IQ | Insigniam Quarterly - Winter 2024: "Will Your Business Survive the Next Five Years?" Part II
Over 30 years ago, Insigniam pioneered the field of organizational transformation. Today, executives in large, complex organizations use Insigniam’s consulting services to generate breakthroughs in their critical business results. Insigniam’s innovation consulting enables enterprises to identify and cross into new strategic frontiers to rapidly generate new income streams. Insigniam provides executives of the world’s largest companies with management consulting services and solutions that are unparalleled in their potency to quickly deliver on strategic imperatives and boost dramatic growth. Insigniam solutions include Enterprise Transformation, Strategy Innovation and Innovation Projects, Breakthrough Projects, Transformational Leadership and Managing Change. Offices are located in Philadelphia, Laguna Beach and Paris. For more information, please visit www.insigniam.com. You have to love and embrace change—there’s no way around it. There’s been a big shift in mindsets. Instead of resisting change, leaders now realize they need to move with it and evolve. The most successful leaders will be those ahead of the curve and able to adapt quickly.
Waseem Abbas, Brandon Bichler, Ettienne Brandt, JW Dobbe, Rory Farquharson, Dan Garsin, Ben Gower, Jon Kleinman,Barry Maloney, Harry Newberry, Guillaume Pajeot, Ashley Tappan, Bonnie Wingate, June Zeringue & Jennifer Zimmer
IQInsigniamQuarterly is a thought leadership publication committed to transforming the world of business by offering content relevant to the C-suite and their executive teams at large, complex global enterprises.
WILL YOUR BUSINESS SURVIVE THE NEXT FIVE YEARS? SPECIAL ISSUE | PART II:
The world is shifting at breakneck speed, with industries being reshaped almost overnight by a convergence of economic strain, rapid technological progress, and evolving consumer expectations.
In this second installment of our two-part special issue, we dive into how visionary leaders in the insurance, biopharmaceutical, CPG, and medtech sectors can not only confront these powerful disruptors but harness critical success factors to reshape and elevate the global business landscape by the decade’s end. Thriving in this volatile environment goes beyond adopting new tools; it requires a fundamental shift in how companies approach risk, build trust with stakeholders, and motivate teams to perform under pressure.
The next five years will reward those who evolve and push boundaries, while those resistant to change may face harsh realities. Now is the time to seize the opportunities of a digitally driven world with bold vision, unwavering passion, and a healthy dose of human ingenuity. Let’s lead the way forward. IQ
Shideh Sedgh Bina Founding Partner, Insigniam & Partner, Elixirr
Winter 2024 | Special Issue | Part II
“In the future, every company will become a technology company, and data will be the basis of competitive advantage.”
—Ginni
Rometty
Former Chair & CEO of IBM, Co-Chair at OneTen & author of Good Power.
FEATURES
BROWSER HISTORY
TURN THE PAGE ON BUSINESS AS USUAL Recommended reads for C-suite executives amid disruption.
By Bonnie Wingate
EXECUTIVE OP-ED A GROWTH-FOCUSED PLAYBOOK FOR AI
Many see AI as a cost cutting tool. Can it be a driver for revenue growth?
By Ettienne Brandt
04 06 20 52 34
SEMINAL FEATURE THE ART OF INFLUENCING CHAOS
Executing your strategy doesn’t have to feel like a whirlwind of confusion.
By Jon Kleinman
INSURANCE RISK REVOLUTION
How global insurers can win the future with innovation and ingenuity.
By Ben Gower & Shideh Sedgh Bina
BIOPHARMA CLINICAL SHIFT
How increasingly complex regulations and emerging tech will reinvent the sector.
By Jennifer Zimmer
CPG & FMCG SUPPLY CRUNCH
Will evolving customer preferences transform the CPG sector?
By Brandon Bichler, Jon Kleinman & Guillaume Pajeot
16 64
SPECIAL FEATURE: PART II WILL YOUR BUSINESS SURVIVE THE NEXT FIVE YEARS? Disruptors and critical success factors across key industries.
Edited by Jon Ball
MEDTECH NEW FRONTIERS
The $6.8 trillion question: Is MedTech ready for a disruptive future?
By June Zeringue
TURN THE PAGE ON BUSINESS AS USUAL
Buzzworthy releases for the disruption-driven executive.
By Bonnie Wingate
That’s on Me: Seasoned Executives Confess Their Rookie Mistakes
By Mike McHargue, Greenleaf Book Group, Oct. 2024
Learning from someone who has firsthand experience of what we are facing can show us how to effectively respond to situations and problems and, perhaps, even how to avoid them. In That’s on Me, author Mike McHargue offers insights and wisdom from nearly 40 C-suite veterans on a wide variety of mistakes they have made. These leaders are authentic and generous in allowing readers to learn from them.
Published in October 2024, these“confessions” can be a guide for current and aspiring executives. A selfassessment is included. The learnings and guidance on leadership can be useful for any level leader.
Be the Unicorn: 12 DataDriven Habits that Separate the Best from the Rest
By William Vanderbloemen, HarperCollins, Nov. 2023
Using research from more than 30,000 senior leaders and from proprietary data over 15 years, author William Vanderbloemen recognized 12 habits that are shared by the most successful. These habits will support you to stand out and be seen as unique. Data is included that validates why a habit is transformative. Easy-to-use ways to develop the habits are included along with examples of how the habit is being used by highly effective professionals. In these days of generative AI, robotics and the risk of positions and roles being eliminated, these habits can provide pathways for development to successfully navigate an unchartered business landscape.
Collaboration is the New Competition
By Priscilla McKinney, Lioncrest Publishing; Sept.
2023
Today’s world of business calls for authentic collaboration from leaders. How companies compete requires employees to be effective with complexity in their own organizations and in the overall market and business environment. Winning and delivering results in a networked environment is an essential competency. McKinney gives the reader an approach to developing this skill that is accessible and actionable. Regardless of your level in the organization, you will discover key principles that allow the exploration of a change in mindset. The goals of individuals and of companies and organizations can benefit from the roadmap offered by McKinney.
When you face the inevitable conundrum of management and people, just thumb to the page you need in [That’s on Me]. It is like having a seasoned mentor in your hands.
—David R. Duncan Proprietor, Chairman & CEO, Silver Oak Cellars
EXECUTIVE OP-ED
CREATING A
GROWTH-FOCUSED PLAYBOOK FOR AI
Many enterprises view artificial intelligence as a cost-cutting tool to unlock greater efficiencies. But how can it act as a growth driver that more broadly benefits your company?
By Ettienne Brandt EVP, Commercial Frontier Communications
Many executives see artificial intelligence as a cost-cutting tool for greater efficiency, but it can also be a powerful growth driver that can have broader benefits for your company. At Frontier, we shifted our perspective— and it changed everything.
When I joined Frontier in mid-2022, the company was in the early stages of a turnaround, having emerged from bankruptcy a year earlier.
