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TECHNOLOGY

Home TECHNOLOGY Page 9

by EOS Intelligence EOS Intelligence No Comments

Fintech Paving the Way for Financial Inclusion in Indonesia

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Over the past two decades, financial sector in Indonesia has witnessed a massive transformation with the introduction of fintech solutions, fuelled by growing digital market and increasing investments in the fintech market. The sector’s growth offers tremendous opportunities and has led to the emergence of various start-ups offering online financial services. Fintech promises technological solutions to various challenges within the financial sector and offers value-added services such as transaction analysis and customer engagement initiatives. However, challenges such as poor financial literacy among Indonesians and cumbersome regulatory processes continue to pose a threat to the market growth.

Fintech is increasingly gaining traction in Indonesia and changing the way financial companies do business. Gone are the days when banks were the only source of financial transactions in the country. Fintech has revolutionized the financial sector with the emergence of various technological start-ups in areas of mobile payment, loans, money transfers, asset management, etc.

Fintech sector’s growth in Indonesia is largely driven by the rapidly increasing internet penetration and rising smartphone usage, as well as solid and continuous investments – over 2013-2018, investments in the fintech industry are forecast to reach US$ 8 billion, growing at a CAGR of 21.7%. Despite these growth drivers, the sector faces several hurdles such as inexperienced financial personnel, lengthy regulatory processes, and poor financial knowledge among the Indonesian population.

Fintech Paving Way for Financial Inclusion in Indonesia

Nevertheless, the country has been taking measures to tackle the challenges to create banks of the future. In November 2016, Bank Indonesia, central bank of the country, set up a fintech office in Jakarta to boost development of the industry. The office is aimed to optimize technological advancements across the fintech sector, assist players in understanding the regulations, and increase industry’s competitiveness by sharing its developments with international institutions. In addition, Indonesia’s Financial Services Authority is in the process of developing regulations to govern the industry, a significant step to enable both the fintech players as well as the regulators to function cohesively. Further, the industry is also receiving support from conventional financial institutions, which have started adopting digital innovations by initiating collaborations with fintech companies.

Indonesia’s high dependency on cash-based transactions along with low financial penetration rate serve as untapped opportunity areas for fintech players to explore. As of 2014, only 36% of the adult Indonesian population had bank accounts. Additionally, 89.7% of all transactions are still conducted in cash. Fintech players have gradually started leveraging these opportunity areas by expanding services with introduction of various start-ups offering a range of online financial products. As of 2016, the country hosted around 140 independent start-ups, an improvement from just a handful a few years ago, representing a steady growth of the industry. Some of the prominent players of the industry include HaloMoney, Cekaja, and Kartuku, among others.

EOS Perspective

Fintech is the answer to the need for a more secure, fast, and practical financial processing system. It has the potential to transform Indonesia’s financial industry by creating a paradigm shift in the way financial services sector operates. However, certain measures need to be taken to realize its full potential. In order to cultivate skilled personnel, the government should collaborate with universities across the country and promote fintech courses to develop the required skill set among people. Additionally, the government should encourage the association between conventional financial institutions and fintech companies to promote collaborative training and communication, which could help to improve financial education among players in the market. The association would also help both parties to improve their own areas of expertise.

Fintech industry has slowly started changing the way financial services are being accessed in Indonesia. Gradual yet steady on-going efforts to overcome hurdles are likely to result in a larger population enjoying benefits of digital financial services.

by EOS Intelligence EOS Intelligence No Comments

Refurbished Smartphones – the Future of High-end Devices in Emerging Markets

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An anticipated slowdown in the global smartphone sales forecast for 2016 due to lack of new first-time buyers in large markets such as the USA, China, and Europe, has been alarming for large players who have turned their focus to other emerging markets. To fit the expectations and financial capabilities of price-sensitive consumers in these markets, companies are lining up to sell refurbished smartphones as a strategic move to increase sales volume. However, competition – primarily from new smartphones – in these markets is still fierce, due to some smartphone makers (such as Chinese mobile phone manufacturer Tecno Mobile) reaching consumers with more economic devices. Are second-hand smartphones capable of outshining new devices in emerging markets?

