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RAPS' Latest | 04 August 2016 | By Zachary Brousseau
When the 2016 Regulatory Convergence begins next month in San Jose, R “Ray” Wang, principal analyst, founder, and chairman of Silicon Valley-based Constellation Research, will kick things off Sunday evening, 18 September, with opening keynote remarks. Wang is a noted Silicon Valley strategic thinker with expertise in areas including technology and innovation, digital disruption, business model design, engagement strategies and customer experience. He also started his career working in the healthcare space.
We recently had a chance to ask Wang some questions about the healthcare product industry, changing business models, disruptive technologies and what it all means for regulatory professionals.
Regulatory Focus: You have a background in health, having undergraduate and graduate degrees from Johns Hopkins in public health and health policy and management, and having worked early in your career at Johns Hopkins Hospital. How did your career journey take you from healthcare to software and technology?
Ray Wang: I started out working in inner city hospitals, both at Johns Hopkins and Detroit Medical Center. Those experiences helped me understand how hospitals worked, and how patient care could be improved. From there, I went on to Deloitte and worked on mergers and acquisition, and healthcare consulting. At Ernst and Young, I ended up being the tech geek on healthcare projects. I was on a team that built a project management system and eventually I was asked to learn SAP which I did. That got me into technology and into jobs as product manager, head of marketing and technology analyst. I’ve been fortunate to work with mentors and managers who understood the balance between business, technology and regulation.
RF: How have you seen business models changing for regulated healthcare product companies like pharmaceutical, biotech and medical device companies?
RW: The business models have massively shifted. We’ve gone from big blockbusters to personalized medicine in less than a decade. We’ve seen a shift from regulated to increasingly regulated environments. The cost to deliver a new product in the market is now at a point where it creates barriers to innovation. Regulatory mastery is now key to an organization’s success.
RF: How is digital disruption affecting these healthcare product companies?
RW: The challenge every organization faces is the shift from ownership to access and the shift from buying a product to buying a brand promise. Product companies now have to think very differently about what the value is. We no longer sell products but do sell experiences, outcomes and insights. Over time, device manufacturers now realize that the insights drive the business model and that the devices could be given away for free. Pharma companies are starting realize that personalized medicine will create a new shift in how not only testing, but also consumption patterns, will change. The shift to digital business models presents a new opportunity for those organizations that can see the long game while addressing the brutal short-term shareholder requirements.
RF: What are the implications of shifting business models and digital disruption for how healthcare products are developed and regulated?
RW: The new winners of the digital era have built business models that aggregate components of network economies. The three distinct components of the network economy include:
Most organizations choose one of these components as the primary business model and partner with the others to create a network economy. However, over time, organizations realize they need to build business models that include two or even all three of these components.
In fact, successful winners of the digital era have created an asymmetrical advantage by taking over all three components. For example, in the consumer world, four companies have the ability to deliver on this network economy: Apple, Amazon, Google and Microsoft. These companies have the content, the network and the arms dealer capabilities to trade on trust and identity.
RF: What can companies in the life sciences learn from other industries dealing with disruption?
RW: One of the biggest opportunities for monetizing digital business will come from insight streams. These insights will come from both least likely sources and the most obvious. For example, least likely sources include the amount of power consumed, water used, visitors into the building, foot traffic on the sidewalk and density of the parking lot. These sources may seem mundane and useless information to most of us, but large insight brokers will take that data to drive contextually relevant information. Obvious sources include internal systems such as workforce performance data, customer satisfaction, product quality stats and other areas. The goal here is to use this information to differentiate.
Differentiation of insight creates new experiences. For a decade or so now, we’ve seen technology and data bring new levels of personalization and relevance. Google’s AdSense delivers advertising that’s actually related to what users are looking for. Online retailers are able to offer—via FedEx, UPS and even the US Postal Service—up-to-the-minute tracking of where your packages are. Map services from Google, Microsoft, Yahoo! and now Apple provide information linked to where you are.
Big data offers opportunities for many more service offerings that will improve customer satisfaction and provide contextual relevance. Imagine package tracking that allows you to change the delivery address as you head from home to office. Or map-based services that link your fuel supply to availability of fueling stations. If you were low on fuel and your car spoke to your maps app, you could not only find the nearest open gas stations within a 10-mile radius, but also receive the price per gallon. I’d personally pay a few dollars a month for a contextual service that delivers the peace of mind of never running out of fuel on the road.
