The term ‘revolution’ is often used to define a popular uprising that can lead to dramatic political changes. A dictator is overthrown, a new government is formed, a constitution is changed or replaced, and immeasurable impact on the country or even the world can occur. However, other types of revolutions also happen. Some of the most commonly known are industrial revolutions, which refer to breakthroughs in technology that change how industries function. We are now seeing the beginnings of a fourth industrial revolution – a fusing of technologies blurring the boundaries between the physical, digital and biological worlds.1 This blog highlights the issues that Deloitte believe will cause the most disruption for life sciences in 2018 as we embark on this fourth industrial revolution.
The history of industrial revolutions and the impact on life sciences trends in 2018
Over the course of history, industry has benefited from qualitative advancements that have become so ingrained in a certain time period and have had such an overwhelming impact that they have become known as ’revolutions’:
- The first industrial revolution began in the late-1780s, with the emergence of mechanisation and mass production, with industry replacing agriculture as the foundations of the economic structure of society. The mass extraction of coal and the development of the steam engine created a new form of energy, leading to the adoption of new manufacturing processes in factories across the world2
- The second industrial revolution in the late 19th and early 20th centuries, known as the technological revolution, was defined by several technological breakthroughs that led to the emergence of new forms of energy, principally electricity, oil and gas. The invention of the combustion engine, printing presses, the telephone and new processes for making steel resulted in heavily populated cities full of skyscrapers, railroads crisscrossing continents, and widespread use of heavy machinery3
- The third industrial revolution marked the shift from mechanical and analogue electronic technology to the digital electronics we use today, with digital computers becoming commonplace, and the appearance of the Internet connecting the world. Termed the digital revolution, it began in the 1980s and laid the foundation for fundamental economic change, as new communication technologies converged with new energy regimes, mainly, renewable electricity4
- The fourth revolution is unfolding at pace, underpinned by digitalisation, and driven by interconnection via the Internet and computing devices embedded in everyday objects, enabling them to send and receive data.5
For the life sciences industry, the fourth industrial revolution is characterised by emerging technologies utilising artificial and augmented intelligence, robotics, the Internet of Things, 3-D printing, and nanotechnology, combined with unprecedented data processing power, storage capacity and access to knowledge that will lead to transformative scientific achievements. Deloitte’s recent report 2018 Global life sciences outlook: Innovating life sciences in the fourth industrial revolution: Embrace, build, grow provides a high level view of what to expect in the next year and beyond, as many of these technologies begin to impact the life sciences industry.
The report begins with an economic overview of the industry, including growth trends in the overall pharmaceutical market, and specific therapeutic trends for orphan drugs, biologics and biosimilars, generics, medical technology (medtech) and personalised medicine (see Figure 1). Further analysis also looks at M&A investment trends in the life sciences and medtech industries.
Figure 1: Growth trends in the life sciences industry
Embracing technology and geopolitical change
Advances in science and technology meant that in 2017 the FDA sanctioned 46 novel medicines, the highest number of drug approvals in 21 years.6 We expect these types of breakthroughs to continue in 2018, although these will be coupled with increasing concerns about R&D costs and the affordability of the resulting treatment, as discussed in our report A new future for R&D? Measuring the return from pharmaceutical innovation 2017. Many new drugs will be accompanied by companion diagnostics and rely on advances in technologies such as 3D printing, gene therapy and artificial intelligence, while cognitive computing will be used to improve patient outcomes.
At the same time, cloud computing will be adopted at scale, due to the speed, flexibility and security it provides. These technologies will also help accelerate R&D processes and optimise supply chains. While the potential for blockchain, one of life sciences’ much discussed technologies, remains to be seen, many pharma companies are starting to explore the technology through pilots.
In addition, if life sciences companies are to survive, they will also need to embrace geopolitical change. Tax reforms and changes in regulation will create incentives and disincentives across the life sciences sector and impact future investments. Although there is still uncertainty as to how regulators will respond to the impacts of digital technologies, more direct engagement and collaboration between companies and key regulatory bodies will be required to clarify compliance requirements and avoid significant legal and financial ramifications of non-compliance.
Build and grow new horizons
New rules are redefining how life sciences companies build their organisations and navigate the future of work. Talent will be a differentiator in a skills-based economy, and the combination of machine intelligence with human skills and insight will allow companies to thrive.
With the potential all of new technologies to transform services, the demand for data, analytical and artificial intelligence talent is increasing and presents significant challenges for an industry where such skills and talent are in short supply. As well as improving processes, new talent will be needed to deal with the scale and complexity of cyber threats, which are expected to increase to the extent that organisations will elevate cybersecurity to a constant, critical priority.
A new culture of courage will also be required to help counter uncertainty, and companies will need to be ethical and proactive in minimising risk, particularly around cybersecurity. This will also require maximising the value of data by building data integrity into working environments and building patient trust and centricity to create a holistic ecosystem across the life sciences value chain.
Partnerships will play a large role in helping the industry grow in 2018. Strategic scientific, clinical and regulatory alliances, particularly with new entrants to the industry, will enable companies to acquire new knowledge about technologies, processes, products and business models. Other growth opportunities will be found in new operating models, whether R&D, supply chain or commercial processes.
What’s next: Actions for 2018
With the arrival of the fourth industrial revolution, the life sciences industry is embarking on a transformative technology journey. The following actions should allow stakeholders to address uncertainties and utilise the strategies needed to survive and thrive in 2018 (see Figure 2):
Figure 2: Actions for 2018 and beyond
1 Schwab K. The fourth industrial revolution: what it means, how to respond. World Economic Forum, 2016. See also: https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/
2 The third industrial revolution. The Economist, 2012. See also: http://www.economist.com/node/21553017
3 Muntone S. Second Industrial Revolution. Education.com, 2012. See also: https://web.archive.org/web/20131022224325/http://www.education.com/study-help/article/us-history-glided-age-technological-revolution/
4 Digital revolution. Technopedia. See also: https://www.techopedia.com/definition/23371/digital-revolution
5 The Fourth Industrial Revolution is here – are you ready? Deloitte Insights, 2018. See also: https://www2.deloitte.com/insights/us/en/deloitte-review/issue-22/industry-4-0-technology-manufacturing-revolution.html?id=us:2em:3na:4di4364:5eng:6di:021518:4ireadiness&sfid=0031400002vBiuaAAC
6 Hirschler B. New drug approvals hit 21-year high in 2017. Reuters, 2 January 2018. See also: https://www.reuters.com/article/us-pharmaceuticals-approvals/new-drug-approvals-hit-21-year-high-in-2017-idUSKBN1ER0P7