I stepped in to lead our B2B division which was grappling with years of negative growth. My goal was clear: stabilize, then accelerate growth. To do that, we embraced AI as a force multiplier to transform how our sales team operates.
“OUR JOURNEY SHOWS HOW REDEFINING THE ROLE OF AI CAN TRANSFORM AN ORGANIZATION FROM SURVIVING TO THRIVING.”
—Ettienne
Brandt EVP, Commercial Frontier Communications
Partnering with Elixirr, we reframed the conversation. Instead of just chasing efficiencies, we prioritized freeing up our sales team to focus on what matters— connecting with customers and closing deals.
The results speak for themselves. In an industry where B2B telecommunications is often in decline, we’ve turned the tide. New customers now drive over a third of our business—up from less than 5%—and our sales team spends more time selling, thanks to AI streamlining processes, and without costly system overhauls.
AI has been pivotal in modernizing our operations and empowering our customers to run their businesses more effectively. It’s more than a cost-cutting tool—it’s a catalyst for transformation, growth, and delivering greater value to those we serve.
So, what exactly did we do? Here’s how we built an AI playbook for growth.
Using AI to Make Us Smarter
One of our early wins was in knowledge management. In B2B sales, time is money, and our sales team was losing time—up to eight minutes per search—digging through our internal systems for training manuals or data. We developed a solution that we call Giga Agent, which is an AI-powered search assistant that operates like ChatGPT. This tool transformed what had been an eight-minute task into a 45-second one. The cumulative effect of this across the team was significant: more time for client engagement and less time spent searching for information.
Next, we used AI to be smarter in how we reach out to prospective new customers.
Tapping Into a New Context
Shifting AI’s context from merely a cost-saving tool to a growth driver reframes its value. AI can spark innovation, open new markets, and create personalized customer experiences, driving revenue and competitive advantage. Emphasizing AI’s potential for growth encourages investment in creative solutions, fostering scalability, resilience, and longterm business success.
Building Gigabit America
Fiber technology is crucial for AI, as it provides the high-speed, high-bandwidth connectivity needed to process vast amounts of data in realtime. This supports rapid data transmission and seamless communication between AI systems, enabling faster decision-making, enhanced machine learning capabilities, and efficient cloud computing. Without fiber, AI’s potential would be limited.
Prospecting is one of the most challenging parts of sales, requiring targeted, meaningful outreach that resonates with potential clients. Using AI, we integrated data from various systems into a unified platform. This approach enabled our sales team to craft tailored, relevant messages that speak directly to each prospect’s needs and industry context. The result was more effective outreach, faster client engagement, and ultimately, increased sales.
A Single Source of Truth
Transparency is more than just a corporate buzzword; it is a lifeline for modern businesses. For too long, sales and project management teams have worked in silos, disconnected from the full lifecycle of a deal. This disconnect often results in frustration, delayed installations, and canceled orders. At Frontier, we decided to change that narrative with a unified, AI-powered platform—a “single pane of glass.”
We built a platform that integrates data from contracting, provisioning, billing, and
even sales commissions into one accessible view. For the first time, our B2B sales teams could track the progress of their deals from start to finish. They could see project milestones, billing status, and commission timelines, empowering them to stay engaged and proactive post-contract. The impact was immediate: fewer canceled deals, faster orderto-cash cycles, and more collaboration.
The benefits extended beyond the sales team. Project management now had better visibility into potential bottlenecks, allowing them to address issues before they escalated. This transparency improved communication and accountability, leading to a more unified operation. The results were undeniable: our post-sale cancellation rate dropped by half, a testament to how transformative a single, connected system can be.
When teams have the tools and insights to see the entire process, they become more invested in outcomes. The result? Smoother handoffs, quicker problem resolution, and a more seamless experience for the customer.
Practical Solutions to Support The Field
Beyond sales, we have found ways to extend AI’s benefits into our field operations, where it could make a real difference for our technicians and customer service teams.
Consider fiber deployment. It’s not just about laying cables; it involves complex route planning, customer mapping, and overcoming logistical hurdles. Traditionally, this work was data-heavy and timeconsuming. By integrating AI into our engineering processes, we streamlined deployment, making route planning faster and more accurate. What used to take days of manual work could now be completed in hours, boosting our overall efficiency.
We also equipped our field technicians with an AI-powered tool that provided access to detailed manuals, troubleshooting steps, and past solutions in real time. Before, if a tech faced a complicated issue, they might have needed to call back to the office or schedule a follow-up visit. Now, with instant access to relevant information, technicians can solve problems faster, reducing callbacks and improving the customer experience.
Customer service saw similar benefits. AI reviews interactions to ensure that our teams follow the right protocols and provide effective solutions. It also flags potential escalations early, allowing reps to manage customer concerns before they become significant issues. This proactive approach has helped us reduce churn and maintain higher customer satisfaction. Predictive modeling is another area where AI has been invaluable. By forecasting customer behavior, we can anticipate service take-up rates and better allocate resources.
This ability to adapt quickly gives us a competitive edge, enabling us to meet customer needs efficiently and effectively.
The Right Infrastructure to Support AI
AI’s potential is only as strong as the infrastructure supporting it, and that’s where fiber comes in. Many executives overlook this, focusing solely on AI’s algorithms and software. But without high-speed, lowlatency connectivity, even the most advanced AI applications will fall short.
Why fiber? Well, AI requires crunching massive amounts of data, so speed and latency are most important. Fiber delivers data at the speed of light, ensuring that AI
applications can crunch all that data quickly and provide insights in real time. This goes beyond downloading movies faster or enhancing video calls. It’s about enabling critical, data-driven applications that rely on real-time decision-making. For example, imagine a traffic management AI system that adjusts signals dynamically to reduce congestion and prevent accidents. Without fiber, delays in data processing could lead to real-world consequences.
Bandwidth matters, and low latency is crucial. Fiber provides an environment that ensures AI algorithms run smoothly and efficiently. At Frontier, we have tested 100gig speeds, preparing for the future where AI applications will become even more data-intensive. This futureproofing ensures that as the complexity of AI grows, our infrastructure is ready to support it.
Advice for Senior Executives
Just like AI, we get better as we learn, so I would encourage you to be inquisitive of the possibilities of AI. Be curious and don’t aim for perfection, it will slow you down. Too often, leaders become paralyzed by the need for a perfect plan, but AI’s true value comes from an iterative approach. Be ready to test, adapt, and refine. The chaos of trying and learning is where true innovation lives. At Frontier, we found success because we dove in, asked questions, and learned as we went.
Another piece of advice is to take AI to where the work happens and engage your IT teams in your day-to-day work. Handson experience provides valuable insights that shape how AI is integrated into your operations. Instead of top-down assumptions, develop practical, on-the-ground understanding of where AI could make the most significant impact. The biggest gains don’t often come from sweeping overhauls but from incremental changes that add up.
