Disruption in healthcare and life sciences 2020

The level of disruption in healthcare and life sciences is unrelenting, our third annual survey of senior executives in the industry shows. This year, 76% of survey respondents say their companies are facing mounting disruptive pressure—and 85% foresee a further increase over the coming 18 months. These figures are virtually the same as last year’s, highlighting the industry’s furious pace of change. It’s also notable that the causes of disruption remain essentially unchanged, with executives citing technology, political or regulatory uncertainty, cost of healthcare, and a shortage of skilled talent most often.

Just over half, 54%, say their companies are well prepared to weather the disruptions they anticipate, again just about the same as last year—and most often, again, they’re relying on strategic agility to do so. Exactly half say they’re a source of disruption in their industry, most often relying on a superior ability to bring innovations to market, their strategic agility, and the caliber of their leaders to do so. Respondents also indicate that, compared with last year, organizational culture is more often aligned with strategy and they’re better able to attract the right people—both factors that can improve innovation and agility.

The views of these executives, 68% of whom are CEOs, other C-suite executives, or board directors, suggest that some healthcare and life sciences companies are finding ways to thrive in the face of these forces, but most still have a fair amount of work to do. This includes continuing to build strong cultures and streamline organizations to support agility and speed, and focusing on attracting diverse people, at all levels, to support innovation and respond to change.

What exactly is driving all this disruption?

This year, we asked about external and internal disruptive factors separately. Externally, executives highlight similar factors to last year, with technology leading the list.

Internally, talent factors are the biggest source of disruption, particularly capabilities related to technology: the top two internal sources of disruption are the growing importance of data and analytics capabilities as a source of competitive advantage and addressing a shortage of skilled talent.

What are companies doing in response?

Just over half of senior executives say their companies are well prepared to face these disruptions, by relying on a mix of strategic agility, their ability to manage complexity, and the caliber of their people at all levels.

Digging deeper into senior executives’ views on their company’s leaders, 77% agree they have the right leaders for what they need to do (up from 64% last year), and 82% agree that the top team is aligned and makes bold decisions when needed, one crucial factor in building strategic agility. Another factor in agility is the ability to respond to change, and 73% of this year’s respondents say their companies are good at that.

Another factor crucial to thriving in the face of disruption is a strong culture. (For more on Heidrick & Struggles’ work on how leadership, culture, and structure work together to support performance, see “Bringing your organization up to speed.”) It’s clear that leaders in healthcare and life sciences understand just how important culture is to attracting and retaining the best people and ensuring their productivity. Last year, 36% of respondents said they were focused on an organizational culture shift to combat disruption (one of the top five choices), and this year, 82% say their culture matches their strategic imperatives—an increase of a notable 10 percentage points from last year.

One finding that indicates culture may be making a difference is the attitude shared by 72% of respondents: that their organization views difficult situations as positive opportunities to emerge stronger. Companies’ focus on culture may also be paying off in commitment: 56% of respondents this year, up from 51% last year, say their people always deliver what they have committed to.

This year, precisely half of respondents say their company is also a source of disruption, most often the result of being able to bring innovations to market—which, in turn, relies in large part on aligning people with the right capabilities toward meeting strategic goals. It’s good news, therefore, that executives continue to be confident overall in their organizations’ ability to inspire aligned action, harness and streamline resources, and innovate to create new growth engines. Furthermore, 77% say their customers regard their offerings as consistently excellent.

Having the right structure in place is also crucial to ensuring an organization can accelerate performance. This year, 58% of survey respondents say their organizational structure is easy to navigate, up from 53% last year. Still, only a third say their company moves fast enough today—down from 40% last year. So it’s not surprising that more than half have undertaken or are considering a further internal restructure. Nearly half are considering M&A to meet the pace of change, which can help bring in new capabilities for innovation as well as drive structural shifts. 

Where do companies still need to do more?

Looking ahead, executives say their companies need to invest most often in talent and innovation to address new strategic challenges. It’s good news that these priorities align with the reasons that executives at companies that do feel prepared give for why they feel that way. 

It’s worrisome, however, that only 70% cite a need to invest in superior talent and leadership team, as that is down from 87% last year. The somewhat lesser focus on talent may be related to some increased confidence in hiring: 56% of this year’s respondents say their companies today attract the best talent in their market, a marked increase from 50% last year.

There’s a second striking shift in how senior executives are thinking about talent this year: only 34% of this year’s respondents say they have increased their focus on hiring from outside their immediate industry, down from 43% who said the same last year. That shift may indicate that some executives haven’t found what they hoped for by looking outside the industry.

But in our view, outside experience is becoming ever more crucial. Indeed, 58% of respondents this year say that having a diverse board and senior leadership team is critical to outpacing competitors, and a further 25% say it’s important. Though “diversity” is most often thought of in terms of gender, race, or ethnicity, defining “diversity” more broadly—in terms of industry or functional backgrounds, nationality, or age—can be crucial to maintaining strategic agility. Other Heidrick & Struggles work highlights how companies across sectors are building diverse boards. (See, for example, Board Monitor US 2019 and Board Monitor Europe 2019. )

Given the importance of innovation and data and analytics, and executives’ overall concern about new technologies and talent shortages, we suggest that healthcare and life sciences executives not decrease their focus on finding the right people at every level.

Finally, 51% of executives this year say they spend enough time preparing for the future rather than “firefighting,” up from 45% last year. That’s another sign that efforts to create strategic agility, overall alignment, and cultural strength are paying off. However, it also strongly suggests that healthcare and life sciences companies’ efforts to continue to restructure to become more agile and innovative have substantial room to offer additional benefits.

About the survey

Heidrick & Struggles conducted an online survey of senior-level executives in the healthcare and life sciences sector to understand how organizations are preparing for and responding to market disruption. Regionally, 61% were from the United States, 20% from Europe, and 13% from Latin America, with the rest from other regions. Forty-one percent were CEOs, 9% other C-suite executives, and a further 18% board members; others were leaders of functions including commercial, finance, HR, and R&D. Just under half, 47%, had more than 25 years of experience in the industry. Twenty-nine percent of respondents were at companies with more than $5 billion in annual revenue, and a further 18% at companies with annual revenue between $1 billion and $5 billion. Those surveyed come from companies in pharmaceuticals (27%), medical technologies (21%), biotech (19%), and healthcare systems and services (15%), with small shares of respondents in other sectors.

This survey builds on previous Heidrick & Struggles research, including our work on accelerating performance, an in-depth examination of how the world’s largest companies build and sustain performance at the leader, team, and organization levels.