The major global management consultancies have, until very recently, been operating in uncharted territory and feeling very uncomfortable, because they were unable to give clients a sense of direction.
This was a direct result of having lost their own sense of direction.
With the passage of time and the collection of sufficient data, there is now enough analysis in place to conclude that we are now in a constant state of disruption and that all the old rules have broken down.
New rules have to be developed and those managers who stay with the old version will be disrupted to extinction.
The McKinsey Global Institute have recently published a book about this subject titled “No Ordinary Disruption: The Four Global Forces Breaking All the Trends”.
The book provides an analysis of how we all need to reset our intuitions as a result of four forces colliding and transforming the global economy.
* The rise of emerging markets.
* The accelerating impact of technology on the natural forces of market competition.
* An ageing world
* Accelerating flows of trade, capital, people and data.
“For evidence of the shift to emerging markets, consider the startling fact that, by 2025, a single regional city in China—Tianjin—will have a GDP equal to that of Sweden, or that, in the decades ahead, half of the world’s economic growth will come from 440 cities, including Kumasi in Ghana and Santa Catarina in Brazil, that most executives today would be hard pressed to locate on a map.
What we are now seeing is no ordinary disruption but the new facts of business life—facts that require executives and leaders at all levels to reset their operating assumptions and management intuition.”
i2P has been noting various changes in the global business of Pharmacy for the past 15 years and has been conscious of various disruptive factors and has reported on them.
Recently, I had an unplanned gap in my working day and tuned in to the ABC program – The National Press Club Address.
The speaker was Catherine Livingstone AO, the president of the Business Council of Australia.
Her address touched on the lack of leadership and the disruptive influences now apparent in Australia.
She caught my attention.
The following link will get you to this address and it is well worth your time to listen to an expert Australian management perspective.
Catherine shone a light on the basic problem of a lack of leadership ability within Australia and on a global scale.
In Australia, we will shortly be debating a new budget that would normally enable business to set renewed targets and create a sense of certainty.
That has not happened to date, and we have had a leadership fumbling its way towards an uncertain future, with an ineptitude that borders on the unreal or farcical.
But it is probably excusable given that leaders of many countries are not exhibiting leadership qualities for the same reasons – they and their advisers have not been able to establish a toehold for direction and are unable to communicate a sense of direction to their general communities.
It is no different for the micro-community of Australian pharmacy.
For pharmacy, there is a need to share information between leadership organisations and come together in areas of policy and direction.
There is absolutely no room to squabble and fight because there is no scope or patience within government to entertain such activity, because they are also undergoing a transitional process to find their own way.
Another global consultancy, the Boston Consulting Group, identifies the same problem and describes it with a slightly different philosophy.
They describe the current problem as one of “Corporate DNA”.
The mistake, they say, are managers who stay true to their company’s defining culture.
This has been correct for the past 60 years, but since turbulence intensity has increased to a disruptive level, with volatility of revenue growth, revenue rankings and operating margins almost doubled, innovation and change is required.
Also market shares shift rapidly and unpredictably leaving all levels of management with a sense of bewilderment and frustration.
Coming closer to home we have seen these issues reflected in PBS growth and reduced gross profits with an unprecedented number of pharmacies sliding into bankruptcy.
Compounding this problem is the banking system’s downgrading pharmacy’s credit rating to an extent that capital growth has almost come to a standstill.
Pharmacy has always been a stable business but volatility is reflected through government health initiatives such as the PBS, all of which are dominated by global Pharma’s (in respect of pharmacy) and so stability suffers through the PBS system.
Yet even banking stability is threatened through the emergence of “Crowdsource Funding” over the Internet.
Still in its infancy, this source of funds could prove disruptive for all major banks eventually, as could alternative currencies such as Bitcoin.
Advisers to the current Australian government mainly fall into the “economic rationalist” basket, but even these people are working on flawed principles and are yet to catch up with their own sentiments and sense of direction.
These are the people that attack the health principles of pharmacy and see everything in terms of the lowest price. They do not understand pharmacy nor do they understand that supermarkets are not necessarily a low price and long-term solution.
Old values management need to be abandoned and replaced by evolution with a capital “R”.
Heritage protection (continuity) needs to be abandoned for new approaches (discontinuity).
An injection of culture change is urgently required and Australian pharmacy needs to develop a more global outlook to be able to moderate and anticipate disruptive change.
Paradoxically, perpetuity is now seen to evolve from change – constant change.