These are some of the lessons we’ve learned, and it’s transformed AI from a cost-cutting tool to a driver of growth for the benefit of our business. It’s not about having all the answers at the start; it’s about asking the right questions and staying open to learning and adapting. If you’re willing to roll up your sleeves and explore, you’re already on the path to success. IQ
Ettienne Brandt has over 20 years of experience in the telecommunications industry across cable, fiber and wireless providers. He served as Managing Director, Commercial for the Consumer Division of BT Group plc. as a key member of the leadership team getting the BT brand back to growth. Previously, he served in a variety of roles at EE Ltd prior to BT’s acquisition, including leading the Enterprise P&L as Marketing and Commercial Director. He began his telecommunications career at NTL (now Virgin Media), the largest UK cable provider, and also worked in South Africa and the USA. Mr. Brandt holds a Bachelor of Commerce from Stellenbosch University and is a member of the Chartered Institute of Management Accountants.
THE ART OF INFLUENCING CHAOS
Executing your strategy can sometimes feel like a whirlwind of confusion. But it doesn’t have to be.
By Jon Klienman
RRewind your mind to 48 months ago. No one could have imagined that in a matter of weeks, a single case of a novel respiratory virus would evolve into a global health crisis, disrupt economies, and force businesses large and small to their knees—with lingering impacts still felt today. It is a dramatic
and costly illustration of the butterfly effect and complexity. But that is the life of an executive, is it not? Daily, we see unexpected challenges unfold all the time. Complexity is normal and yet it is not well understood. Given this practical reality, the question we must concern ourselves with is: How do you manage and lead complex phenomena so that you can achieve your intended outcomes?
INSIGHT SEMINAL FEATURE
Complex adaptive systems can feel chaotic, especially during a crisis, but that chaos is where the magic happens. When there is room to adjust course, take tangents and step into the unknown where interesting patterns can emerge.
Planning is the easy part; execution is where it gets tricky. Why? Because businesses, and the environments in which we operate, are dynamic.
If you plan as though your business is static and anticipate everything to move linearly, you will be disappointed (at best) or caught flatfooted with sub-optimal results. Effective execution does not occur in the safety of orderly and linear process management. It emerges from complexity and well-led chaos. While you cannot control complex adaptive systems, you can influence them to establish conditions from which your intended outcomes can emerge.
In a recent conversation, a chief strategy officer of a large healthcare system expressed frustration about their organization’s ability to execute broadly on a very ambitious strategy. They were using Lean and had their priorities and projects, but they were not executing with the needed velocity or power. And they were not getting to where they wanted to be. We believe that executing strategies, particularly for large organizations, is a chaotic phenomenon that requires a different approach.
Process-driven solutions are great for controlling big, linear undertakings. If you do things the same way every time, you will get the same result every time. That kind of cause-and-effect thinking is useful in, say, assembly-line manufacturing or transactional work. Lean is derived from a manufacturing environment and its very purpose is intended to be orderly, predictable and controlled.
Even project planning and program management methods assume a certain predictable order. However, what makes these methods so powerful in one environment can hamper organizational
growth or transformation when undertaking a complex phenomenon.
Unlike an orderly process, where actors must do exactly what they are told to do, the actors in large-scale initiatives are agents operating locally and making decisions locally. In these cases, the agents are interacting with each other, being affected by their interactions with each other, thus altering their choices, their perspectives and their behaviors with each interaction. In this complex adaptive system, linear execution models are not appropriate.
It’s About Butterflies & Basketball
Although the concept of the butterfly effect has long been debated, the identification of it as a distinct effect is credited to Edward Lorenz, a meteorologist and mathematician who successfully combined the two disciplines to create chaos theory.
Results that are a function of these complex adaptive systems come from independent actions that cannot be predicted and thus cannot be controlled. And yet that is the role of management: to predict and control in order to reliably deliver. So, how can reliability be generated without control? In fact, how can critical strategies be executed when the actors are operating like a roomful of cats?
Instead of following prescriptive rules when managing and leading a complex phenomenon, the challenge is to set the conditions. From these conditions, choices and behaviors among the agents will emerge that will give rise to your desired outcome.
When legendary UCLA basketball coach John Wooden started a new season, the first thing he did was make his players practice tying their shoelaces. Yes, the first few practices included significant time tying
shoelaces! Why? Because loose shoelaces lead to blisters or sprained ankles, either of which is likely to result in injured players. That, in turn, can cause other repercussions.
Also, tying shoelaces tightly requires intentional discipline, a be-here-now alertness. All of which goes a long way toward building a condition that is necessary for basketball success. This coach—who led his teams to 10 NCAA national championships—rarely talked about winning. Rather, he talked about what mattered, like tight shoelaces.
In Lean, the tying shoelaces module could be considered standard work. Thus, setting a condition to manage chaos does require a set of standard work. But the intent of the standard work is not to prescribe an action in a linear set of actions. Rather, in a complex phenomenon, the challenge is to develop the sufficient and necessary set of practices needed to create the requisite conditions.
Let us not forget that in complex phenomena, the standard work is about setting conditions whereas, in linear phenomena, standard work is to ensure the mechanistic predictability of the system.
The Challenge of Herding Cats
If you approach the problem of herding a room of cats in a linear fashion, you may try picking up one cat and moving her near the door, then picking up the next cat, and so on. The problem is that cats—the agents in this system—are not static: They are dynamic. They move where and when they want to move, and there is no way to predict where they will go next. This sort of nonlinear complexity requires a different approach. Instead of trying to manage each cat individually, establish a condition whereby all the cats eventually move toward the door.
For example, you can tilt the floor. Instead of following prescriptive rules when managing and leading a complex phenomenon, the challenge is to set the conditions. From these conditions, choices and behaviors among the agents will emerge that will give rise to your desired outcome.
To follow through with the example of Mr. Wooden, basketball is a perfect example of setting conditions to allow the emergence of an intended outcome. You have certain conditions in a basketball game. The athletes have muscular prowess
Why Chaos Reigns
Unlike an orderly process, where actors must do exactly what they are told to do, the actors in large-scale initiatives are agents operating locally and making decisions locally. In these cases, the agents are interacting with each other, being affected by their interactions with each other, thus altering their choices, their perspectives and their behaviors with each interaction.
According to Niagara Institute, poor management and an inability to properly respond to chaos within large enterprises—i.e., complex adaptive systems— is estimated to cost companies in the U.S. alone up to $550 billion (USD) annually.
and intentionally developed skills. There are some plays that are understood and yet cannot be scripted.
People know exactly what their roles are and what is expected of them within those roles. Also, people know some fundamental strategies: When only a few seconds remain in a game, and you are down by three points, your team gets in a position to execute a three-point shot. The ball is passed to Jon because he is the best player for that role. The conditions guide behavior, but they also provide room for responses that emerge from the unexpected. And,
when the conditions are right, order seems almost effortless.
