Can a Japanese pharmaceutical become a social innovator?

Santen CIO Minori Hara explains how IT is enabling the ophthalmological company to deliver a holistic sense of well-being around eye health.

When it comes to digitalization in the healthcare sector, many conversations revolve around harnessing artificial intelligence (AI) to accelerate the development of new drugs. That’s understandable; the race to find a COVID-19 vaccine has impressed on everyone the need for speed. That said, it’s important not to overlook the other ways in which pharmaceuticals can harness technology to improve healthcare.

In Japan, the ophthalmology company Santen recently announced its Santen 2030 vision of becoming a social innovator by capitalizing on technological advances. “We want to deliver happiness through vision,” says Minori Hara, the company’s chief information officer (CIO). To achieve this goal, Hara is spearheading a digital transformation focused on deepening the company’s engagement with customers, including before and after the point of prescription. Prior to joining Santen in 2018, Hara spent nearly 20 years working at the United Nations advancing the Sustainable Development Goals (SDGs) and sees a continuation in his current role: “Promoting digital transformation is one of the key enablers to strategically address social issues related to people’s eye health.” For example, establishing a telemedicine platform allows rural communities to access ophthalmologists and specialist services that they otherwise would have to travel long distances for.

Last December, Hara spoke with McKinsey’s Lari Hämäläinen and Jason Li. Aside from explaining how technology can create more touchpoints with customers, Hara shared how Santen’s digital transformation serves a higher purpose than its bottom line, and why IT departments and their CIOs should play a more proactive role in strategic and business discussions in the digital age.

McKinsey: From your vantage point as CIO of a global pharmaceutical based in Japan, how has digitalization affected the healthcare industry?

Minori Hara: In many parts of the world, including Japan, healthcare usually isn’t a front-runner for digital transformation, because it’s an industry protected by many increasingly strict regulations. It’s not just healthcare but also information management. As we engage more intensively with our patients and consumers, we become more affected by data-privacy regulations. Thus, our business model has always been more traditional and conservative.

But the environment around us is changing very quickly. In an aging society, medical expenses have been dramatically increasing, and the healthcare system is overstretched. There’s huge pressure for pharmaceuticals to keep costs down, and a huge gap is now growing between what the existing healthcare ecosystem is providing and what people expect from it. We’re expected to deliver healthcare more rapidly than before, with greater levels of personalization.

At the same time, in addition to traditional players like pharmaceuticals, hospitals, and insurance companies, new players are popping up. New platforms and apps are being developed to focus on healthcare, yes, but also to provide lifestyle or cosmetics services. The ecosystem is growing and becoming more complex. To remain relevant, we need to innovate our business model and go beyond our traditional ring-fenced battlefield.

McKinsey: Where are you seeing opportunities for Santen?

Minori Hara: Traditionally, our value lies at the end point of the patient journey. A person falls sick and goes to the doctor for a diagnosis and treatment. If necessary, the doctor writes them a prescription and they head to the pharmacy, which is where our products are located. But we don’t really know what happens before or after, because we don’t have customer touchpoints beyond that.

We want to change that and add value at other points of the patient journey. We recently announced our ten-year vision called Santen 2030, which expresses our ambitions of becoming a social innovator. We’re orchestrating and mobilizing key technologies to deliver happiness through healthy vision and improve people’s lives. People are used to accessing a wide range of services online, and they want to be able to access healthcare services online too, but our company was optimized for the traditional prescription-based business model. To meet our customers’ needs more holistically, we cannot limit ourselves. We have to build new externally oriented business modalities by enriching our service offerings and providing greater levels of personalization.

McKinsey: And how do you actually go about deepening your engagement with customers more directly?

Minori Hara: First, we had to define our approach, which required a lot of internal discussions and reprioritization. We looked at our core business, ophthalmology, and realized the importance of an ecosystem perspective that goes “beyond the pill.” There are a number of common eye diseases, such as cataracts and glaucoma. Santen produces the eye drops that are used in the treatment of cataracts. In many developed economies like Finland and Japan, cataracts are fully treated at a very high rate, but this is not the case in many rural areas or developing economies, where many people become blind from cataract disease due to a lack of medical access. In other words, it’s an ecosystem issue—we need specialized doctors, and people need to be diagnosed. In response, we are creating more touchpoints at the prevention and diagnosis stages. We are working on ways to enable easier access to treatment, especially for people living in rural areas—who may not have access to ophthalmologists but have smartphones—through digital channels like telemedicine.