The global smartphone market has been witnessing a slowdown in sales during 2016 in comparison to previous years, partially because some markets, such as the USA, China, and Europe have become saturated (in large part with mid-range and high-end models, such as Apple’s iPhone and Samsung’s Galaxy). Therefore, to avoid a decrease in sales and a subsequent loss in profits, smartphone makers are readjusting their strategies to focus on marketing economic second-hand sets in developing countries.

Refurbished Smartphones - Market Growth

 

 

According to a 2016 Deloitte report, refurbished smartphones global sales volume is expected to increase from 56 million units sold in 2014 to 120 million in 2017, growing at a CAGR of 29%. Large part of this growth is likely to occur in emerging markets, such as India, South Africa, or Nigeria, which is a sound reason for large players to venture into these geographies.

Most smartphone buyers in these markets are highly price-sensitive and frequently precede their phone purchasing decisions with intensive online research to get a good understanding of options that are available to them based on their financial capabilities. These consumers are likely to prioritize price over features and appearance of a smartphone. Therefore, refurbished devices from well-known brands, such as Samsung or Apple, need to offer satisfying functionalities yet be available at affordable price in order to be attractive for buyers in these emerging economies.

Refurbished Smartphones - India, South Africa, Nigeria

Refurbished smartphones hit obstacles across the markets

Emerging markets, despite their favorable dynamics that should at least in theory offer a great environment for refurbished phones sales to skyrocket, are not easy to navigate through, especially for high-end devices makers.

Some markets are becoming protective of their local manufacturing sectors, and introduce regulations that make it difficult to import smartphones, especially refurbished ones. India is one such case. In 2014, the Indian government rolled out the Make in India program, with the idea to promote local manufacturing in 25 sectors of various industries, one of them being electronic devices (including smartphones).

Coincidentally, two years later, when Apple initiated efforts to start importing and selling its refurbished smartphones as a way to increase the iPhone’s market share in the country, these efforts were unsuccessful. The Indian government rejected Apple’s plan, justifying its decision with a concern about the electronic waste increase caused by a deluge of refurbished smartphones entering the country. As a result, the refurbished version of Apple’s iPhone is currently sold only by online commercial platforms (e.g. Amazon, Snapdeal) from vendors that are not always official company retail stores. This could fuel sales in a parallel market, not necessarily benefiting either India’s local manufacturing or Apple.

In case of South Africa and Nigeria, both markets share similarities in terms of advantages as well as potential barriers for refurbished smartphone sales volume to grow. Nigeria’s GDP contracted by 2.06% in the second quarter of 2016, causing wary consumers to maintain their old phones or purchase very economic options due to decreasing disposable income. In South Africa, consumers are also highly price-sensitive with a very limited brand consciousness.

The rapid level of smartphone adoption registered in both markets is seen mainly in handsets with retail price of US$150 or less in South Africa and US$100 or less in Nigeria. Therefore, refurbished high-end models may dazzle local consumers, but low-cost devices can be expected to represent an obstacle for brands such as Samsung or Apple, as these smartphone makers are likely to sell their refurbished devices for half the original price which is still above the consumer-accepted purchase price in these two markets.

EOS Perspective

In case of India, the recent rejection of Apple’s plan to import and sell refurbished smartphones is an indicator that similar issues might be faced by other large players willing to do the same in the future. However, as one of the world’s largest smartphone markets, India is likely to continue building a strong sense of brand loyalty among consumers, especially towards Samsung’s and Apple’s brands in general (smartphones and beyond), and consumers will demand access to these brands (Samsung and Apple already held a 44% and a 27.3% market shares, respectively, in 2016).