Setting the Conditions for Breakthrough Performance
Here is a practical application: A client called us in to achieve a breakthrough in labor-management relations in their brandnew flagship distribution center. This state-of-the-art facility had implemented a pay-for-performance system for the warehouse and delivery associates. The facility and the incentives should have led to top-tier performance.
Instead of following prescriptive rules when managing and leading a complex phenomenon, the challenge is to set the conditions. From these conditions, choices and behaviors will emerge that will give rise to your desired outcome.
However, although they had the bestpaying contract in its region, the client also had the worst labor-management relationship, which is the worst-case scenario for an employer.
Although the employees were making top dollar to stock trucks quickly, the client was beset with workplace vandalism, safety issues and late deliveries. While able to provide exceptionally well for their families, the workers expressed frustration at having to defy the union principles of solidarity to generate said income. And the employees’ commitment to their families was repeatedly violated with the client’s bad practices in managing overtime and scheduling holidays.
The butterfly wings were embodied by an often-repeated comment made by the previous CEO. Upon implementing the new pay system seven years earlier, he had been asked, “What about worker loyalty?” (a synonym for solidarity). The CEO allegedly answered, “If you want loyalty, get a dog.”
His comment set a context that workers and dogs could be referred to in the same breath because they were held in the same regard. The high payroll of a pay-forperformance system subsequently resulted in the workplace vandalism, safety issues and late deliveries.
Employees often referred to the dog comment as what emphasized their frustrations, further stressing the conflicting forces of union solidarity, commitment to family and obstacles to that commitment.
To add insult to injury, each worker had to enter and leave the distribution center through a gate that had been previously installed so security personnel could check their bodies and bags for theft. Although the checks had not happened for a few years,
every day the employees walked through that gate still reinforced their condition of not being respected.
What Allowed for a Breakthrough?
Interviews and focus groups showed the executive team the conditions which they were managing and leading. Forums were established for executives, managers and workers to understand each other and to discover a common commitment to the employees’ families.
The new CEO removed the gate. Overtime and holiday scheduling were revamped to be more supportive of family commitments. A joint management and worker family picnic became a company tradition. It is hard to see each other as adversaries when your kids are playing together, squealing with joy. Also, it is evident that being a parent is the same no matter your work category. The outcome? Highest results in all measures, ranging from workplace safety to “in stock” to “on time.” Without mentioning customer experience, the right stock was delivered on time and in the correct quantity, which was exactly what was needed to elevate customer reviews.
Complex adaptive systems can feel chaotic, especially during a crisis, but that chaos is where the magic happens. When there is room to adjust course, take tangents and step into the unknown where interesting patterns can emerge. The challenge is then knowing how to leverage and influence those patterns to move the business forward.
Emergence is the dynamic whereby new outcomes are created as we bring different elements together. Understanding and managing emergence is an art to master as a leader of any complex enterprise. IQ
EDITED BY JON BALL
DISRUPTIVE FORCES & CRITICAL SUCCESS FACTORS | SPECIAL ISSUE | PART II
Eexistential threats are mounting, and global executives are feeling the pressure. A recent study found that 85% of senior executives fear geostrategic risks could jeopardize their business’s future, and alarmingly, 45% believe their companies might not survive the next decade. In this era of constant disruption, staying ahead of the curve isn’t just an advantage it’s essential for survival.
Ignoring the escalating threats ranging from global market volatility and geopolitical tensions to climate change and rapidly shifting consumer preferences is like hitting snooze on a ticking time bomb, intensifying risks across industries. It’s no surprise that anxiety is spreading throughout boardrooms and C-suites worldwide, and concerns are as varied as they are urgent. From the complexities of decarbonizing supply chains to shortages in manufacturing labor, executives are grappling with major challenges. For instance, The National Institute of Manufacturers predicts the U.S. labor gap could leave 2.1 million manufacturing jobs unfilled by 2030. Even more striking, 54% of C-suite executives believe their businesses won’t survive beyond 2030 if they fail to scale AI, as reported by Fortune. In nearly every sector or vertical, there are metrics that would stop even the most seasoned CXO in their tracks.
With stakes this high, how can leaders effectively navigate threats that evolve faster than they can assess and address? Overcoming disruptions means seeing opportunities where others see risks and moving decisively when others hesitate. Leaders must focus on critical success factors unique to their sectors—these provide the roadmap to overcoming challenges before they claim industries.
As A.C. Boynton and R.W. Zmud wrote in their 1984 article, “An Assessment of Critical Success Factors,” “Critical success factors are those few things that must go well to ensure success… and therefore, they represent areas that must be given special and continual attention to bring about high performance.”
As the second installment in our two-part series,
our Winter 2024 issue delves into the insurance, medtech, biopharmaceutical, and consumer packaged goods sectors, revealing the most pressing challenges and offering strategies for growth and resilience.
The future of your business depends on navigating unprecedented risks and seizing transformative opportunities. Are you ready to lead where others falter? Time is running out. The big question is: will your business survive the next five years? IQ
BY SHIDEH SEDGH BINA & BEN GOWER
HARRY NEWBERRY
DISRUPTIVE FORCES & SUCCESS FACTORS | INSURANCE
n the face of constant change and increasing uncertainty, the insurance industry finds itself at a critical juncture. As insurers contend with technological advancements, regulatory complexities, climate challenges, and evolving customer expectations, the road to success is fraught with obstacles. However, those that can adapt swiftly and strategically stand to gain a significant competitive advantage. Whether it’s tailoring products to meet industry-specific risks, leveraging AI to forecast catastrophes, or offering personalized policies, the future belongs to the agile and innovative. The question is— will enterprises keep up, or be left behind?
Based on industry research and insights from global executives across the insurance industry, the top five disruptive forces are:
1
Achieving Speed to Quality: The New Competitive Edge
Speed and quality have become paramount in the insurance sector, driving insurers to make faster, better-informed decisions to stay relevant and competitive. Achieving “speed to quality” means mastering the art of quick yet robust decision-making. This necessitates that insurers must innovate and streamline processes, especially in areas like underwriting and claims processing, where automation and advanced analytics can drive both speed and precision.
The impacts of speed to quality are numerous and have a direct corollary to an insurer’s bottom line. According to J.D. Power’s 2022 U.S. Auto Claims Satisfaction Study, customers whose claims were handled within a week reported higher satisfaction than those whose claims took longer. Success will require insurers to
embrace automation and data analytics while refining risk assessment models. The emphasis should be on enhancing operational efficiency, maintaining accuracy, and maximizing customer satisfaction, all while making swift, data-backed decisions that align with evolving risk landscapes.
According to research from Bain & Company published in Insurance Asia, insurers who integrate digital tools and analytics into claims handling can improve productivity up to 30%, optimizing resource allocation and boosting customer satisfaction. The integration of automation in claims processing can lead to cost reductions of 25% while enhancing overall customer experience and loyalty, as seen in studies from Bain.
