When organizations develop strategies, they need indicators for implementation. KPIs are traditionally used for this purpose. If market needs change, new strategies are required, which immediately calls for new KPIs. This, however, overlooks the fact that KPIs say nothing about the quality of market development. Measuring and incentivizing change is a task that should follow two rationales. Although measurability creates orientation, it should not result in a situation where new forms of market development are no longer tried out for fear of not meeting the respective KPIs.
Anecdotal evidence – old but true
Not long ago, you could hear the same story told over and over again in the hallways of life science companies. In a waiting room, a few minutes before visiting a physician, a sales rep would quickly click through the marketing slides. Not that reps in this situation wanted to better understand the content just before an important meeting; they merely wanted to trick the software and fulfill the requirement to “show the physician all the documents” – for the sake of appearances.
This story is just one example of a badly failed attempt to control KPIs. And it is not an isolated case. Some physicians report receiving up to 100 emails per month from one and the same pharmaceutical company. Even if activities for multiple indications are the root cause, the conclusion is obvious: Behind this digital avalanche may be suspected employees who simply want to fulfill their targets and send off a specific number of emails – no matter whether it seems reasonable or not.
Behind closed doors, sales reps often tell us they have driven hundreds of kilometers to visit physicians – in vain. They knew beforehand they would not be welcome. But at least they wanted to appear to have met the target of a certain number of personal contacts per month. You can also see KPIs springing up to track digital marketing: whether mails were opened, how click-through rates and dwell times are changing, or how download numbers have developed. These KPIs mirror how other industries monitor digital customer journeys and influence buying behavior. What physicians’ customer journeys look like and when they can best be run digitally has, in many cases, not been clarified yet. Nevertheless, these KPIs pretend that the answer has already been found. Whether the low opening rate was due to the flood of mails triggered or because the content did not fit the digital customer journey remains to be seen.
Dysfunctional KPIs due to misguided strategy work
These examples may be of anecdotal evidence, but they still point to an elementary truth. In life science there are numerous functionless KPIs that do not serve to optimize performance, but actually worsen it. They generate meaningless work and prevent employees from developing creative solutions (or ensure that employees learn to creatively work around these KPIs). This is because such KPIs target a market development that was once successful, but now address a problem from the past. Some KPIs continue to measure the number of physical visits to physicians. Yet physicians are now limiting access, not just because of the pandemic. They have long called for interactions that are beneficial to both sides (e.g., discussion of new real-world data). The focus should be on gaining knowledge about the use of a substance and potential barriers to its application.
The problem, however, is not only in the implementation of KPIs, but also in the creation of strategy processes. Nowadays, these processes mostly take place in life science silos. It is left to the individual functions (medical, commercial, etc.) to work out the strategic directions, which are then translated into a plan of action. In changing market situations, strategy work is all about working out which new and which old indicators are promising. If you make success measurable through KPIs, you lose sight of the question: what does an organization learn during the implementation and evaluation of different measures? A cross-functional discussion about what global goals mean for affiliates only takes place to a limited extent. The side effect of this approach is that during strategy implementation, the price paid for the lack of strategic integration of the functional perspectives becomes obvious. The functions tend to behave with regard to key indicators that were specifically set up from their perspective alone. If you take a cross-functional look, the wheels do not mesh.
Innovative power of organizations impacted by KPIs
Datafication, in particular, has made the activities of individual functions visible. You can now count the number of event invitations sent to physicians by medical or commercial field staff. Yet the question of whether the sending of messages pays off with respect to physicians’ actual needs remains unanswered. Each function in the back office or the field has important insights into therapy rationales, but this customer-oriented form of market development often does not pay off in terms of the respective employees’ KPIs. Worse still, it may even contradict them.
Individual sales reps may have developed creative practices for engaging with their customers to increase market share. And a lot of effort is put into protecting the behavior patterns required by KPIs – against the insights of the central functions. At the very least, an amount of effort has to be invested in making the claimed KPIs look good.
If decision makers do not rethink these old KPIs, they at least have to face up to the question of why they are not exploiting an organization’s innovative power. To solve the problem, it is not enough to unmask the myth of wrong KPIs. Nor does the answer lie in “simply” developing better KPIs. What is needed is to link the setting of KPIs to a strategy process that takes market needs as its starting point.
Getting to the root of change (and making it measurable)
If you no longer want to pursue a strategy following the old means of market development, you have to start the strategy process at point of the division of labor between medical, commercial, market access functions, etc. The strategy process has to be based on a physician’s local rationality and the internal logic of their respective organization (e.g., clinics). Every function has to look at a physician’s local rationality, the internal logic of clinics, and the structures in the life science ecosystem (authorities, competitors, etc.). These local rationalities then need to be related to a company’s own strategy. And this process has to be cross-functional, because all these functions have their own perspective on the needs of market players and have gathered many insights of their own. Then the tug-of-war over strategic guidelines will begin. Where do we want to develop our accounts, or do we really need to do that? What resources do we require for this strategy, and in which functions? Such a cross-functional struggle is, however, not without risk, as compliance has to be maintained. Joint strategy work does not change an organization’s internal firewalls. In implementation, medical affairs staff will continue to talk about substances that are about to be approved, while commercial and sales will not.
Part of the struggle is to define smart KPIs that align with strategic guidelines. How do market development activities pay off in terms of outputs such as revenue, market share, and growth? And on that note, which KPIs serve as steering purpose? Thinking more granularly, what are the indicators of good customer relationships with physicians? And what measures have led to an improvement in a specific customer relationship over the past two years?
So, the good news is that KPIs are not an evil feature of pharma and biotech organizations, nor of field functions. But what is needed is cross-functional strategy work that finds KPIs that are aligned with the reality of the market ecosystem. This is because a strategy process that reflects the market’s expectations of a company’s own structures also facilitates effective control in implementation – through better KPIs.