payments were a fairly new space. There was a lot of grey area. Wells Fargo in particular couldn’t afford to jeopardize its business by skating too close to the regulatory line. 

PayPal, on the other hand, embraced the risk; when PayPal filed its S-1 form as it prepared to go public, Kopelman says, the company disclosed it was under investigation by a slew of state attorneys general. PayPal’s willingness to take on this risk – and do so successfully – were key to its ultimate success (including its post-IPO acquisition by eBay for $1.5 billion).

Kopelman also cites the example of Uber, specifically calling out controversial founder Travis Kalanick for his fearless approach to regulatory grey areas. 

It’s amusing to contemplate how innovators like Kalanick and the PayPal leaders would fare within big pharma, an industry that is highly regulated to begin with, and then has arguably exacerbated these challenges through a culture that reflexively resists innovation through a deep, shared belief that “regulators will object.” 

Moreover, these concerns are not unfounded; as much as FDA leaders such as former Commissioner Scott Gottlieb, current Principal Deputy Commissioner Amy Abernethy, and the head of the Oncology Center of Excellence Richard Pazdur have passionately championed innovation and flexibility, this attitude is still not universally embraced (to say the least) by the reviewers responsible for most of the heavy lifting inside the agency. 

Other qualities of startup founders described by Kopelman might also struggle in the context of a large pharma. For example, Kopelman highlights the value of betting on people rather than a specific idea – he views a founder’s initial product proposal as more of lens to understand how the founder makes decisions and processes signals than it is a detailed plan describing what’s actually going to happen. Similarly, Kopelman says his firm tends not to be “thematic” investors, contending that by the time something bubbles up as a discrete theme, it is effectively too obvious, and something everyone is doing. (I entirely agree; however, most VCs, and virtually all corporate VCs, are explicitly thematic.)

Again, anyone who’s tried to get buy-in to anything in a large pharma appreciates immediately the contrast; extensive and excruciatingly deliberative processes generate themes and areas of focus (leading invariably to oncology, immunology, and rare disease these days), and even individual early-stage projects that hope to be resourced must be described and mapped out in exaggerated, if not comical, precision. (Then again, I’ve heard the same said from academic researchers applying for NIH research grants.)

Several attributes of successful founders cited by Kopelman can and — I’ve often insisted — should be adopted by pharmas. For example, Kopelman emphasizes that you can’t build a great platform without first having a killer app; while he was making an even deeper point, one simplistic way to think about this is that pharmas contemplating data science would do well to consider what very specific and concrete problems they hope to solve, and then focus on developing a pragmatic solution that clearly works. 

Instead, there’s an unfortunate tendency to spend huge amounts of time and resources investing in and developing a massive data and analytics platform in hopes that it will someday prove useful – despite considerable experience to the contrary. Startups are often critiqued for creating an elegant solution in search of a problem. The related mistake large companies tend to make is architecting a vague, expansive solution they hope will solve every problem, presumably reflecting the promises required to secure funding in complex, matrixed organizations.

Kopelman also emphasizes the importance of getting product feedback early and often – an idea long-advocated by “Lean Startup” guru Steve Blank. If instead, you decide you know from the outset exactly what’s needed and work head-down until you’ve perfected your product, the product you emerge with may be elegant but totally off base.

Bottom line: A large, legacy pharma is never going to have the agility of a startup, and compelling new ideas will always struggle for traction given the intrinsic risk-aversion of massive multinational corporations. Many (I assume most) new health technology concepts will have to be developed and proven out in a less constrained environment first. The innate skepticism towards tech solutions by most people in the trenches at big pharmas remains exceptionally high, and the meticulously-structured, rigidly-articulated way most work is done in pharmas (and other large companies) tends to be poorly aligned with the agility and improvisation new tech product development often requires. The most exciting and most innovative opportunities at the interface of health and tech almost certainly remain in the startup space.

Yet pharmas desperately need better technology, and promising technologies can benefit from the scale, experiences, and established relationships of a large pharma. 

To succeed, pharmas need to scope projects in a fashion that’s relentlessly focused on tangible outcomes that matter, results that are palpably experienced by users. Uber was adopted because you press a button and a ride shows up; Google was adopted because you type a query and the answer shows up; Amazon was adopted because you place an order and your purchase shows up. Simple. And effective.

A successful technology in pharma doesn’t need to be all things to all people. Paradoxically, it’s this very need to gain the approval of multiple stakeholders that often results in poorly-scoped, ill-fated projects. Instead, at least initially, the tech solution should brilliantly meet the substantive needs of an individual stakeholder, and accelerate an important process. In actually delivering on this promise – in delivering tangible delight and utility for somebody in the organization — a technology champion in pharma can do more to change a company’s culture and attitude than all the Successories posters, inspirational corporate messaging, and aspirationally hip (tucka-tucka) corporate hackathons combined.

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