2
Delivering Excellence, Cost-Effectively
Balancing cost-effectiveness with highquality, speedy service is a delicate act that can be achieved through optimizing teams and leveraging strategic resources. Automating routine tasks, for instance has led to significant productivity gains for insurers. According to a report by Capacity, companies that adopted insurance automation experienced a 55% increase in productivity, an 80% increase in accuracy, and quadrupled their average revenue savings in 2023 compared to 2019. These improvements enable frontline employees to focus on more meaningful work and enhance customer interactions. Additionally, mapping out workflows through service blueprinting can help leading insurers reduce costs while improving service quality and response times, as it allows companies to identify redundancies and optimize each step in the customer journey.
Moreover, insurers that strategically align operations with automation and resource optimization report 25% higher operational efficiency, reports KPMG, helping them adapt to rapid changes without incurring additional costs. To achieve this, insurers can utilize offshoring, outsourcing, and service blueprinting, which maps out a structured approach to optimize workflows. These strategies not only cut costs but also support a flexible operating model that aligns with business objectives.
By strategically supporting frontline employees with automation, insurers can improve customer service without compromising on speed or quality.
3
Navigating a Complex Regulatory Landscape with Suppliers
Regulatory complexity in the insurance industry has grown exponentially, particularly in the vendor space. As insurers increasingly depend on external suppliers for technology, data, and services, they must manage regulatory risks while ensuring supplier compliance.
The challenges are especially pronounced in markets with strict regulations, such as Europe, where the General Data Protection Regulation (GDPR) requires rigorous compliance checks for third-party vendors.
A study by the International Association of Privacy Professionals (IAPP) and EY found that large organizations allocated an average of $1.3 million to GDPR compliance efforts.
Furthermore, the costs and risks of noncompliance can be severe and substantial, with fines reaching up to €20 million or 4% of annual global revenue (whichever is higher), making it crucial for insurers operating in Europe to enforce strict data compliance with vendors.
To address this, insurers should adopt a proactive approach, embedding regulatory checks into supplier onboarding processes and creating ongoing compliance assessments. As illustrated, failing to secure regulatory compliance with suppliers can lead to significant legal and financial
repercussions, making it imperative for insurers to adopt an “always-compliant” approach to vendor management.
4
Managing Effective Change with AI and Emerging Technologies
Change is no longer a periodic event; it’s an ongoing requirement for survival. Yet, as noted by industry experts, the insurance sector has historically struggled with implementing large-scale transformations effectively. The failure rate of IT projects is notoriously high, with costs often exceeding budgets and timelines.
According to the Standish Group’s CHAOS report—an influential research publication that examines the success and failure rates of IT projects worldwide—31% of all IT projects are canceled before completion, with an additional 52% facing budget overruns and delays.
To drive effective change over the next five years, insurers must first step back and focus on creating the conditions necessary for transformation to succeed. This begins with a clear vision, strong leadership, and a commitment to aligning every layer of the organization toward shared goals. With those peices in place, AI investments stand a higher likelihood of generating a meaningful impact.
According to market research firm ARIQX, AI and emerging technologies can reduce processing times by up to 50% and improve risk assessment accuracy by 30%. Additionally, a study by MIT Technology Review found that companies utilizing AI in customer service experienced a 25% increase in customer satisfaction scores and a 30% reduction in service costs.
However, the key is not only adopting new technologies but also ensuring they are used effectively to unlock their full potential. This requires a clear implementation roadmap, as evidenced by Gartner research, which notes that only 30% of AI projects advance beyond the pilot phase, highlighting the necessity for robust planning and change management strategies to be successful.
6.75 T $
Insurers worldwide collected approximately $6.75 trillion (USD), or about EUR 6.2 trillion, in premiums in 2023, marking the fastest growth within the industry since 2006. By 2030, global insurance premiums are projected to reach approximately $10 trillion.
DISRUPTIVE FORCES & SUCCESS FACTORS | INSURANCE
When properly planned and deployed, insurers have a greater probability of realizing a return on their AI and technology investments.
5Responding to Environmental Impacts and Climate Risks
As climate change intensifies, so do the risks associated with it. The World Economic Forum ranks climate change as one of the top five global risks, warning that failure to mitigate it will exacerbate environmental and financial instability. Over the next five years, insurers will grapple with rising claims from natural disasters and climaterelated losses, making it imperative to reassess risk models and adapt products.
Climate risk is not only an environmental challenge but also a financial one, with the potential to impact insurers’ bottom lines significantly. According to Swiss Re, natural catastrophes and climaterelated disasters cost the insurance industry approximately $120 billion (USD) in 2022 alone, with the trend of rising costs expected to continue as extreme weather events become more frequent. Additionally, Munich Re’s data shows that climate-related events account for nearly 75% of insured losses globally, highlighting the significant impact of climate risk on insurance costs.
These impacts are also leading some insurers to shift to climate-sensitive models and policies. S&P Global found that 70% of insurers have started incorporating climate change considerations into their risk assessment models—a number likely to increase over the decade— recognizing the financial risks posed by extreme weather events.
Lastly, insurers are tasked with developing products that encourage
sustainable practices, such as insurance policies that support green energy and renewable projects. For instance, many insurers are increasingly partnering with governments and industry to build climate resilience, such as through public-private partnerships that support infrastructure against flooding and other climate risks. This shift aligns with the industry’s broader role in fostering societal resilience.
Critical Success Factors
In a 1984 Sloan Management Review article titled, “An Assessment of Critical Success Factors,” A.C. Boynlon and R.W. Zmud wrote: “Critical success factors [CSFs] are those few things that must go well to ensure success for a manager or an organization, and therefore, they represent those managerial or enterprise areas that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization’s current operating activities and to its future success.”
For insurance industry executives and enterprises to survive—and thrive—over the next five years, capitalizing on the following critical success factors will be key:
Don’t Compromise on Data
For insurers, data is more than just information—it’s the lifeblood of accurate underwriting, pricing, and customer insights. Quality data provides sharper insights into customer risk profiles, enabling faster and more precise policy decisions. Insurers who fail to prioritize data quality risk falling behind.
A report by Avenga—a global IT engineering firm specializing in custom software development—highlights that insurers adopting advanced analytics can reduce claims processing costs by up to
In an increasingly turbulent world, insurers must anticipate and respond to realworld events that shape and redefine risk at unprecedented speeds.
40% and improve loss ratios by 3-5%, underscoring the significant financial benefits of data-driven decision-making in the insurance industry.
However, the key isn’t simply collecting data but ensuring its accuracy and relevance. Insurers with robust data management practices can achieve a reduction in claim processing times and an increase in customer satisfaction scores. This improvement is attributed to more accurate underwriting and personalized services, highlighting the critical role of high-quality data in enhancing operational efficiency and customer experience.
Build a Strong Partner Ecosystem
Gone are the days when insurers operated in isolation. Today, partnerships within ecosystems are vital for survival and growth. By collaborating with tech firms, data providers, and even traditional
competitors, insurers can create an ecosystem that broadens their capabilities and market reach.
