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In theory

Clinging to industry 'best practice' may be perceived as a route to success, yet an open approach to bespoke marketing theory is more likely to help you shine

To steal a momentous phrase from the Americans, pharma marketers hold these truths to be 'self-evident': national marketing is now subordinate to global strategy, the market environment will only ever get harder not easier and, increasingly, the onus is with marketers to deliver the growth that company shareholders seek.

So, what are we to do when we are given the task of creating an international strategy capable of beating giant global competitors with a new chemical entity that may not have the luxury of being a totally new, fully differentiated molecule?

Marketing strategy, especially in markets where the customer is the healthcare system, is my area of research interest. I spend my life in research interviews and at industry conferences and client workshops, and get to see at first hand how most senior pharma marketers respond to the indisputably difficult challenge of international marketing strategy.

You probably see it too in your internal meetings because the pattern is so similar in the majority of companies that it could well be called the industry-standard responspe to strategic planning. From Malm? to New Jersey and from Tokyo to Basel, marketing strategists look for 'industry best practice', often in the form of case studies and sometimes codified as benchmarking. This is an understandable response.

It is quite normal to want to know what we can learn from our competitors. It is also natural to seek the reassurance and comfort of industry examples which allow us to generalise with less effort than from examples that hail from another industry.

It is also natural that a business as notoriously incestuous as pharma should develop an industry mindset which believes that the market is somehow special and unique. Natural, but inadequate. The instinctive reaction to seek comfort in industry best practice is not simply inadequate; it also drives out a better approach to managing the complexities of international marketing.

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FIGURE 1: THE RESOURCE-BASED VALUE (RBV) THEORY VS BEST PRACTICE ëPULLí

One firm we studied wanted to promote its treatment for a chronic, but non-life-threatening condition. However, a dilemma existed between salesforce push Vs pull, involving disease awareness campaigns, PR and patient advocacy groups.

An element of all of these was needed, of course, but resources dictated that only one could be the main thrust. In one European country, a competitor had done great things with ëpullí ñ much to the envy of our firm ñ so best practice dictated pull. However, when this strategy was attempted in another country, it was an expensive failure and, worse still, no one could understand why; until resourced-based value (RBV) was considered.

In a nutshell, RBV theory says that companies win when they work out their relative and distinctive resource superiorities and choose a strategy which leverages them. The catch is that these superior resources are often intangible and hard to observe. In this case, the success of the competitorís pull campaign was due to a unique combination of strong consumer marketing skills which the copying company did not have.

Best practice did not transfer because it wasnít the strategy that mattered, it was the resource profile. If the follower had known that in advance, its decision would have been very different.

Myth of Best Practice
There are three fundamental problems with trying to copy or adapt what other companies appear to have done.

The first is limited knowledge. We can never know fully what it is the competition has done. Even if we watch them carefully and steal their people, we get incomplete knowledge and, because strategic success never has a single cause, we miss important parts of the winning formula. If you have ever read a case study on something you were involved in first hand, you will know how incomplete and deficient they often are.

The second problem remains even if our best practice case study does manage to reveal the whole story. It is what academics call external validity: how transferable the idea is from one business context to another context. In practice, ideas that work in one situation often fail in another. You have only to look at the relative failure of generics companies in Japan, or the distribution of market share in France to see the difference national context makes. Copying best practice from one country and pasting it into another, even when allowances are made for the differences we can see, often falls foul of the differences we can't see.

The third fundamental problem with best practice as a guide to marketing strategy can be seen, ironically, when it succeeds.

If one or more companies does manage to copy the leader successfully, the result is decreasing differentiation between the major players. For example, look at the therapy areas you are familiar with and ask, objectively and from a prescriber's viewpoint, what is the difference in the overall offering from the main players?

It is increasingly hard for customers to tell the rivals apart, yet successful strategies depend on differentiation. Without it, payers focus in on price, so playing follow-the-leader really benefits only the buyers' negotiators.

Best practice case studies are often incomplete, inappropriate to our business and lead to market commoditisation. That is not to say they are completely useless, but they usually fail to give strategic insight, unless we somehow find a way to draw out the lessons from them in a non-superficial way.

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FIGURE 2: AGENCY THEORY VS CROSSCOUNTRY WORKING BEST PRACTICE

Perhaps the most popular best practice idea that guides marketing across different national subsidiaries is that cross-functional and multinational teams are imperative for strategy development and implementation.

Words like ëconsensusí and ëbuy-iní are the mantras of this school, although the research evidence for it is flimsy. At many pharma companies, teams have spent lots of time, not to mention huge travel and accommodation budgets, yet have still failed to make the strategy become a reality.