The risk of India’s market being flooded with refurbished smartphones sold in a parallel market or online commercial platforms without proper regulation by authorities could result in lost control over excessive e-waste in the country, without necessarily driving local production of competitive products. Consequently, India’s government might have to consider the possibility of allowing large manufacturers to import factory-certified second-hand smartphones into the country, perhaps under the condition of refurbishing the devices in India.

In Nigeria and South Africa, the consumer price sensitivity and limited brand loyalty seem to be the most pressing issues for large players such as Apple or Samsung intending to sell their refurbished phones. In both markets, the rivalry is rather fierce, mainly due to a relatively strong presence of smaller regional manufacturers and large Chinese companies (e.g. Xiaomi) that offer affordable smart devices. While consumers in these markets are willing to spend up to US$100-150 for a device, in most cases they lack brand loyalty.

Apple or Samsung are likely to be negatively affected by this when launching their refurbished high-end handsets at half of the device’s original retail price, which in most likelihood would still be above the price consumers in these markets can and are willing to spend. As a result, large players may have to set their eyes on a long-term horizon, and slowly build the brand loyalty sense in local consumers and temporarily relinquish on large profits in order to enter these markets and settle among their potential customers.

by EOS Intelligence EOS Intelligence No Comments

A Doctor under Your Skin: Wearable Medical Devices in India, Brazil, and China

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From smart glasses that allow a surgeon to operate having his patient’s medical records at sight to an intelligent contact lens that measures glucose levels of its wearer, technological innovations are changing the world as we know it. Wearable medical device market growth has been promising and the industry is expected to reach a value of US$7.8 billion by 2020, growing at a CAGR of 19% from 2015 to 2020. Since 2015, the USA and Europe have been two key markets hosting majority of users of these new technologies. However China, India, and Brazil are expected to increase its demand for wearable devices driven mainly by rapid expansion of smartphone users and an increasingly aging population. Is these emerging economies’ current set-up favorable for medical wearable to maintain a steep growth?

 

The use of wearable medical devices is skyrocketing due to aging populations, fast adoption of new trends, and greater incidence of chronic conditions around the world. An increase in health awareness across the globe and a simultaneous increase in worldwide wearable medical device shipments estimated to reach 97.6 million units by 2021, growing at a staggering CARG 108% between 2016 and 2021, might indicate the industry’s large growth potential.

Wearable Medical Devices in India, Brazil, and China-Global Outlook

Brazil, India, and China (BIC), in particular, have been registering increasing rates of chronic diseases such as heart failure, diabetes, and obesity for the past several years. Therefore, these countries have started to be considered as the next destinations to focus on in search for high growth-potential wearable medical devices markets.

Wearable Medical Devices in India, Brazil, and China - BIC Markets Are Attractive

Regardless of the fact that wearable medical devices are thriving in the USA and Europe, in countries such as Brazil, India, and China, these devices are bound to face challenges that could translate into major roadblocks for the market to grow. For instance, although wearable medical devices have proved to be a significant aid when monitoring and preventing illnesses, these are not yet considered an essential product for healthcare consumers. Consequently, BIC buyers, who tend to also be highly price sensitive, may refrain from purchasing such solutions if the retail price is high in comparison to their purchasing capabilities. As a result, this behavior may lead to a stalling sales volume in these markets and, subsequently, a slowdown in the wearable medical market growth.

Wearable Medical Devices in India, Brazil, and China - Successful in BIC

In addition, the growth of wearable medical technologies in BIC is challenged by deficient regulatory frameworks with regards to categorizing and supervising such devices for their import and commercialization in each market. Currently, regulatory frameworks are mostly outdated and do not include specific category for wearable devices with proper security measures. Moreover, as these wearables are battery-operated, improper testing due to lack of regulation can affect their safety as well as may reduce the trust consumers need to develop in order to accept and use the device. Further, this inadequate regulatory scenario may drive away potential market players (including key providers).