While specific percentages may vary across studies, a survey by DXC Technology found that 22% of European insurers were already part of an ecosystem providing additional services to customers, and another 46% planned to join such ecosystems within two years. These collaborations aim to integrate advanced technologies, streamline operations, and offer personalized services, reflecting a significant industry shift towards modernization and improved customer experiences. This ecosystem approach allows insurers to deliver a broader range of services and products without bearing all costs.
For instance, partnerships with telematics companies enable insurers to offer usage-based auto insurance, tapping into the rising demand for personalized,
data-driven products. Recent industry data suggests ecosystems will account for 30% of global revenues by 2025. These collaborations enable insurers to expand their offerings and tap into new customer segments, driving significant financial gains. Building a strong partner ecosystem will allow insurers to stay agile, expand service offerings, and meet customers’ evolving expectations without constantly reinventing the wheel.
Be Brilliant at Change
From digitization to climate-driven policy adjustments, the need for change is relentless. However, insurers often struggle to execute large-scale transformation programs effectively. A report by the Consortium for Information & Software Quality (CISQ) found that approximately 70% of large IT projects in the insurance industry fail to meet their goals,
contributing to $260 billion in costs. These failures frequently stem from inadequate project management practices and a lack of focus on the critical conditions for success. Furthermore, a report from the Life Insurance Marketing and Research Association revealed that 32% of global life insurance executives identified change management as their top internal challenge, underscoring the pressing need to improve execution capabilities across the industry.
To succeed in the face of these challenges, insurers must prioritize establishing the right conditions for transformation. This involves aligning leadership, fostering cross-functional collaboration, and ensuring clarity around objectives and outcomes. Insurers should focus on building a culture of accountability and creating robust frameworks that support effective execution. Rather than jumping headfirst into ambitious initiatives,
Stormy Weather Ahead
The growing frequency of natural disasters is leading to higher premiums and reduced coverage availability, increasing the risk of underinsurance in high-risk areas. By 2030, global insured losses from natural catastrophes are expected to average $151 billion (USD) annually, up from $106 billion over the past five years.
organizations must first assess their capacity to deliver and address gaps in project management and operational readiness. By getting the conditions for success right—clarifying priorities, eliminating wasteful initiatives, and creating strong governance structures—insurers can ensure their change programs deliver real value. This approach will enable them to navigate complex market conditions with resilience and remain competitive in an ever-evolving landscape.
Make Life Easy for Customers
Customer expectations are evolving across every industry, and insurance is no exception. With digital tools and online interfaces, insurers must make it easy for customers to manage their policies and interact with the company.
However, personalization needs vary by sector: while health insurance customers may require more hands-on support, most auto insurance customers want fast, straightforward services.
By focusing on core digital features, insurers can streamline the experience, reduce operational costs, and keep customers satisfied, while reserving more intensive support for cases that genuinely require it, such as health and life insurance.
Focus on Pricing and Reduce Spend on Unwanted Features
Price sensitivity is high in the insurance industry, and insurers must prioritize costeffective solutions that customers actually value. A 2023 survey by ExpertBeacon revealed that 52% of auto insurance customers prioritize obtaining the best price above all else. Similarly, 50% of home insurance customers and 38% of life insurance customers consider price as the leading factor in their insurance decisions. Insurers that can effectively control expenses and avoid spending on features that customers don’t care about will have a competitive advantage. This means cutting unnecessary overhead and focusing on essentials, such as accurate risk pricing and essential customer service features.
Furthermore, trimming down complex or redundant processes can lead to faster turnaround times, which improves both customer satisfaction and cost efficiency. By aligning pricing strategies with customer priorities and eliminating low-value expenses, insurers can offer competitive pricing that appeals to cost-conscious customers while maintaining profitability.
Take Five
In a time of profound disruption, the insurance industry must evolve quickly to address technological advancements, regulatory changes, customer expectations, and environmental challenges. Success will favor those who proactively transform rather than merely react. The leaders of tomorrow will invest in high-quality data, build collaborative ecosystems, embrace change, streamline customer interactions, and focus on value-driven pricing.
Each of these success factors aligns with efficiency, accuracy, and customer satisfaction. High-quality data enables insurers to anticipate customer needs, while strong partnerships support innovation and shared risk. Overcoming the industry’s historical resistance to change will require a culture that values adaptability, especially in technology adoption.
To stay relevant, insurers must also prioritize customers’ needs, simplify interactions, and leverage digital tools for an accessible, efficient experience. As climate risks grow, insurers have a responsibility to offer products that not only protect but also support sustainable practices.
The future belongs to those who act boldly, innovate, and build trust. By embracing these success factors with clarity and commitment, insurers can secure a leadership position in an evolving industry. The path forward demands immediate action, with opportunities for those prepared to navigate the challenges ahead. IQ
20 B $
As existential threats from bad actors increase over the next five years, the global cyber insurance market is expected to exceed $20 billion (USD) by 2025, reflecting the increasing importance of cybersecurity coverage. Some estimates suggest that number could reach $51.5 billion by 2030.
DISRUPTIVE FORCES & SUCCESS FACTORS | INSURANCE
EXECUTIVE PERSPECTIVE:
INSURTECH & REINSURANCE
To better understand what will be required of insurance leaders and enterprises over the next five years, IQ spoke with Dr. Andrew Johnston, global head of InsurTech for Gallagher Re. Dr. Johnston heads a multidisciplinary practice that vets hundreds of technology candidates on behalf of Gallagher Re clients, traditional insurers, or incumbents. Dr. Johnston and his team then support reinsurance company clients select appropriate technological solutions for their businesses, in addition to providing insurance technology related consulting and advisory services. Dr. Johnston is also the author and editor of the Gallagher Re Global InsurTech Report (formerly WTW Quarterly InsurTech briefing).
DR. ANDREW JOHNSTON
IQ : What are the top challenges you see insurance executives—particularly within the InsurTech space—contending with over the next five years? What’s top of mind for you?
Dr. Johnston: First, understanding the dynamics of the reinsurance market is key, especially for newer companies trying to break in. I assumed you were referring to InsurTech companies when you asked, so these are often young firms that haven’t been around for long. If you’re not a seasoned reinsurance executive,
it can be tough to grasp how the market shifts from year to year. For instance, if you’ve never experienced a hard or soft market, it’s difficult to know how to prepare your business for those conditions. Knowing the landscape and what a decade of reinsurance market changes looks like, and how to future-proof your company, is a top concern.
Second, many InsurTechs will need to work with multiple reinsurance partners, which means establishing success criteria that works for all parties. This can be
Global Head of InsurTech Gallagher Re
tricky, especially in a market where you’re working on thin margins while your partners, with larger capital reserves, can afford to take bigger risks. It’s natural for InsurTechs to want to follow their partners’ lead, but that’s not always the best approach. Knowing how to stay scalable and relevant to different partners while being prudent is a big challenge.