A far better result was achieved by a wily manager who had never heard of agency theory, but applied it by instinct. The essence of agency theory is that people (ie, national brand managers) are supposed to work for the company, but in fact work in their own interests. Understand that, as this manager did, and consensus becomes less important than understanding vested interests.

The wily manager worked out the personal agenda of the key agents (country managers) and, using financial and status incentives, made it in their best interests to implement his strategy.

By replacing trust in human nature with belief in human avarice, agency theory provides a much better explanation of how teams work than best practice ideas about consensus.

The Practice of Theory
If following industry best practice is not the way to create strong, global marketing strategies, what is? To answer that question, we have to use a dirty word, one that is so universally discredited by less knowledgeable marketers that it is used as a pejorative to kill ideas they don't like: that word is theory.

Theory gets a bad press, partly because some academics shout it down from their ivory towers, but let me argue the case for the defence, first with a redefinition and then with three examples where theory beats best practice.

A theory, to quote a 1638 dictionary, is an explanation based on observation and reasoning. Theories can be considered good or bad, depending on how well they explain what happens in the real world. Good theories explain complex realities like international markets, while bad theories disappear without trace.

To escape from the negative connotations some people derive from theory, we should rename it as `explanation'. Approached in this way, many of the more general challenges in international marketing and strategic management are better addressed by using good explanations (theories) developed by people who have observed the business world very closely.

If theory is better thought of as explanation, what explanations exist to tell us what works and what doesn't in international marketing? There are many, but three good examples are given in figures 1 (see page 2), 2 (see right) and 3 (see page 4).

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FIGURE 3: CONTINGENCY THEORY VS TEST MARKETING BEST PRACTICE

In some pharma companies, the internal politics of international marketing mean that some countries must get their own way, or at least feel as though they do.

In one medium-sized pharma company, this fact of life led to an expedient approach to international marketing campaigns. Each country was asked to pilot, or test, market campaigns to see what worked. If something worked well in one country and one therapy area, the other countries were encouraged to follow suit.

On paper, this reduced risk and increased organisational learning.

In practice, however, success in one country was rarely emulated in another. Failure even occurred when they used a control for things that might get in the way; ie, northern Vs southern European
cultures and different reimbursement systems.

After a long and expensive post-mortem, the team concluded that it was indeed national market differences that caused the failure, but not the ones that had been foreseen. Market segmentation and targeting criteria were in fact the crucial differences that made one countryís success anotherís failure.

This failure and financial loss could have been avoided if the firm had considered contingency theory. This is a large body of management research which, when stripped of jargon, usually explains success or failure in terms of a small number of factors.

If the company had questioned the impact of contingencies on campaign success, it would have found lots of research about
national variation in segmentation and targeting. Indeed, the firm ëreinventedí the findings of that research when it did the postmortem, but it could have avoided failure with a bit of thinking.

Learning to Think
These examples, only three of the many that emerge from our research and consultancy, illustrate a common point. Best practice and case studies are, in essence, war stories. They are appealing and make good conference speeches, but often they do not provide generalised explanations for how a market works or guidance about what to do in practice.

Theory, by contrast, is dull and made duller by the abstract ramblings of some academics, but good theory is transferable and is based on lots of peer-reviewed research, not just war stories.

Why don't senior pharma marketers pay more attention to theory when faced with difficult problems in international marketing? Certainly, there is a delicious irony here. A typical pharma marketing director goes to work in a car explained by theory (from chemistry and mechanics), has their office lit by theory (from electronics and physics) and sells products based on theory (biochemistry and pharmacology). They even work at a computer based on the theory of semi-conductors. Marketing strategy is probably the only part of their life in which they ignore theory.

There appear to be three reasons why international pharmaceutical marketers do not always use theory well when planning their strategies:

1) The company culture - it is acceptable to be dynamic and action-oriented, yet to talk about theory can be ridiculed

2) The hard work - theory involves more thinking than best practice and, as Henry Ford said, thinking is the hardest work there is, which is why so little of it is done

3) The training - pharmaceutical marketers spend a lot of time and money on training, but most of it reinforces the best practice myth and hardly mentions theory.

The good news is that these three obstacles can be overcome quite easily. Pharmaceutical marketers are not averse to hard work and changing training objectives in order to move away from best practice is one of the easier things on their list of issues to tackle.

The best companies are starting to reward people for the quality of their thinking. Achieve all three of the above objectives and both market understanding and results will improve dramatically, in practice, as well as theory.

The Author
Dr Brian Smith is a visiting research fellow at Cranfield School of Management and runs specialist strategy consultancy PragMedic

2nd September 2008

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