Wearable Medical Devices in India, Brazil, and China - Regulatory Frameworks

 

Wearable Medical Devices in India, Brazil, and China - Challenges

EOS Perspective

Global wearable medical device market is witnessing a steep growth driven mainly by changes in demographic profiles of many populations and a growing incidence of chronic conditions. In developed economies, wearable medical technology is experiencing high adoption rates and its role in the healthcare sectors is strengthening, mainly because physicians already use such solutions during consultations, whether to monitor, diagnose, or treat a patient. In emerging economies such as Brazil, India, and China, wearable medical technology has even more room to continue expanding, however, current scenarios in these countries may partially impede this growth.

Some of the key issues in these markets include the problem of import regulations unfitted for wearable medical devices, and this seems to be an important issue which needs to be sorted out in the short term to avoid driving potential players and manufacturers away from BIC markets. At the same time, the high retail price makes the wearable devices unaffordable for a large percentage of the population causing low rate of adoption among patients, and hindering medical wearables’ market growth.

Further, the fact that healthcare providers are not planning to include such devices in public health insurance schemes and reimburse the cost of wearable devices as part of their health plans, lowers the chance of this technology reaching higher number of consumers. This limited accessibility to wearable medical devices in BIC markets may result in low consumer’s awareness about their benefits, or even their existence.

Local governments should reform and adapt their import regulations to fit the wearable medical devices characteristics, allowing a better flow of these products to enter the countries without risking human health. At the same time, for wearable medical devices to healthily grow in these promising and widely populated markets, manufacturers and retailers should aim to lower a wearable device retail price. A way to achieve this could be by adding wearable devices to private health care plans (and encouraging public health insurers to do the same) – especially for chro
nic diseases patients and people over 60 years old. This will most likely allow consumers to purchase such a device at a lower retail price or rely on their healthcare reimbursement policies.

by EOS Intelligence EOS Intelligence No Comments

China’s Digital Single Market – Internet of Things

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Underpinned by immense government support, private investments, as well as the highest number of machine-to-machine (M2M) mobile connections globally, China has potential to get to the forefront of IoT (Internet of Things) development. While most countries are still beginning to understand the benefits of IoT, China already embraced the technology as early as 2010, when it built a national IoT center and aimed to create a market worth US$160 billion by 2020. IoT, with its promise of delivering continuous connectivity, is likely to usher an industrial revolution in China resulting in improved productivity, global competitiveness across industries, and higher economic growth.

IoT is helping China to build momentum and succeed in the digital age, fostering development across various industries by revitalizing manufacturing, boosting connectivity through smart cars and buildings, crafting a new consumer market for wearable devices, enhancing healthcare services, and stimulating energy efficiency.

China seeks to integrate various industries with IoT technology for economic gains and efficient management. Industries such as logistics, manufacturing, transportation, and utilities and resources, in particular, are likely to witness improved efficiency, lower costs, and better-managed infrastructure through real-time information provided by IoT technology.

China’s Digital Single Market – IoT - Revitalizing Growth

 

Chinese consumers are very open to adopting IoT technology, which results in growing penetration of smart devices. Smart home appliances, cars, meters, and retail devices are likely to witness tremendous success in China.

China’s Digital Single Market – IoT - Adoption

 

Industry dynamics are improving driven by launches of new smart devices by private companies, pivotal government support, and several digital drivers (including growing M2M connections as well as smart phone and Internet users). However, there a few factors such as security and infrastructure issues, fragmentation in the market, and lack of standardization that are slowing down IoT development.

China’s Digital Single Market – IoT - Promotors and Inhibitors

 

Despite IoT’s immense potential, several driving factors, and promises of economic gains across industries, a 2015 study conducted by Accenture revealed some deterring factors such as lack of specialized skills, low R&D investments, and substandard infrastructure, which may hold back IoT development in China.

China’s Digital Single Market – IoT - Readiness for Adoption

EOS Perspective

Undoubtedly, China is likely to witness unrivalled opportunities in terms of productivity improvements and economic development as IoT technology spreads across the country. Efforts made by the Chinese government are stimulating the IoT growth – ‘Made in China 2025’ initiative launched in 2015 aims to integrate production with Internet to deliver smart manufacturing and higher manufacturing value. Further, with the ‘Internet Plus’ strategy, China plans to integrate mobile Internet, cloud computing, big data, and IoT with manufacturing.