Talent acquisition is another issue. There are some extremely skilled people in the industry, but it’s highly competitive. For an InsurTech, hiring top insurance and reinsurance talent can be an expensive process. This challenge, though, isn’t unique to InsurTech.
Then, there’s the fast pace of technology. You might build your business on cutting-edge tech in 2024, but that tech could become outdated quickly. InsurTech executives need to stay aware of this. Insurers and reinsurers are becoming better at adopting and dropping technology based on their needs, so staying relevant is critical.
Finally, for InsurTechs working in the natural catastrophe (Nat Cat) space, climate change is putting pressure on the models used for pricing and underwriting risk. This impacts long-term profitability. Additionally, the funding environment has changed. Back in 2021, it was easier for InsurTech executives to raise capital than it is now.
IQ : As an intermediary, how is Gallagher Re’s InsurTech practice helping insurance carriers mitigate and manage some of the risks you’ve mentioned?
Dr. Johnston: Let’s break this down into two parts. First, let’s talk about the risks involved in working with outside tech vendors. At Gallagher, we help insurance companies vet InsurTech companies. Since our criteria for successful partnerships with InsurTechs align closely with those of our clients, we’re in a fortunate position to provide objective advice on their selection process. Whether it’s using new technology or supporting a
digitally-enabled risk originator, we’ve been advising on these decisions for about 10 years now. In that time, we’ve likely worked with around 3,000 different vendors. Now, regarding the primary risks you mentioned, especially for carriers, we’re always updating models and working with InsurTechs that bring fresh perspectives on issues like climate change. We constantly aim to develop innovative products that can support our clients in these areas.
As a global intermediary, we have the advantage of seeing what works and what doesn’t at scale. This gives us valuable insights into where companies are still profitable and allows us to advise on successful strategies used by others in the market.
In terms of mitigation, that’s a big part of what we do—helping insurers buy structured reinsurance to protect their balance sheets from downside risks.
According to Dr. Johnston, InsurTech companies that have thrived are those that balance insurance expertise with technological mastery. While this may sound simple, finding and maintaining this balance requires understanding both tech and insurance-related nuances to succeed.
We cover everything from helping with technology selection to the reinsurance purchasing process.
IQ : What is the role of AI in the reinsurance value chain? How can AIdriven innovations help reinsurers better assess risk and reduce uncertainty in their portfolios?
Dr. Johnston: AI definitely plays a part in improving risk assessment, but it’s also about reducing operating expenses. AI is a broad term that covers many technologies, all designed to mimic human cognitive processes. Right now, we’re still in the “art of the possible” phase, where companies are testing out ideas and trying to see how AI can enhance their businesses.
What sets AI apart from other technologies is that it can be trained on data and has a specific purpose right out of the box. This gives it more immediate value compared to traditional technologies. The long-term potential of AI is enormous, but for now, we’re still figuring out where it fits best.
In the long run, AI will excel at tasks it was originally designed for—detecting patterns, spotting anomalies, and speeding up predictable workflow processes.
However, I’m skeptical that AI will ever fully replace the human experience in more complex areas. Trying to replicate human decision-making could be a costly experiment that may not pan out as expected.
Where AI is already proving valuable is in automating routine processes. For example, AI is great at scanning thousands of claims quickly and using pattern recognition to flag potential fraud. Once a suspicious claim is identified, it’s still handed off to a human for review, but the process is much faster. These types of AI applications are already showing a strong return on investment.
As for chatbots and similar AI tools, I don’t think they’ll completely replace human-to-human interactions, but as an industry, we’re still exploring how far they can go.
IQ : In Gallagher Re’s Q2 InsurTech report, you noted that funding had reached a quarterly high. From an outsider’s perspective, that seems like an exciting time for those in the InsurTech space.
Dr. Johnston: Yes, and to clarify, the peak of InsurTech funding was in 2021. However, in the last 18 months, Q2 was
Gears & Levers of the Future
the highest-funded quarter. Over the past year and a half, funding has hovered around the $1 billion mark, but in Q2 it rose to $1.27 billion.
That said, in 2021, we saw $16 billion invested in total. So, while current funding is up from recent levels, it’s still down from the heights of 2021.
What’s really interesting is who’s doing the investing. Insurers and reinsurers are now investing more heavily than ever, particularly in early-stage rounds. This suggests they are more confident in picking winners and are willing to take greater financial risks on these investments. We’re also seeing an increase in mergers and acquisitions as the valuations of many InsurTechs have dropped, reflecting the lower funding levels. Some companies that were valued much higher three years ago are now available for acquisition at a discount, which has spurred more activity in the M&A space.
To me, this all indicates that the InsurTech sector is evolving and maturing. Insurers and reinsurers are more comfortable and confident working with these companies, and they remain optimistic about the long-term impact of this technology. They also feel more
qualified to select the partners who will succeed in the future.
IQ : Looking ahead to the next five years, what do you think will be required from InsurTech companies to secure funding, especially in such a challenging global economic environment?
Dr. Johnston: It’s all about ROI. In the early days, InsurTechs had more freedom to experiment and test different growth strategies because capital was more readily available. Investors were more patient. But now, for companies to continue raising capital, they need to deliver returns faster and show real value creation. The era of “technology for technology’s sake” is over. Technology now has to meet predefined success criteria, like improving efficiency, driving growth, or expanding into new markets. The technology itself is no longer the main focus—it’s the results it delivers that matter. InsurTechs that can clearly articulate their value in traditional terms, like profitability and long-term growth, will thrive. Back in 2021, some companies tried to sell concepts like blockchain to insurers without a clear path to ROI.
“As a global intermediary, we have the advantage of seeing what works and what doesn’t at scale. This gives us valuable insights into where companies are still profitable and allows us to advise on successful strategies used by others in the market.”
Dr. Andrew Johnston
Global Head of InsurTech, Gallagher Re
DISRUPTIVE FORCES & SUCCESS FACTORS | INSURANCE
“Looking ahead, it’s all about ROI. In the early days, InsurTechs had more freedom to experiment and test different growth strategies because capital was more readily available. Investors were more patient. But now, for companies to continue raising capital, they need to deliver returns faster and show real value creation.”
Dr. Andrew Johnston Global Head of InsurTech, Gallagher Re
We’re past that now. Moving forward, the companies that can quickly demonstrate profitability and sustainable value will be the ones that succeed.
IQ : We’ve talked about strategy and tactics within the industry, but what qualities will be required of individual leaders and executives in InsurTech?
Dr. Johnston: I think the key qualities are humility and a willingness to collaborate within the insurance and reinsurance community. Historically, many companies entered the space with a mindset to disrupt the incumbent landscape. Those that tried this approach quickly realized how expensive and difficult it is. The more successful InsurTech companies have been led by founders who understood early on that adding value to the broader industry is crucial. Being a part of the industry’s complex network, and providing value to multiple stakeholders, leads to long-term success. It requires a mindset focused on teamwork, partnerships, and creating winwin situations, rather than trying to take market share through disruption.
