by James Robinson, director of solutions, Model N
Studies by IDC have confirmed that productivity is a top three driver on today’s corporate agendas. And this is not just the domain of large enterprise businesses, as the analyst’s latest survey of IT professionals in SMBs highlighted that for 62 per cent of respondents, improving employee performance is the main driver behind growing investment in mobility.
Across all markets, businesses are only now emerging, slowly and uncertainly, from the global economic downturn, which impacted in particular the supplier/customer relationship and the ability to protect profitability in a tougher, more competitive commercial environment.
Many businesses have had to face additional sector-specific challenges. In the pharmaceutical market, for example, changing regulation has reduced the level of patent protection, as the industry moves from an era of ‘blockbuster’ drug development to one of more personalised medicines. Together with new purchasing strategies adopted by governments around the globe, this is having a profound impact on manufacturers’ ability to recoup substantial R&D costs and protect margins throughout the lifetime of each product.
However, companies continue to struggle with Excel spreadsheets and multiple point pricing tools, which makes a consistent company-wide approach to margin optimisation all but impossible. As such, a much more effective approach is to centrally manage price and profit strategies by adopting some form of integrated revenue management solution linked to a global data source.
The benefits are felt both financially and in the productivity of the pricing teams. Yet too few companies are taking advantage of advanced technologies to improve employee productivity and profit performance.
However, this is changing, as businesses are able to learn from others in more advanced industries such as airlines, hotels and consumer products in how to benefit from integrated revenue management methodologies.
And, with tailored solutions now available which meet the specific needs and challenges of individual sectors, technology can now play its full part in enabling consistent enterprise-wide processes and collaboration essential to maximise margin performance.
Technology – the poor relation?
In tackling the three pillars of any successful change programme – people, process and technology – there can be a significant difference in how companies view the relative importance of each element.
Again in the pharmaceutical arena, a recent poll of 700 senior managers at a global industry webinar found that almost two-thirds (62 per cent) of respondents highlighted the need to ramp up existing skills and competencies as their greatest priority in building a global pricing improvement programme. This compared starkly with only eight per cent who saw the need to put in place long-term viable technology as the key to sustainable improvement.
Addressing technology change can be especially problematic when budgets are tight, as it always has a price tag attached. However, the findings also highlight a lack of understanding regarding the role that technology must play in delivering effective change. Whether ensuring clear processes and governance or enhancing people skills company-wide, an end-to-end pricing solution is essential in reducing revenue leakages, margin erosion and other aspects of price optimisation throughout the lifecycle of any product.
This is especially important in highly-regulated sectors. Where the technology underpinning pricing management is restricted to the desktop, spreadsheet and email, this also exposes the business to the further risk of fines for non-compliance, through an inability to report on financial issues such as pricing to the satisfaction of local regulatory authorities.
Changing markets, changing technologies
Developments in technology directly reflect the priorities of the industry they serve. So, in the highly competitive world of fast moving consumer goods (FMCG), in which product lifecycles are typically short, best-practice systems and processes have evolved to enable companies to be commercially agile and responsive to change.
By contrast, in a traditional ‘big brand’ pharmaceutical environment in which blockbuster drugs have benefited from patent protection, the principal focus has until now centred on technologies and systems to support R&D, with the result that CRM and pricing systems have remained embryonic.
As a result, in developing more customer-sensitive and responsive strategies, individual industries can benefit from the experience of others, where the tools to support customer segmentation, understanding buying preferences and the commercial supply chain are well-embedded as standard processes throughout the sector
Technologies are available to help businesses undertake this transformational change. First, they can provide visibility of net margin segmented by product and customer groups, by abstracting and reporting data on all elements of the sale and invoicing process. Complex modelling of this data can then be undertaken to explore the potential impact of different pricing scenarios and also enable central control of all strategic pricing decisions.
For this to take place effectively, management needs to understand the connected nature of the revenue lifecycle, involving the pricing team, sales, marketing, finance and all other relevant departments. In overcoming old siloed mentalities, it needs the buy-in and commitment of senior management, with all departments understanding how an integrated approach linking all pricing processes on a single platform will meet the tougher demands of a more competitive marketplace
Implemented effectively, the business and technology can work together harmoniously. Each department understands its role in the new cross-functional processes, fully supported by technologies and systems aligned to the unique needs of the pharmaceutical sector.
As a result, productivity is greatly improved, as employees at each level can focus on carrying out their appropriate function rather than, as often happens today, staff at all levels wasting time and effort chasing data and information from across the business. Equally, automation gives greater confidence in the quality of pricing data, avoiding the need for constant checking and re-checking, again freeing up time for more insightful and effective decision-making.
Any investment is not just about solving today’s problems but putting in place a template for the future. In turn, technology will form a central element of any business strategy which demands full transparency and control of pricing and revenues as the basis of tomorrow’s competitive business model.