It has become fashionable in the life sciences industry to use the word ecosystem. Read the industry media or listen in at a conference and it won’t be long before you hear phrases like ‘patient-centred ecosystem’, ‘innovation ecosystem’ or ‘oncology ecosystem’. The term has become ubiquitous. But trying to find meaning in these various uses of the word is more difficult. More often than not, ecosystem is used as a modish synonym for a part of the market or a relationship between different organisations within the market. Language has its fads and it’s pointless to rail against this particular semantic trend. But thinking about our industry as an ecosystem has so much more value than sounding fashionably smart. In this article, I’ll guide you through how ecological thinking helps business thinking and addresses real-world challenges in the life sciences market.
To an ecologist, an ecosystem is a biological community of interacting organisms and their physical environment. This concept helps us to see that ecosystems in the life science industry are not simply sub-parts or the market or the industry. They have wide boundaries and those boundaries blur and overlap with other ecosystems. This definition also emphasises complex interaction, which is central to understanding how our industry works. Ecologists also subdivide ecosystems into the biotic and abiotic. The former is all of the biological organisms in the ecosystem whilst the latter consists of its non-biological elements, such as geology and climate. Ecologists understand that the biotic components of the ecosystem, the different species of plants and animals, adapt not only to each other but also to the abiotic environment. To a lesser but important degree, the biotic component also influences the abiotic, such as when rain forests shape the weather and grazing animals change surface geology. As we will see, these fundamental concepts of biological ecology become useful when we start to think about how the life sciences industry works.
From biology to business
If we eschew the fashionable but illinformed use of the term, thinking of ecosystems in the same way that an ecologist does gives us a powerful and practical way to understand and manage the industry that provides healthcare professionals with the tools to do their job.
The first idea to transfer from biology to business is the definition of an ecosystem. It is best to think of the life sciences ecosystem broadly rather than narrowly. It makes little sense to talk of an oncology ecosystem when it is connected at manufacturer, user and patient levels to most other therapy areas. Similarly, to describe the innovative ecosystem as innovative companies in big pharma and biotech is too narrow when it is so closely connected to payer systems and to publicly funded basic research. Oncology (and other therapy areas) and innovation (and other parts of the value chain) are really just parts of a wider life sciences ecosystem, just as the tree canopy and the ground vegetation are part of a rain forest ecosystem. Most misleading of all are terms such as patient-centred ecosystem, which is as platitudinous as calling the forest tree-centred. The life-sciences ecosystem is a community of interacting commercial, governmental, non-profit and other organisations, embedded in their sociological and technological environment that employs science towards the betterment of human health. Using this wider, biology-like, definition of our industry ecosystem also reminds us that, although distinct, our industry is adjacent to and intimately connected to adjacent ecosystems such as the health provider ecosystem and government finance ecosystem.
The second useful idea we can borrow from the biological ecologists is the biotic/abiotic division. Looked at that way, the life sciences ecosystem includes a biotic component of many different ‘species’ of organisation, from pharmaceutical, device and diagnostic companies to distributors to contract organisations to regulators to Health Technology Assessors (HTAs). As in any ecosystem, these species are interdependent and are in a constant state of co-evolution and adaptation. Drug development and the regulatory environment are good examples of this. So are how we sell our products and how our customers wish to buy them. Equally, many pharmaceutical innovations today emerge from the way that big pharma has adapted to work with small, focused innovator companies. Overall, a truly ecological perspective helps us to see our industry as a massively interconnected network of many different and differing business organisations, just as a coral reef is a similar system of biological organisms.
Our industry’s parallels to the abiotic part of ecosystems are less obvious but just as informative. Whilst biological organisms adapt to geology and climate, business organisations in the life sciences ecosystem have to adapt to their sociological and technological environments. The former includes laws and regulations but also political systems, demographics and social attitudes. The technological environment encompasses both directly relevant technologies, from CRISPR to the many ‘omics’, and indirectly relevant technologies, such as information technology and nanotechnology. Just as biological organisms can shape weather and geology, life science businesses can
shape the sociological and technological environments. Consider, for example, how control of infectious diseases has shaped demographic and epidemiological trends. Or how companies such as Illumina have shaped the availability of genomic information. Overall, understanding that the ‘biotic’ life science companies co-exist and co-evolve with the ‘abiotic’ sociological and technological environment is an important step towards understanding our industry’s complexity.
