Commercial excellence is one of those buzz words entire books are written about and in the medical device industry this is no exception. The question I would like to (attempt to) answer here is what it could look like in our industry, whether it is actually achievable and necessary, in the region I understand (Europe). I am using the experience I have in this industry, with some favorable results in several suppliers in various clinical areas, combined with common knowledge as displayed in business research which has been reported in publications such as the Harvard Business Review.
What kind of challenge have we been facing for many years now? In other words, what is our problem statement? I believe many of you will agree with me that one of the most mentioned challenges for suppliers is the ongoing price pressure they face by their customers, undoubtedly driven by the real need to keep healthcare affordable in markets where demand is growing based on demographics and the need for improved patient outcome is ever increasing, often requiring innovation. Our customers, whether they are hospitals and clinics, research institutions, private labs, insurance companies, government bodies or the biopharmaceutical industry, have all become far more professional in procurement in the past 15 years which is often translated into “lower prices”. This allows the budgets (capital and operational expenses) to be spent as wisely as possible.
Several companies I have been working for could historically only respond to this pressure by actually lowering prices and saving their own expenses in an attempt to keep profits in line with expectations, often with less than favourable long term results. Fortunately I have been joining those companies in a time when they were open minded to try something different and even consider the input from “outsiders”, new managers who brought different views and experiences.
The only right solution to tackle the above mentioned challenge of price pressure is, in my sincere opinion: commercial excellence. What does that entail? In a nutshell: to deliver the value the customers expects (or even outperform the expectation) for a price that leaves them with the confidence that their need has been met, they experience enhanced satisfaction and they are convinced that they obtained a good return of investment, leading to repeat purchasing (customer loyalty) and they voluntarily recommend the product/service to their peers.
What are the prerequisites of commercial excellence? I will try to sum them up coherently:
A generic strategy for the company in line with its strengths and market needs.
A vision and mission statement that insipres all stakeholders and creates desire.
Inspirational leadership at the top and throughout the company.
Business objectives which are SMART (specific, measurable, realistic and time specific).
A business strategy in line with the generic strategy, relevant to achieve the objectives, feasible for the company based on its core competences and relevant for the customers.
Strategic marketing (not just the tactics like brochures and a website).
A solid sales process leading to reliable forecasts and a healthy pipeline of sales leads.
A well trained and highly skilled sales and marketing team with solid leadership.
All elements of the value chain delivering what is needed to execute the strategy.
The right customers (based on segmentation, needs discovered and buying mode).
In this article I will focus on two elements of the business strategy which I have been using a lot and quite consistently, as they helped me and my teams to deliver great results in terms of sustainable, profitable revenue growth as well as customer satisfaction, loyalty and employee satisfaction.
They are value discipline and value proposition. It would go too far here to write about vision, leadership, sales process, segmentation, etc. so for now, I would like to limit myself to value discipline and value proposition as tools of business strategy.
Why is strategy so important? And why do so many companies and teams get it wrong?
I like to start with the well known statement “tactics without strategy is the noise before defeat” (Sun-Tzu). Even when this is a wisdom that goes back to 500 B.C., often I witness commercial teams that apparently lack any strategy and are just doing tactics, hoping they will achieve success. A company which lacks a real strategy will try anything when it comes to tactics and indeed, that is also often seen in the markets in which we operate. They try to overcome the lack of strategy with increased pressure on their employees and cutting costs out of processes which would otherwise deliver value such as quality, research, product development, marketing, HR.
I am not entirely certain why so many companies do not “do” strategy. Their managers attended universities with good business management programmes, they read management books full of disaster stories and success stories, they “talk the talk” when meeting with their teams but often they do not “walk the walk”. I can only speculate as to why this is happening. Perhaps strategy is not as easy and simple as it seems. Perhaps it is not well understood by everyone who should really understand it well, and therefore avoided in many business discussions and processes.
The reason which I feel contributes the most to this issue is the short term focus dominating business in general and perhaps also life in general.
For many people in society and in business, strategy feels and sounds like “long term”. Those in charge of the company and divisions demand quick fixes that deliver short term results in an attempt to please all stakeholders. I would agree that only having a business strategy and not paying due attention to the right tactics is a mistake. After all, “strategy without tactics is the slowest route to victory”. However, in business we need to “do the right things” before we “do them right”; they are both needed and in my view equally important. Strategy supersedes tactics in the sense that choosing tactics is much easier and logical once the appropriate strategy is chosen. Strategy does not change overnight, unlike tactics which can (and should) change based on market developments and changes in the environment. Because strategy and tactics are so closely linked and need to be aligned, having the right strategy is definitely not a long term obscurity standing in the way of achieving immediate success. It is, simply said, the bit in the middle between objective and tactics which can not be left out. As you will hopefully agree, the golden rule “objective-strategy-tactics”, or OST, is one not to be forgotten. When working in workshops on choosing strategies, I often use the following questions:
WHERE do we want to get to = OBJECTIVE.
HOW will we achieve this objective = STRATEGY.
WHAT will we do exactly to visibly execute this strategy = TACTICS.
Going back to value discipline and value proposition, I will argue how in my opinion they became (more) relevant in the medical device industry and what the proper use of these strategy tools did for some of the business I have been responsible for.
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