However, Chinese business leaders and policymakers cannot expect to reap benefits of IoT technology without the right enabling conditions. In order to ensure development, it is imperative for China to overcome the gap in technical skill set, infrastructure, as well as focus on promoting IoT investments. To address the shortage of critical skills, China needs to improve the number and quality of tertiary graduates in science and engineering fields. Beyond that, building a cross-industry ecosystem is also essential for IoT-led growth, which requires development of an integrated communication system along with cluster of secured networks for data transmission.

China’s IoT industry, still at a developing stage, has promising growth potential that could materialize only if the country takes all necessary measures to improve its infrastructure and technological platform, which will allow IoT to diffuse through its industries and completely transform them.

by EOS Intelligence EOS Intelligence No Comments

Sharing Economy Needs Regulator Support

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Sharing economy works on a business model where individuals have the ability to borrow or rent goods or services owned by someone else. The concept has been widely accepted in a short span of time and companies such as Uber and Airbnb have become well known among consumers. The sharing economy sector has witnessed tremendous growth with aggregate valuation of the companies operating in this market reaching US$ 140 billion in 2015. The industry has already started causing a shift in the employment sector and is said to have far-reaching implications which are likely to disrupt the traditional rental business model, particularly for companies in hotel and transportation sectors. The growth potential of sharing economy has become of considerable interest to policy makers around the globe as well, and the industry has recently come under scrutiny of various governments and regulators, and is likely to face regulatory barriers affecting its potential to scale up.

The concept of sharing economy, also known as peer-to-peer economy, facilitates a direct contact between consumers and service providers and is centered around the use of privately owned, unused inventory. Technology is key to the growth of this type of economy, which has already witnessed the emergence of several sharing platforms enabling consumers to share products and services such as cars and houses.

Sharing EconomySharing EconomySharing EconomySharing EconomyEOS Perspective

Companies such as Uber and Airbnb have become the talk of the town, due to their tremendous growth achieved thanks to a simple business model: providing consumers the ability to monetize idle inventory and rent an asset, instead of purchasing it. Sharing economy also meets consumers’ desire for social interaction, lower costs, and technology-based access to goods and services. However, the sudden and overwhelming rise in its popularity has shaken the governments’ ability to appropriately and sufficiently regulate this economy. Weak legal frameworks hampering consumer’s safety and tax collection have led to debates around the benefits of sharing economy.

Implementation of the traditional regulatory frameworks in the sharing economy sector is likely to upend the peer-to-peer business model. Inclusion and implementation of monetary employee benefits, tax obligations, and safety regulations in the sharing economy can be expected to lead to an increase in the cost of services offered by these companies, thereby defeating the purpose of the existence of sharing economy. Thus, instead of imposing regulations originally developed and meant for traditional rental sector, there arises a vital need to develop a new policy framework best suited to the peer-to-peer business model.

Instead of completely imposing bans on these services and eliminating the opportunity to make use of idle inventory, governments should work alongside these companies and create regulations tailored to their regions to encourage safe business conduct. For instance, Airbnb signed an agreement with the City of Amsterdam to promote responsible home sharing in 2015. The agreement includes a set of rules for the hosts to be followed before activating their listing, and also stipulates the collection and remittance of tourist tax by Airbnb on behalf of the hosts. In addition, the agreement also includes a partnership with Airbnb to collect content from the company’s database to shutdown illegal hotels. These efforts are expected to ensure the hosts receive clear information on renting their homes and promote consumer safety.