This approach also applies to glaucoma. A lot of older people get it, but it has completely different characteristics from cataract disease. For the treatment of glaucoma, one of the big issues is compliance monitoring. A lot of people don’t keep up [their regimen], and their conditions deteriorate. As an ophthalmology company, we strongly believe that we can use digital innovation to create services that are integrated into the patients’ lifestyles so that they can better track their behaviors and treatments.

McKinsey: How are you tracking the performance of Santen’s digital transformation?

Minori Hara: We employ a range of KPIs [key performance indicators] to study the impact of digitalization across the entire spectrum of business functions. We are implementing KPIs that link the company’s financial and business growth to new digital offerings, for instance by measuring the number of people who reach out through our digital channels. We intend to improve indicators measuring how data-driven decision making is driving operational excellence across our value chain, including R&D, manufacturing, quality assurance, supply chain, marketing, and commercial and corporate administrative functions. We’re also analyzing how new arrangements like digital workplaces are affecting work styles and behavior. Finally, we also have KPIs that relate to organizational resilience, which include cybersecurity, data privacy, and business continuity.

Another important thing is accumulating failures at an early stage. We need to analyze the results of our existing initiatives in different regions and incorporate the lessons we learn into our central coordination- and strategy-implementation frameworks. We faced difficulties launching some new services because some internal departments didn’t know how to deal with new digital channels. And that’s understandable. After all, we’re not a gaming or software company, and neither are we a consumer-goods company that is used to relying on online shopping portals. That’s why we’ve partnered with external companies to acquire the necessary capabilities quickly.

Another important thing is accumulating failures at an early stage. We need to analyze the results of our existing initiatives in different regions and incorporate the lessons we learn into our central coordination- and strategy-implementation frameworks.

McKinsey: What are some examples of these external partnerships?

Minori Hara: We’ve partnered with Verily, an Alphabet subsidiary, on a joint venture to create ophthalmic digital and device solutions. We’re also working with Plano, a Singapore-based eye-health tech company, on a digital-platform app that’s focused on treating myopia. We’re also exploring using telemedicine to tackle the increasing burden of eye diseases in low- and middle-income countries through a collaboration with Orbis International, a global nongovernmental organization. We want to better support healthcare professionals with an AI-driven platform. These are capabilities that we didn’t have internally, so we’ve had to acquire them from the outside to enter these domains. At the same time, we’re taking the time to develop our own internal capabilities as a foundation for longer-term innovation.

McKinsey: What were some challenges you faced and how did you overcome them?

Minori Hara: Whenever you’re introducing a new topic, there’ll always be both excitement and fear. Many people are comfortable with the old way of doing things and are not sure if they can adapt to new modalities. Just saying “digital” all the time won’t work. We should execute new initiatives with the company’s long-term vision in mind and with a people-centric approach. The purpose part has to be crystal clear so that people will understand why digital is needed.

Another difficult challenge is speed. The traditional chain of introducing a new drug to the market takes a long time, usually nine to 17 years. And that’s the life cycle of only one project. But with digital innovation, this process can happen over six months or a year. How can we deal with this? It’s not just about the mindset but also about the company’s organizational system, which needs to be overhauled. That’s why we’ve put some initiatives on the fast track and are taking advantage of external partnerships. Through this experience, we’re hoping that many of these new processes and technologies will also be internalized.

McKinsey: How has Santen coped with the COVID-19 pandemic?

Minori Hara: We reacted very swiftly when the pandemic broke out. Our scalable online infrastructure enabled office-based workers to smoothly transition to full teleworking with remote-access capability and enhanced cybersecurity measures. In addition to the physical hardware, we also deployed a “digital workplace” concept to improve collaboration online supported by digital workflows and a standardized online business platform. For our workforce in the field, such as medical representatives, we enabled them to conduct remote detailing and online conferences so they are able to continue meeting the needs of our clients with more digital touchpoints.

The experience of quickly adapting to this “new normal” accelerated Santen’s digital initiatives around employee experience and improved our organizational resilience globally. In a sense, we’ve trained the company’s internal muscles to drive mid- to long-term value-chain transformation and new digital offerings in the ophthalmology domain.

McKinsey: Has the role of CIO changed for Santen in light of all the digital transformation?

Minori Hara: Santen’s previous long-term vision didn’t talk about digital at all; it had put more emphasis on the globalization of our business and reaching more people in the world through the products we manufacture, but our old “growth” strategy is being replaced by a strategy focusing on people’s happiness. The new Santen 2030 comprises three pillars: one is ophthalmology, which is further broken down into innovation and ecosystem; the second pillar is wellness, which includes our daily lives; the third is inclusion of those who are already visually impaired or blind.

