Managing Relationship Assets: 

Survival in Shifting Markets Depends on Adaptability

 By Brad Mitchell and Sallie Sherman, S4 Consulting

An unavoidable conclusion having advised American business over the last two decades: in a rapidly changing industry, firms need to keep a close eye on critical business relationships. The industries vary-manufacturing, financial services, health care and many others-but the shifting global economy creates similar challenges in all of them: a rush toward consolidation, an erosion of margin, heated-up global competition, an explosion of niche players, a much greater need for cost control and a growing need to treat business relationships as assets. We believe these dynamics apply to the pharmaceuticals industry and that you might benefit from what other industries already have learned.

Let's examine how firms from another highly regulated industry, such as financial services, treat their relationships as assets.

Say a large firm-let's call it World Investment Products, or WIP-wanted to become one of the top three providers of financial products. They felt that only the top three providers would be around in 10 years.  Before changing its strategies, WIP realized it had to better understand its current relationships.  WIP decided to determine the health of its most critical customer/distributor relationships.

After extensive research, WIP realized that five major customer/distributors were deeply concerned about the low levels of contact and support they were receiving. WIP also saw that there were substantial opportunities with those customers if it could improve its relationship-management approach and treat these relationships as assets.  This goes well beyond account managers "being nice" and providing enjoyable social events for customers. Relationship management is a detailed performance issue.

Systematically and intensely, WIP began to focus on its customers' business problems and issues. If WIP understood those, they would better understand how and what they might do to add value to protect and grow the relationship. They initiated executive visits and relationship building at multiple levels. They made their systems easier to work with.

WIP also added sales and support people at a time when other firms were dropping such people as a way to cut costs.

 Within a year these changes were accomplished and WIP found it had more than doubled its customers' share of wallet, which meant several hundreds of millions of dollars in incremental revenue. In addition, it made everyone's jobs easier. The financial services industry was changing and WIP realized that thriving in this dynamic environment required fundamental changes in how it treated its critical business relationships.

In pharmaceuticals, the sprawling network of relationships encompasses pharmacies, R&D firms, manufacturers, wholesalers, distributors, advertising firms, pharmacists, pharmacist techs, physicians, federal and state governments as payers and regulators, PBMs, large employer groups and many others. These relationships are shifting as quickly as those in other industries due to increasing market and regulatory pressures. For instance, pharmacies are losing business to health care firms that mail prescriptions directly to patients-even though pharmacy personnel offer the greatest opportunity to increase drug therapy compliance and persistency.

We see other shifts as large manufacturers invest more and more money in finding the next blockbuster drug. New innovative biotech firms are becoming niche players in the drug market, foregoing blockbusters for very specific treatments to very specific diseases. Even now, as fewer and fewer new drugs are reaching the market, large manufacturers are determining new ways to work with-and relate to-these niche firms.

So we ask:

Are you prepared for the pharmaceutical market shifts now under way? How comfortable are you that your existing relationships are solid? How prepared are you to create new relationships with the right new players in the changing market? What are the industry's likely new business models and where can you best fit within them? How can you improve your existing critical relationships and still stay aggressive about cost control?

We believe that your survival, and ultimate success, depends upon how well you answer those questions.

© S4 Consulting