Brokering augments the value of insight. Companies such as Bloomberg, Experian and Dun & Bradstreet already sell raw information, provide benchmarking services and deliver analysis and insights with structured data sources. In a big data world, though, these propriety systems may struggle to keep up. Opportunities will arise for new forms of information brokering and new types of brokers that address new unstructured, often open data sources such as social media, chat streams and video. Organizations will mash up data to create new revenue streams. The permutations of available data will explode, leading to sub-sub specialized streams that can tell you the number of left-handed Toyota drivers who drink four cups of coffee every day but are vegan and seek a car wash during their lunch break.
New players will emerge to bring these insights together and repackage them to provide relevancy and context. For example, retailers like Amazon could sell raw information on the hottest purchase categories. Additional data on weather patterns and payment volumes from other partners could help suppliers pinpoint demand signals even more closely. These new analysis and insight streams could be created and maintained by information brokers who could sort by age, location, interest and other categories. With endless permutations, brokers’ business models would align by industries, geographies, and user roles.
Delivery networks enable the monetization of insight. To be truly valuable, all this information has to be delivered into the hands of those who can use it, when they can use it. Content creators—the information providers and brokers—will seek placement and distribution in as many ways as possible. This means, first, ample opportunities for the arms dealers—the suppliers of the technologies that make all this gathering and exchange of data possible. It also suggests a role for new marketplaces that facilitate the spot trading of insight, and deal room services that allow for private information brokering.
The most intriguing opportunities, though, may be in the creation of delivery networks where information is aggregated, exchanged, and reconstituted into newer and cleaner insight streams. Similar to the cable TV model for content delivery, these delivery networks will be the essential funnel through which information-based offerings will find their markets and be monetized. Few organizations will have the capital to create end-to-end content delivery networks that can go from cloud to devices. Today, Amazon, Apple, Bloomberg, Google, and Microsoft show such potential, as they own the distribution chain from cloud to device and some starter content. Telecom giants such as AT&T, Verizon, Comcast, and BT have an opportunity to also provide infrastructure, however, we haven’t seen significant movement to move beyond voice and data services. Big data could be their opportunity.
Meanwhile, content creators—the information providers and brokers—will likely seek placement and distribution in as many delivery networks as possible. Content relevancy will emerge as a strategic competency in delivering offers in ad networks based on the context by role, relationship, product ownership, location, time, sentiment and even intent. For example, large wireless carriers can map traffic flows down to the cell tower. Using this data, carriers could work with display advertisers to optimize advertising rates for the most popular routes on football game days based on digital foot traffic.
RF: Regulations have to keep pace with the latest technology, but with new health technologies developing more rapidly than ever, it’s a significant challenge. How do you see this playing out over the next five-to-10 years?
RW: We will see a shift to network economies. This is where the content (i.e., product, service, experience and outcome) meet networks (i.e., how customers and suppliers provide the services) and technology (i.e., the disruptive technologies that will power new business models). The goal will be to trade insight and pay for outcomes. Expect insurers to pay for efficacy. Device manufacturers will focus in on the precision of insights. The regulatory focus may bring competitors together to deliver a common platform to address regulatory in order to achieve operations efficiencies.
RF: Regulatory professionals’ work has become increasingly strategic, and their expertise has come to be recognized as an important business asset. What do they need to know about how business models are changing to be more effective business partners?
RW: Regulatory professionals must realize that their mastery of regulations and the strategy to optimize will eventually be augmented by artificial intelligence and machine learning. Their jobs will not be eliminated but their expertise in identifying new patterns and opportunities will be more rewarded going forward.
RF: What do you plan to cover in your keynote remarks at RAPS’ Regulatory Convergence?
RW: We’re standing at the dawn of a digital business revolution, but we barely realize it. As with the beginning of every revolution, those in the midst of it can feel it, sense it and realize that something big is happening. Yet it’s hard to quantify the shift. The data isn’t clear. From how we interact with each other to how we engage with organizations, the shift is right in front of us. However, organizations usually react to change by denying, delaying and disparaging—a key reason why 52% of the Fortune 500 have been merged, acquired, gone bankrupt or fallen off the list since 2000.
Digital business disruption is no longer an option—it’s a necessity. Social, organizational, and technology shifts require a new way of thinking about business, one that leverages a digital DNA to deliver experiences and outcomes, and to transition from selling products to keeping brand promises. Learn how regulatory professionals can understand how digital transformation allows one to use digital to disrupt instead of become one of the disrupted.
For more information or to register for the 2016 Regulatory Convergence, visit RAPS.org/Convergence.
Tags: Regulatory Convergence, conference, San Jose, 2016, keynote, speaker, Ray Wang