In the past, IT’s role in the company was providing solutions that met the explicit needs of the business department. Now we need to be the catalyst of organizational resilience while continuing to support Santen’s technical needs.

With these pillars in mind, Santen’s IT department has to become more value driven and impact oriented. In the past, IT’s role in the company was providing solutions that met the explicit needs of the business department. Now we need to be the catalyst of organizational resilience while continuing to support Santen’s technical needs. We’ve become a more proactive and strategic business partner rather than merely being a back-end service provider. The success of the customer-facing ambitions depends on the successful optimization and digital transformation of Santen’s internal functions. We’ve rolled out robotic process automation across the company, as well as a cohesive operating model to unify our processes globally. In the area of manufacturing, we’ve started a number of digital initiatives such as data-driven kaizen [a Japanese business philosophy espousing continuous improvement], which leverages the power of IoT [Internet of Things] and data analytics. We have to develop the capabilities to generate, collect, and leverage data if we want to provide solutions and services like AI-driven diagnosis, targeted intervention, and automated triage.

As CIO, I’m now leading Santen’s digital strategy in close collaboration with the CEO, and we have a lot of interactive sessions with other departments in Santen—from supply-chain management and manufacturing to R&D and corporate functions—to incorporate their plans into our digital agenda. Our work to develop new digital capabilities is now an essential part and the key enabler of the company strategy over the next few years.

At the company level, the medium-term strategy serves as a sort of constitution for the whole company. Every individual initiative should be aligned to the strategy, and the KPIs for IT and business departments should be linked. That’s why we’re entering decision-making discussions at the strategy-development phase very proactively rather than waiting until only after decisions are being implemented. This partnership between IT and business has to be an iterative process to consolidate and grow the digital strengths of the company.

McKinsey: Talking about developing Santen’s internal capabilities, how are you looking at your workforce? Are you prioritizing reskilling or hiring new talent?

Minori Hara: We need to adopt a hybrid approach. Our existing employees need to be reskilled for sure, but we don’t have the time for everyone to be reskilled to the optimal level. So we’re also hiring people with the relevant digital experience, and they could even be from different industries. Having new, experienced hires in the mix will stimulate our internal workforce too.

Reskilling is not just about technical or digital capabilities; we’re also talking about business-partnership skills and project management. With digital being a key focus for the company in the years ahead, we need more agile forms of project management, as opposed to the traditional waterfall project-management system. So when we’re thinking about expanding our employees’ capabilities, we’re really looking at a strategy that embraces a mix of internal reskilling and external hiring.

McKinsey: You spent two decades at the UN. Have you brought anything from that experience to your current role?

Minori Hara: Last year, we announced a partnership agreement with ITU [International Telecommunication Union], a Geneva-based UN-specialized agency for ICT [information and communications technology]. We are now participating in a program called “Be He@lthy, Be Mobile,” a joint initiative of ITU and WHO [World Health Organization]. It is designed to raise awareness of the prevention and management of noncommunicable diseases through the use of mobile and digital devices to promote healthy lifestyles. I am happy that I have a unique role in this partnership as Santen CIO as well as a former UN professional.

Former Secretary-General of the United Nations Kofi Annan once said, “The future belongs to you, but it can only belong to you if you participate and take charge.” A fundamental part of my own career aspiration has been and continues to be an implementer of SDGs, not just managing an IT department. Promoting digital transformation is one of the key enablers to strategically address social issues related to people’s eye health. Digital is glue to the two worlds, and I hope we continue to be relevant to the global agenda.

McKinsey: Finally, can you paint a picture of Santen as a social innovator in 2030?

Minori Hara: Internally, if we’re still talking about digital transformation in 2030, we haven’t transformed. By then, digital should already have become an integral part that is fully embedded in our company’s core. The work that we’re doing now should already be forgotten.

From an outside perspective, my hope is that Santen would have a closer presence in people’s lives. Yes, our products are easily found in drugstores and often prescribed now, but we could contribute to people’s happiness more actively and directly. We want to be an “orchestrator” of the healthcare ecosystem’s transformation, and as traditional business models are becoming obsolete, we’ll be engaging in more unconventional partnerships to reimagine Santen’s boundaries and provide more integrated services, which will lead to happiness with vision for people around the world.

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