Transferring these concepts from biology to business, as opposed to simply throwing the word ‘ecosystem’ around, is of more than academic interest. It has many important practical implications, some examples of which I will describe in the following paragraphs.
We often talk of the changing pharma business model or the evolving medtech business model. If we equate business models to species, both of these ideas are, from an ecosystem perspective, naïve and simplistic. In biological ecosystems, the evolutionary struggle for survival leads to speciation and biodiversity. Research into the evolution of the life sciences industry reveals the same speciation process. There is no longer a pharma business model, there are many. The medtech business model is not evolving, it is diversifying into many related but distinct models. Practically speaking, this means that life sciences firms have to understand that speciation process and deliberately direct the evolution of their own business.
Biologists talk of ‘holobionts’, which are interdependent networks of distinct organisms that work together to survive. A coral reef is a holobiont but so are you with your gut microbiome. From an ecosystem perspective, the idea of one company competing against another is again too simple. In nature, one holobiont competes against another and building and maintaining a holobiont is a critical survival skill for many organisms. The same is true in the life sciences industry, where external innovation and outsourcing mean than no company competes alone. In practice, this means that life science firms need to build their capabilities to attract and retain partners. The holobiont concept has many lessons for how to do this.
The ecologists’ concept of keystone species refers to one that is widely and diversely connected to other species in the ecosystem. The concept is important because changes that affect a keystone disproportionately impact the whole ecosystem. Bees, starfish and India’s Cullenia tree are all examples of keystone species. In the life sciences ecosystem, for example, elite universities and their associated teaching hospitals are keystone species. So too are certain global innovator companies. Functionally, being aware of the keystone organisations in the life science ecosystem helps life science companies to drive change in clinical practice and to develop innovative markets.
Some biological organisms can modify the abiotic environment to improve their evolutionary fitness. Beavers’ dam building is the most often cited example but earthworms, termites and, of course, humans also change their own environment rather than just adapt to it. The concept of niche construction is important in explaining the success of certain species. In the life sciences ecosystem, some companies have extensively influenced their own environment. For example, industry-shaped regulation creates barriers to entry whilst laws around orphan drugs have created a profitable market sector. From a real-world perspective, niche construction activity is often a better competitive strategy than simple adaptation the environment. Again, biology has important lessons for business here.
Ecologists define habitats as regions with specific characteristics and that are populated by specific species. Desert, forest, grassland and ocean are all examples of biological habitats. The concept is important to understanding why certain species thrive or fail in different regions. In the life sciences industry, habitats are defined by how value is created and for whom. For example, many life science companies are limited to the habitat where value is created for institutional payers by means of technological innovation. By contrast, generic pharmaceutical companies operate in the habitats where value is created by operational efficiency and for either institutional payers or consumers. The application of the habitat concept helps life sciences firms both to plan growth and anticipate competition.
The ecosystem perspective has allowed ecologists to develop practical approaches to managing natural environments based on some key principles. Central to this is the idea of holism, the opposite of reductionism. From an ecologists’ perspective, it is foolish to do one thing to an ecosystem and expect a single, direct consequence. The complex interconnectivity of an ecosystem always leads to indirect effects. The same concept of holism also means that ecosystems can only be improved or sustained by adjusting multiple factors at once in order to keep the system in balance. The concept of holism applies well to the life sciences ecosystem. The introduction of Sovaldi and Harvoni, for example, transformed hepatitis C management but had unintended consequences for the financing of some health systems. The human genome project did not have the immediate, direct consequences many predicted but had wider, indirect results. The passage of a single act in the US, Hatch-Waxman, was intended to improve competitiveness but also transformed the global generics business. Understanding the holistic nature of the market is essential to crafting strategy in the life sciences.
The ecosystem paradigm
When executives in the life sciences industry set out to manage their businesses, they necessarily work within a certain paradigm that shapes their thinking. For many years, the pipeline metaphor was that thinking. Others have seen the industry as a garden where tending to basic research grows new medicines. Like all metaphors, these have their limits. The ecosystem paradigm is a much more comprehensive, coherent and useful paradigm for anyone wanting to understand the global life sciences industry. It is more than a metaphor. It is the only way to make sense of the most important industry in the world.