Sharing economy has the potential to make a tremendous impact on the traditional rental sector and is likely to create opportunities across various different economic activities. However, from a legal perspective, it cannot be ignored that the model lacks a strong regulatory support, which over time will continue to put pressure on this newly emerged sector. The peer-to-peer model will be required to address these imperatives in the near future in order to scale to new heights.

by EOS Intelligence EOS Intelligence No Comments

Demystifying the Microsoft-LinkedIn Deal

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Microsoft’s savvy move to acquire LinkedIn at US$26 billion in June 2016, making it one of the highest value technology deals, is observed with both skepticism and optimism. On the one hand, the deal is being called a ‘natural fit’, as LinkedIn dovetails with Microsoft’s evolving corporate strategy, while on the other hand, Microsoft’s checkered history with acquisitions questions the acumen behind the huge price tag. Nonetheless, the acquisition will give Microsoft an opportunity to establish foothold in the social networking platform and professional content as well as expand its reach to 433 million LinkedIn users.

There is definitely a synergy between the two companies and their products, particularly, Microsoft’s Office productivity suite and LinkedIn’s professional profiles. LinkedIn users are the core demographic for Microsoft’s products. Microsoft could monetize the investment in LinkedIn by leveraging access to such enormous amount of data to sell its products.

The key reason for the acquisition was a shift in Microsoft’s business strategy to focus on building a social media presence, while LinkedIn’s growth slowdown was a motivation to agree to the deal. Together these companies plan to integrate their products to capture a larger market share – for instance, the plan is to align Microsoft’s Dynamics CRM and LinkedIn’s Sales Navigator to enhance presence in the social selling market.

1-Why


2-What

The merger of two prominent global companies is likely to impact various industries and stimulate possibility of Twitter acquisition. The deal could impact B2B marketers, SEO companies, and recruitment industry.

3-How

EOS Perspective

LinkedIn wanted to be acquired due to its ailing stock performance and growth, and Microsoft was the best fit. LinkedIn’s acquisition was a good move from shareholder’s perspective, and the association with Microsoft might open avenues for LinkedIn to compete against Facebook and Google.

Acquiring LinkedIn is part of Microsoft’s masterplan to combine professional cloud and professional network using LinkedIn’s database of corporate users. The world’s largest software maker, Microsoft, has to now compete with Google and Apple mandating the need to shift to mobile devices, cloud, and social network. LinkedIn gathers in-depth information on its users including employment history, education, and user’s connections. This data is very useful for Microsoft, as it plans to manage relationship with customers and compete with Salesforce (an American cloud computing company).

However, questions are being raised on Microsoft’s ability to preserve LinkedIn’s value and grow both companies. Microsoft’s acquisition history is tinted with deals such as Skype, Nokia, and Yammer, all of which are not runaway success stories. For instance, Microsoft registered write-downs exceeding US$ 9.4 billion, which it paid to acquire Nokia in 2014. Further, the financial viability of the deal is being challenged as Microsoft paid an equivalent of US$ 260 for each monthly active user of LinkedIn. To keep its shareholders happy, it will either have to add more users to LinkedIn’s network quickly or devise a clear strategy to earn money from LinkedIn’s data.

Nevertheless, at this initial phase it is difficult to assess whether the deal is a success or failure for both companies. The actual worth of the deal can only be unmasked when the two companies begin to align their offerings and start devising a combined corporate strategy to compete in the market.

by EOS Intelligence EOS Intelligence No Comments

Generic Medical Devices: Can They Breach the Branded Wall?

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Multinational companies such as J&J, GE, and Siemens have dominated the medical devices industry thanks to product innovation and lack of competition from cheaper alternatives from generic manufacturers. Though local competition has emerged in some of the larger markets such China, most domestic companies remain small-sized, focusing on less complex Class I and Class II type medical devices, such as orthopedic accessories, catheters, wound solutions, and inhalers.

Most emerging countries rely heavily on imported devices such as stents, pace-makers, artificial joints, biologics, etc., as there are very limited alternatives available in their domestic markets. For instance, India imports about 80% of the required medical devices. This is where generic devices come into play.

