By Mandar Paralkar, Global Vice President and Head of the Life Sciences Business Unit, SAP
Committed to enhancing outcomes for patients and their caregivers, the life sciences industry has played a considerable role in resolving environmental, social, and governance (ESG) issues. Yet, this impact has never been considered a source of growth and operational improvement – until now.
In an SAP Insights study, business leaders from life sciences organizations with annual revenues under $1 billion plan to use sustainability to drive revenue growth and increase business efficiency. Such measures include using recyclable packaging, sourcing sustainable materials, locating plants closer to business-to-business (B2B) customers, reducing the distance goods travel, and onboarding vendors that demonstrate ethical labor practices and diversity.
For companies that traditionally rely on mergers and acquisitions (M&As) for growth, this focus on sustainability may appear to be a dramatic shift. But the volume-centric nature of the industry’s midmarket segment is turning sustainability into a prime opportunity for amplifying the value of midsize organizations as M&A candidates and long-term partners.
The interplay of growth, sustainability, and digitalization
Midsize organizations add tremendous momentum to the life sciences industry in numerous ways. Some innovate modern technologies and approaches to develop critical pharmaceuticals or devices. Meanwhile, others augment specific areas of R&D and clinical trial operations to increase the capacity, accuracy, and speed needed to run trustworthy testing and production.
These contributions make midsize organizations impressive candidates not just for M&A, but also as value chain partners for larger life sciences companies. And underlying this fundamental edge is sustainability – an emerging imperative, according to SAP Insights, which is becoming increasingly essential to core strategies for the overall industry.
For midsize organizations, the industry’s growing interest in sustainability is expanding the scope of their business transformation efforts. It doesn’t matter if their programs look good on paper in terms of cost reduction and efficiency improvement. They must also consider the needs of prospective and existing B2B customers and value chain partners – especially reliable sourcing of eco-friendly materials, minimized energy costs, and accurate tracking of carbon emissions from ingredients and components.
Widening the scope of transformation to include sustainability brings about more progress, of course. However, it can also introduce strategy misalignment, conflicting decision-making, and cultural confusion when business leaders and their employees don’t have the visibility and insight to realize all objectives and expectations within a well-defined, cohesive approach.
How can midsize organizations balance their role in a collaborative and resilient supplier network without spending excessive time and money in tracking and reporting sustainability objectives? Based on SAP Insights research, the answer is digitalization that goes beyond data collection to focus on strategic execution.
The path to industry-focused transformation
Like most of the industry’s innovation projects and initiatives, digital transformation is critically linked to business performance. For instance, organizations with the visibility and insight to measurably reduce carbon emissions and waste can fulfill a supplier network’s sustainability goals while lowering operational costs and overhead without negatively impacting performance and quality. Furthermore, that can rapidly identify exceptions and risks for corrective actions by enforcing standardized processes and comparing operational data.
SAP Insights analysis suggests that most midsize life sciences organizations start their digitalization journey with a public cloud infrastructure for relevant industry topics. Initial goals are typically related to the desire to alleviate the burden of maintaining and continuously updating software in house. Private cloud option gives flexibility with tighter governance and control around compliance aspects. However, they also realize the benefits of a scalable deployment environment that accelerates adjustments to address business or customer requirements and increases employees’ confidence when adapting their work and pivoting priorities.
Consider the rising popularity of cloud-based ERPs specifically designed for midsize organizations. The technology’s architecture provides the simplicity, interconnectedness, and flexibility needed to improve processes and operational efficiency. Additionally, companies further ahead in their digital maturity can build autonomous operations and integrate fiscal management across multiple locations.
Cloud ERP offers a distinct benefit by supporting the skills midsize organizations need along every stage of their growth. From product lifecycle management (PLM) to customer relationship management (CRM) and supplier relationship management (SRM), necessary capabilities can be set up, implemented, and upgraded quickly with minimal customization. This approach enables a smooth migration from paper-based work to digital processes and integrates business data and systems to help drive global compliance, operational efficiency, cost reduction, and ultimately revenue growth.
In addition, financial and sustainability reporting can be automated and delivered together to help ensure investments and expenditures contribute to green objectives and business growth. For example, they can pivot finance operations to address new plastic tax regulations, extract origination and characteristic information from the materials they have, and determine recyclability.
Growth with an impact that expands organically
Exciting innovations in the life sciences industry are all about improving how people prevent illness, treat health conditions, and cure disease. But the real power of these efforts is enabled by midsize industry players that develop the behaviors and functional skills needed to deliver the sustainability aspirations of their B2B customers and value chain partners.
Article Credits: Forbes
Image Credits: TWI