The need for a changing role of the CMO
When is a CMO not a CMO? If CMOs want to succeed, it is time for them to dissociate themselves from the ‘CMO’ label, and change their mindsets to succeed in their region and to grab market share.
CMOs are facing some interesting times and challenges. In their own countries, they are looking at how to respond to growth, different buying practices in China, and an ageing and maturing market. In the West, they have to satisfy growing complexity and an increasingly complicated demand model that is looking for much faster delivery, smaller batch sizes, and customer centricity.
So far, they have operated only as suppliers in traditional buying/selling relationships, which are completely cost-driven and transactional. They have worked in their own silos by optimising their own manufacturing. However, in this very different pharmaceutical world, CMOs will have to learn how to play a different game. They will have to learn to strike much closer relationships within an end-to-end value chain model, where their customer is the same as their customers’ customer, and where they have to be much more agile and smart. They will have to learn what it means to be one value-added step in a whole supply chain and also what changes in behaviour this must drive in their businesses.
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For those of you who have been working in the supply chain industry as long as I have, none of this will come as a surprise. Retailers have learned that they cannot afford to pass responsibility for the supply chain to their suppliers and just demand service and cost. Instead, leading manufacturers now regard themselves as supply chain companies. Some are even able to synchronise the activities of the entire supply chain to the demand of the customer. End-to-end supply chain and internal and external collaboration are no longer new projects in leading pharma companies.
Of course, CMOs are not completely responsible for the way they behave today. Most of their customers are still waking up to the fact that they, too, need to change. CMOs can’t afford to sit around and wait for their customers to ask them to work in a different way. Life is moving too fast for that. CMOs who do wait will struggle to compete with CMOs who have already taken the lead. Time is of the essence.
In other industries, like electronics and high-tech, where there are obvious comparisons to the pharma CMO, it is easy to see that contract manufacturers are playing a very different role. The days of “I will give you an order to make my product, I will tell you how to make it, and then you make it and deliver it to me when I want it” are disappearing fast. However, for the most part, that is exactly where the pharma industry is today.
That is an entirely transactional relationship. The knowledge of what the CMO does, how it does it, what else it does, how it could help, and so on, is unknown. Customers place an order with their CMO and at some point it will be produced, so they pay them. Nobody shares forecasts and plans, no one collaborates over new products or channels to market, nobody is working end-to-end; they just work in their own silos.
These changes are coming. They will arrive faster than people expect because now people know it can be done. Startup businesses are developing products faster, communication is instant and digital technology is driving change. The biggest challenge for CMOs is having the courage to drive change. Their customers are slower than them, so it will take longer to get them to change. Even for leading major pharma companies, this kind of transformation does not come easily.
The biggest step forward is a change of mindset, particularly within leadership teams. They must fully embrace the idea that they can drive necessary change to their own advantage, whether that is profitability, growth, volume, market share, or all of these things. That means they have to give themselves time to understand what this change means.
They have to lose their behaviour as a ‘contract manufacturing organisation’ and redefine their roles in the pharma industry.
Technology’s importance is growing, capabilities are expanding exponentially and CMOs need to embrace the opportunities that today’s technology is offering in order to drive the changes that are needed. Leading players are researching how to use new technology to do what humans have traditionally done, but faster and better – planning, for example.
Last but not least, they need to invest in people. Skills and capabilities are now at the top of the agenda for leading companies, whether in pharma or not. Leadership engagement is vital. However, in this new end-to-end world, technically competence is far from sufficient. Leaders at every level in the business now need interpersonal skills, behavioural skills, collaborative and communication skills, management skills, and their own subject matter expertise.