Generic medical devices are copies of those branded devices that are not patent-protected. While the quality of such medical devices is at par with branded products, the price can be up to 50% lower. So far, only a few generic products, such as asthma inhaler (1995) and Pulse-Oximeter (2003), have caught market attention. The recent addition being a range of orthopedic products, including plates, rods, and screws by Emerge, a company started by former employees of Swiss-based Synthes (now acquired by J&J).

Currently, the market for generic devices is predominantly US-driven, where regulations do not differentiate between a branded device and its ‘substantially equivalent’ design. It is expected that more generic devices may enter the market as branded devices go off-patent. Other branded devices, which are similar in function and not manufactured through proprietary process, may also face generic competition.

Generic Medical Devices

Generic devices may be the answer to various governments’ aim of minimizing healthcare cost without compromising on quality. However, the market for generic devices is still fragmented and geographically constrained vis-à-vis branded ones. Much would depend upon the ability of generic manufacturers in containing costs (to remain competitive) and in breaking the hold of established players over sales and distribution channels.

by EOS Intelligence EOS Intelligence No Comments

Will Pharma Tweet Louder? 6 Rules of Doing it Right on Social Media

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Initially considered to be exclusively a tool for common people to connect with friends and share their private pictures, social media platforms have now gained the status of a potent communication channel eagerly used by companies across the world. While the expansion of social media is influencing the way businesses are conducted today, pharma and healthcare industry has been somewhat slow and reluctant to use it to its fullest potential.

By 2012, Facebook user base crossed 1 billion mark, increasing by 200 times since 2005, while Twitter recorded tremendous growth, reporting 200 million active users sharing 400 million tweets per day. While some industries such as consumer goods, retail, and hospitality have been benefitting from engaging with their customers through a range of social media platforms, other sectors, including pharma and healthcare, have been slow to join the ‘social crowd’.

Points of concern

There is a reason why healthcare-related sectors were late on the social media map. Creating an open platform for communication on health and drugs aspects, raises a range of concerns: the FDA regulations, patient confidentiality, cyber security, unavoidable off-label use discussions, uncontrolled negative comments, and risks of providing wrong medical advice that could lead to lawsuits. The FDA in particular, plays an important role here, through its Division of Drug Marketing, Advertising and Communications (DDMAC), which lays out the rules of the content that can and cannot be communicated, what content must be included and the manner in which the communication must occur. The fears associated with social media activity monitoring by the FDA, typically originate from three problems:

  • Lack of clarity and formal guidelines – in 2011, the FDA published draft guidelines, and it is yet to develop definitive rules on social media policy. The FDA is acting slow, and there is no clarity on dos and don’ts for social media engagement, yet the authority regularly scans the social space to monitor risky communication, while pharma companies find the rules of the game ambiguous

  • User-initiated off-label use discussions – a common issue in pharma social media platforms is user questions and discussions on off-label use of drugs, i.e. using a drug in a different way than described in the approved drug label or leaflet. This is considered unsolicited content and companies must respond and correct such a content occurring in public forum as these discussions might encourage dangerous experiments with drugs by patients or might be confused with recommended and approved use of a drug

  • Adverse event reporting obligation – the FDA obliged pharma companies to immediately report any adverse drug effect or reaction they learn about. Social media give platform for large numbers of patients to share their experience with adverse drugs effects, and the companies are afraid they will have to report it, which may cause investigations, bad press, and might lead drug being banned from sale

Similar fears are faced by non-US pharma companies too, as the FDA’s local counterpart authorities introduce similar regulations on communication via social media, which at times can be even stricter than the American ones.

Game worth the candle

Ignoring the risks by pharma companies can unfold a range of undesirable scenarios, a fact that has kept many drug makers hesitant of engaging in social media for quite some time. But this does not mean that pharma and healthcare organizations are still not present in social media at all. To the contrary, pharma companies, healthcare providers, device manufacturers, and health insurers have started to listen and engage with users through social platforms, though many of them still do it cautiously and have still not been able to unlock the social media’s full potential. These players have started to understand that with careful moves, the benefits will outweigh the risks:

  • generate engagement and discussion around health issues, which contributes to the positive reputation and brand image, and obviously – increase sales,

  • get quick, cheap, first-hand information on drugs’ effects on a large scale, which brings valuable insights that are not available from regular clinical trials whose scale is always smaller,

  • gather information invaluable in building marketing strategies, including pointers on price perceptions, drug availability as well as patients’ opinions about competitors’ drugs.

