Metaphors, as Milan Kundera said in The Unbearable Lightness of Being, are not to be trifled with. But, now and again, the metaphors between biological evolution and economic evolution are so powerful that they beg to be used. Just such a metaphor leapt out at me recently, flying home from the strategy workshop of a mid-sized pharma company, I reflected on how its leadership team had reacted to its own situational analysis. Allow me to explain before I try to pull out a lesson. 

Evolution's paradox
A paradox of evolution is that well adapted creatures are also the most vulnerable; species thrive in their chosen habitat but decline when it changes. We see this when climate change alters habitats. Few creatures (Homo sapiens is the best example) are able to thrive in many different habitats and it was this biological metaphor, about the reasons that some species can survive change and others can't, that ran through my mind as I contemplated the unpromising future of that mid-sized pharma company. 

Species thrive in their chosen habitat but decline when it changes 

What is it about us humans that allows us to survive changing conditions and to occupy habitats as diverse as the tropics and the arctic? How do we differ from the polar bear, the orange-spotted filefish and the Monteverde harlequin frog, all of which occupy niches and are under threat? This is an old evolutionary question that was debated by Darwin and Wallace, but I think Steven Pinker put it best. He describes humans as capturing the 'cognitive niche', meaning that our abstract intelligence evolved to allow us to get the best out of any given situation without restricting us to a particular habitat. By contrast, the mental software of other species is superbly but inflexibly adapted to their specific habitat. 

Just think of how that cognitive gene was selected for. Hundreds of thousands of years ago, our ancestors and those of our now extinct cousins huddled around a shrinking waterhole. As the water evaporated, our cousins followed their genetic programming and huddled closer to it, trying to avoid the thirsty lions and other predators drawn to the same spot. Our genetically slightly different ancestors, by comparison, reasoned that the future was grim, took one last long drink and headed for the horizon. Somewhere in their genome, they had the mutations for forward thinking and imagining another, wetter, safer habitat. That's why they have descendants and our cousins are known to us only as fossils. I simplify of course, but you get my point.

Pharma's shrinking pool
If you're still with me, let me bring you back to the pharmaceutical industry. The waterhole of payers willing to stand high prices is shrinking fast. It won't ever dry up completely but it will shrink to difficult, unmet needs such as orphan drugs, some oncology and some neurodegenerative diseases. This sweet but shrinking pool is being fought over by ever more desperate and dangerous animals. The cleverest and luckiest of these creatures will survive but the pool won't be big enough for every thirsty company. The pharma equivalent of our cousins, the traditional research-based company, will stick around the waterhole as long as it can before it dies of thirst or gets eaten. The pharma equivalent of our cognitively-skilled ancestors will evaluate the situation and head for the horizon. Some may head in the disease management direction, others may go set up home with their distant cousins in telehealth. But they will become more and more distant from their traditional cousins. Interestingly, they will be repeating the experience of their own ancestors, the apothecaries, some of whom pooled their genes with the dye chemists 150 years ago while others were eaten by retailers. 

I hope my metaphor is not too stretched and the lesson is clear enough. Focusing on innovative drugs feels comfortable but it won't support most of the companies following that strategy. Looking for new ways to create value will be a better option for many pharma companies, but only those firms with certain cognitive genes will be able to do it. The question is can you change your genes in time?