Globalisation is one of the key drivers for change.
And global pharmacy giants such as the Walgreen group (Walgreens, Celesio and Lloydspharmacy) could be hitting our shores if the economic rationalists have their way.
And I am uncertain myself as to whether this would be a positive or a negative.
For much of the past 100 years, the U.S. was the dominant economic force in the world.
In 2014, however, China became the largest economy, at least in terms of purchasing power.
Its companies are making their mark on many industries around the world. For example, Lenovo Group—formed in 1984 as a start-up with $25,000 in a guardhouse—is now the world’s largest maker of personal computers.
It has more than 54,000 employees (including joint ventures) in 60 countries and generated sales of $39 billion in its 2014 fiscal year.
As we look ahead to 2020, it is easy to foresee further change in the balance of economic power, with the continuing rise of Asia, the maturing of the European Union, and the changing fortunes of the emerging markets.
The once “rapidly” developing economies are no longer all developing so rapidly.
Brazil’s GDP growth—an enviable 7.5 percent in 2010—slowed to 0.1 percent in 2014.
Similarly, Russia’s GDP growth was an unimpressive 0.6 percent in 2014, down from 4.5 percent in 2010. Russia’s softening growth has been hastened by the dip in oil prices, with the ruble falling 46 percent against the U.S. dollar in 2014 as crude oil fell to its lowest level since 2009.
“Australia’s growth overall (currently 2.5%) is now forecast to remain at a below trend pace somewhat longer than had earlier been expected,” the RBA said in a revision last February.
Another key driver of change is the disruptive increase in technology.
The Internet of Things—the computers and other inanimate objects that communicate with each other and with people through mobile technologies, sensors, and software—challenges every business model in every industry everywhere.
In the manufacturing industry, machines are able to schedule their own maintenance automatically; in retail, supply chains and inventory systems are becoming self-regulating; in health care, medical devices can collect and pre-analyse patients’ data for practitioners.
We have experienced technological change before—but perhaps not on this scale, and not at this rate.
Over the last 15 years, the number of new devices (mobile phones, PCs, and tablets) sold each year around the world has grown almost tenfold to 2.5 billion.
The number of people connected to the Internet has grown to 3 billion, generating more than 30 terabytes of IP traffic per second.
Technological change has been dramatic—and no company is immune from its impact.
New technologies will force you to reconfigure your strategy, your operations, and your whole approach to business.
Besides globalisation and technology, companies must deal with increasing regulation, protectionism, and nationalism, along with rising social inequality and social strife, and even terrorism, civil wars, and international conflict—all of which require continuous change.
Australian pharmacists must resist any unnecessary changes or regulations. For example, the regulation requiring pharmacists to get approval for any physical change in a pharmacy. Also, changes in drug scheduling that do not make sense for patient safety balanced against convenience.
Time and again, business executives, consultants, and academics have searched for drivers of sustainable success. Clearly, there are many contributory factors.
But what are the core factors?
Three strategies rank among the most important: innovation, restructuring, and growth.
To any CEO, these are deeply familiar strategies.
But they are hard to implement on a continuing basis.
To be successful, you need to think about them jointly.
They reinforce each other, creating a virtuous circle.
In the beginning, there is innovation, a new idea of what to do and how to do it.
The new idea requires you to restructure your portfolio, your organization, and your team.
The process of restructuring creates an additional dynamic, leading to growth.
Growth gives you more scope, scale, and attraction—and the opportunity to invest more, which in turn can lead to new ideas and innovation.
As i2P continues to develop ideas surrounding a new paradigm pharmacy, suitable for Australia and potentially suitable for Australia’s near neighbours, we find that we have to continually front entrenched ideas, an inability to culturally evolve and a reluctance to take risk.
Pharmacy has a lot of potential to expand its health horizons and capitalise on its natural assets and abilities.
Collectively agreeing to positive change can create a single voice for pharmacists of all persuasion.
In turn, that opens the gate to innovation and restructuring.
We are only just starting to think about these elements.
And when all these gaps are filled, we can take growth to a new level, creating stability and confidence along the way.
That’s a better way forward to what we are currently experiencing, and it will require the reduction of PBS dispensing and an increase of whatever becomes its substitute, to create more balance.
That requires a bit of hard work and ingenuity – activities that never hurt anyone but are confidence and leadership builders.
There is no single person, organisation, group or corporation that can provide all the answers.