Who’s doing it?

Though it was estimated that in 2011, 90% of the pharmaceutical industry was still inactive on social media, currently, this has changed (though today’s participation share is unknown). Several pharma-sponsored communities are now active across Facebook, Twitter, YouTube, Google Plus, on one or multiple platforms, with a differing level of interactivity and different weight being put on inbound versus outbound marketing. Some of the examples include:

  • Roche’s Accu-Check Diabetes Link, a diabetes-support community with information, discussions, and blogs

  • GSK’s Alli Circles well-being, weight loss, and health community

  • Novartis’ CV Voice for cystic fibrosis patients and Chronic Myelogenous Leukemia own community-based site CML Earth

  • Pfizer’s community ‘getold.com’ targeting the expanding elderly group of the American population

  • Sanofi US’ Diabetes support community

  • Soon-to-be-launched Boehringer Ingelheim’s Facebook-based game, where players create and operate their own pharmaceutical firm, and discover imaginary medicines through virtual laboratory

Getting it right

It appears that the healthcare industry is finally attempting to catch up on the social media revolution in spite of a slow start. From primarily information dissemination, it is now moving towards real time engagement between physicians, patients, and other stakeholders. Soon, developing a social media policy will no longer be an option for pharma companies. But this should not be seen as a burden, but rather as an immense opportunity for the pharmaceutical companies to develop trust, build brand image, and impart health education. Drug makers that want to be successful on their social media path should consider 6 basic rules of online presence for pharma companies:

  1. Take your risks seriously – social media engagements, especially in pharma domain, always raise privacy, legal, and confidentiality concerns among the participants and monitoring bodies. Extra cautiousness in operating online communities is of utmost importance, including constant monitoring of the content being added by individual users and patients. Social platforms also pose risk of incorrect drug information or unfair accusations that might damage your image, but it can be flipped to an advantage, using the platform to quickly clarify and avert unwanted comments, provided that you have a dedicated, competent staff handling your social media

  2. Control your speakers – given the high risks and ambiguity of formal guidelines, there is a need for internal policy or guideline book listing dos and don’ts for online communication, content approval process, crisis management practice, confidential information sharing policy for employees running social platforms on behalf of the company

  3. Know your target audience – the social media pharma-related content must stay relevant and target focused groups to have the right impact. Patients with a particular disease or ailment look for relevant, detailed information, and they typically already know quite a bit about the problem. Expertise must be shown along with dedication to creating high quality content, that is useful, new, and (ideally) entertaining

  4. Get the objective right – social media is not another advertising board. The primary aim of the social media presence is to generate engagement as well as share and manage knowledge by facilitating interaction and discussions. This must take precedence over advertising

  5. Be transparent – transparency is always appreciated by consumers and patients. The link with the company must be clear, users working for the company must disclose their affiliation, and negative comments, unless unjustified or vulgar, cannot be censored

  6. Understand that social media are not a lone island – social media activity and content must be aligned with overall marketing strategy and be used cohesively with all other marketing channels, ideally to complement each other. Social media cannot become a neglected child of the marketing department in a long run, it must be maintained actively and linked to other marketing efforts whenever possible (e.g. to disseminate important announcement teasers, generating traffic to blog entries, or provide interactive content as part of larger marketing campaign including traditional media)

Social media engagements by drug makers might seem only as a nice publicity stunt, but it is so much more than that. Pharma companies, as most players across many industries, finally started to realize that listening and engaging with conversation with the customer pays off in many aspects. Just as was the case in consumer goods or retail sectors, social media will continue to change the pharma industry on a large scale. Players who want to matter, should not allow themselves to stay behind, even considering the risks involved.

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