Ecosystem Strategy 101
Solving for 'Value Alignment'
Satya Nadella last week at Y Combinator's AI Startup School:
“If it doesn’t move GDP, it’s not transformative.”
Foundation models are infrastructure, he went on to say, sort of like a new kind of SQL. "The real product isn’t the model itself, but the [new ecosystem] that surrounds it: feedback loops, tool integration, and user interaction.”
Satya’s north star for AI: Is it creating economic surplus?
Both Eli Lilly and Eisai lost a ‘big value argument’ with NICE last week. The U.K. health agency said the limited clinical benefits of their new Alzheimer’s drugs, Kisunla and Leqembi, not long ago celebrated as a scientific triumph because they showed, for the first time, that it was possible to change the course of Alzheimer's, do not justify their high prices. NICE concluded they were “a poor use of taxpayers' money” and said funding them could lead to other services being cut. This means the medicines won’t be made available through the National Health Service.
The drugs entered the Alzheimer’s drug market after decades of failed attempts by many in pharma to combat the mind-wasting disease. From 1995 through 2021, the private sector collectively spent approximately $42.5 billion on Alzheimer’s drug development — covering 235 unique drug candidates, only 6 of which were approved, with a daunting ~95 % failure. Eli Lilly alone has dedicated over $8 billion across 30+ years toward Alzheimer’s therapeutics, including current drugs like Kisunla. But business has been a slow slog through an embedded economic system, the feedback loops Nadella references as the true source of power and control already sustaining the current state of dysfunction at the NHS.
The BBC in its coverage, Breakthrough Alzheimer's drugs too pricey for NHS:
Nick Burgin, President & COO & President Global Value & Access at Eisai, said the NHS "is not ready" for the challenge of tackling Alzheimer's and flaws in the process meant their drug would have been rejected "even if Eisai provided lecanemab to the NHS for free".
Eli Lilly, the company behind donanemab, has already expressed its disappointment.
"If the system can't deliver scientific firsts to NHS patients, it is broken," said Chris Stokes, Eli Lilly's president and general manager of UK and Northern Europe.
Stokes isn’t incorrect.
Like the United States with the Veteran’s Health Department specifically, and the American Way of Healthcare generally, executive management at the United Kingdom misunderstands the business value of a national asset. The UK’s Health Secretary Wes Streeting said recently there’s a "risk of disruption" in the already-disrupted NHS as he attempts to reconfigure things, to find ‘strategic fit’ for a national care and service infrastructure that delivers a horrible EBITDA.
Some 6.2 million people are waiting for hospital treatment.
Productivity —one of those fuzzy economic concepts like “value-based care” that, in the vapor trail of healthcare communications and messaging, can mean everything, anything or nothing, often at the same time — is still almost 20 percent lower than before the covid-19 pandemic, according to the UK’s Office for National Statistics. In emergency departments 12-hour waits are routine.
Which is why 2024 is setting records in private hospital admissions, records in outbound medical travel and records in self-pay. Brand NHS is riding the fast horse to strategic collapse.
‘System Value’ is a Different Argument
Adoption of the new Alzheimer’s drugs (‘tool integration’, to use Nadella’s language; “market access” to use the language of the Kisunla and Leqembi brand teams) into current healthcare workflows has stalled worldwide. Eisai cut forecast for Leqembi (again) to around $280 million, down from $370 million, citing delays in uptake. But this is due less to the complexities involved with their use, such as the need for extra diagnostic tests and regular brain scans to monitor for side effects, and more to the Lilly and Eisai brand teams not thinking and selling big enough, stuck conceptually in a zero-sum view of competition in a non-zero-sum game.
The first rule of an ecosystem-centered strategy: You’'ll fare better when you link capacity-building. When it comes to big market innovation, a system that succeeds is the one that gains control over more and more parameters affecting its evolvability. It's better to think in terms of gravitational pull, a new "universe" that rotates around the concepts of 'shared marketspace' and value alignment. (For more Blue Spoon thinking, see ‘Whatever Happened to Eisai’s “Dementia Ecosystem”?).
Technical potential yields a flat playing field.
The next cycle of business and economic innovation belongs to those superpowers — and make no mistake, Big Pharma is a superpower in the same way that Big Tech and Big PBM and Big Insurance are superpowers — that propagate the best and most responsive rulesets, build and operate the most inviting and empowering networks, and win new subscribers with integration schemes that deliver what citizens most desire: predictable and unhindered access to goods and services.
More simply: Superpowers compete to revise the rules of the game. It’s not personal, it’s strictly business.
And the really big business opportunity now is about having a cool head in a bad hour, of taking advantage of everyone's else’s fear and uncertainty, competing with intentional creative leadership that starts with better system vision. This means many things, of course, but one of them is getting comfortable with ambiguity and leading collaboratively with other markets to construct a new operating environment for business, a conversation around planning for what will occur rather than getting suck on what ought to be allowed.
To wit: the ‘evidence of value’ of GLP-1s in lowering Alzheimer’s risk is already there and growing, as is the ability to predict Alzheimer's decades in advance. Assume consumer demand will follow. The way forward is industry + government collaborating to position the ‘production of cardiometabolic health’ as a form of economic innovation that can not only change the practice of medicine worldwide, but can move GDP at a similar grand scale.
By refusing to put its paddle in the water, to move faster than the current, Brand NHS will remain trapped in the storyline of its nostalgic fantasy, of restoring past greatness. The question for Big System Change is: do industry and government face better odds — and outcomes — attempting their journeys strictly within their own conceptual borders and their respective enterprises? Or would it be a far less pressurized path to growth to methodically extend the concept of ‘enterprise-wide’ to absorb markets and encompass polices within the context of new industry ecosystems, designed from scratch?
“We continue to see a significantly elevated level of uncertainty in the global economic and geopolitical environment as compared to calendar year 2024,” said Julie Sweet, chief executive of Accenture, in its latest earnings call, where the company reported a slowdown in new business for the second quarter in a row. “In every boardroom, in every industry, our clients are not facing a single challenge. They’re facing everything at once: economic volatility, geopolitical complexity and [changing] customer behavior.”
Welcome to the era of predictable unpredictability. The only way out is to start adapting to and creating with each other, and at the same time weaving into one whole system, an evolutionary dance that winds antagonists into a single organism, more inseparably, until each is dependent on the other’s antagonism. (For more Blue Spoon thinking on this, see Can Novartis Save the NHS?)
Better Market Integration Stories
The true danger that healthcare now faces is the continuing hard partitioning and hyper-fragmentation of its foundation model, a feedback loop of psychic disintegration, skyrocketing complexity and under-achievement on a market by market basis.
Eisai and Lilly plan to appeal what they say is England's “flawed” refusal to not recommend their new Alzheimer’s drugs due to cost concerns. But the broader, recurring lesson that doesn’t seem to take root is this: when it comes to ‘market access innovation’ in the fuzzy business of healthcare-as-pharmaceuticals/pharmaceuticals-as-healthcare, it's probably better to drop the word “access” altogether, think in terms of system entrepreneurship.
If Western governments and the Western pharmaceutical industry wants to keep or restore its global leadership, then it needs to scale up collectively to the true challenge of the day: positioning healthcare not as a “cost” but as the real wealth of nations.
The right story is out there, awaiting joint articulation.
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/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry ecosystems.