Additionally, the InsurTech companies that have thrived are those that balance insurance expertise with technology expertise. While this may sound simple, it’s actually quite challenging. Companies that find this balance, maintain a conservative approach, and understand both tech and insurance are positioned to succeed.
IQ : What is your overall outlook for AI in the InsurTech space? What do you imagine the future will look like five years from now?
Dr. Johnston: Overall, I’m optimistic about AI’s role in our industry. However, I want to reiterate what I said earlier: AI is a broad term that includes many different types of technology. While some of these technologies will thrive, not all will perform equally well.
The key is prioritizing clear business use cases and then selecting the appropriate technology to meet those needs. It rarely works when great technology is developed first and then people scramble to find a problem for it to solve.
I believe AI will benefit processes that are predictable, labor-intensive, and don’t require a high level of expertise or sophistication— these are the tasks most ripe for automation. One concept I’m particularly excited about is the idea of a “bionic underwriter”—a human underwriter supported by AI technology. We’re just at the beginning of seeing how this could evolve, but the potential is very promising.
That said, much like the term “InsurTech,” I think it’s important to be disciplined about the language we use. We need to be clear about the specific technology we’re talking about and its true benefits. If you can’t explain the use case without relying on buzzwords, it’s probably not the right application of that technology.
It’s a fascinating time in the industry, and I do believe AI, or certain versions of it, will add long-term value. But we should be careful not to rush into spending billions on vanity projects, a mistake we saw with some early InsurTech ventures. Hopefully, the industry has learned some important lessons from that experience. IQ
Premium Coverage InsurTech companies that have thrived are those that balance insurance expertise with technology expertise, says Dr. Johnston. While this may sound simple, it requires a mindset focused on teamwork, partnerships, and creating win-win situations, rather than trying to take market share through disruption.
Clinical
Pricing, Patents, and Progress: Navigating Biopharma’s Biggest Hurdles Shift
BY JENNIFER ZIMMER
SUPPORTING RESEARCH
BY
ASHLEY TAPPAN
DISRUPTIVE FORCES & SUCCESS FACTORS | BIOPHARMA
The biopharmaceutical industry is currently navigating several disruptive forces that are reshaping its future.
In the post-pandemic landscape, companies are focusing on key macroeconomic trends such as regulatory changes, geopolitical tensions, and the increasing integration of technologies like Generative AI (GenAI). GenAI’s potential for improving drug discovery, cutting research timelines, and optimizing operational efficiencies makes it a vital tool for future growth. Some estimates suggest that leading biopharma companies could generate $5-7 billion (USD) in additional value by fully adopting AI over the next five years.
In addition to technological advancements, the industry faces heightened pricing pressures and regulatory scrutiny, especially in the wake of patent expirations that could result in significant revenue losses. Strategic mergers and acquisitions are expected to play a critical role in offsetting these challenges, as companies seek partnerships to maintain competitive advantage. Moreover, the global pharmaceutical market is projected to exceed $1.2 trillion by 2025, driven by innovations in AI and a focus on improving patient outcomes. However, the industry’s growth is tempered by supply chain issues and geopolitical shifts. The increasing concentration of global trade and a focus on building local markets are leading to a more restricted international trade environment. Alongside this, pricing controls and government mandates are expected to escalate, further affecting drug affordability and access across both developed and developing nations. These challenges will require biopharma companies to balance innovation with regulatory and pricing constraints to thrive in the evolving landscape.
Based on industry research and insights from global executives across the biopharmaceutical industry, the top five disruptive forces are:
1A Coming Onslaught of Global Health System Reforms
Aging populations and declining birth rates are expected to dramatically disrupt the biopharmaceutical sector. These shifts are pushing governments worldwide to reform healthcare systems to manage costs more effectively, impacting drug access and pricing.
In the U.S., the Inflation Reduction Act (IRA) has initiated price negotiations for key medications, while the European Union, Germany, and other nations like Japan and China are pursuing similar reforms to lower drug prices. These changes are creating uncertainty in the pharmaceutical industry and are putting pressure on traditional revenue models.
The IRA is expected to impact how U.S. pharmaceutical companies allocate resources for research and development and commercialization efforts. Since the U.S. accounts for about 43% of the global
pharma market, these reforms will likely influence drug pricing and access worldwide. Additionally, the IRA’s provisions to reduce out-of-pocket costs for Medicare patients could reshape commercial insurance designs, pressuring companies to incorporate patient costs based on net prices rather than list prices.
For drug companies, this new environment presents challenges, particularly regarding the total value of medications and therapies, and the impact on gross-to-net revenues.
The broader healthcare ecosystem, including insurers, pharmacy benefit managers (PBMs), and hospitals, will also face pressure as negotiated drug prices affect acquisition costs and reimbursement rates. Additionally, the IRA could have unintended consequences, such as influencing the market entry of biosimilars and generics. Such policy changes will require biopharmaceutical companies to adapt their strategies to remain competitive in the evolving landscape.
Seismic Demographic Shifts Across The World
poised to disrupt the biopharmaceutical sector, and countries are facing increased socioeconomic challenges as a result. For example, Spain anticipates a significant decline in its labor force’s contribution to GDP growth by 2040, while Switzerland expects a 30% rise in public health spending by 2050, driven by long-term care needs. South Korea and China are already grappling with the economic consequences of fewer working-age adults supporting larger elderly populations.
As birth rates decline and aging populations grow, biopharmaceutical companies will need to shift their focus to meet the rising demand for elderly care. Companies like Oji Holdings are already transitioning from producing infant diapers to adult sanitary items to address these demographic changes. The demand for innovative technologies in elderly care is also increasing, with solutions like automation and AI being developed to support independent living and reduce the burden on caregivers. With chronic diseases rates rising, digital therapeutics are also gaining popularity. Companies like Welldoc and Astellas Pharma are collaborating to improve diabetes management through digital health apps. These technological advancements aim to extend “healthy life expectancy,” allowing older populations to maintain a higher quality of life. However, balancing increased life expectancy with healthy aging remains a challenge that biopharmaceutical companies must address to reduce healthcare costs and improve patient outcomes.
3 2
Demographic shifts, including aging populations and declining birth rates, are
Rapidly Evolving Patient Experiences and Expectations
Although trust in the pharmaceutical industry has improved, many patients still hold a cautious view of the healthcare system. According to the 2024 ZS Future of Health Report, about half of healthcare consumers across six countries believe the system does not care about their communities. There is also a disconnect between doctors and patients, with doctors being twice as likely to think their patients are satisfied with their care than patients themselves report.
A growing concern is the increasing number of patients avoiding healthcare altogether. The survey shows that one in four patients avoid seeking medical care because they find it inconvenient or too expensive.
The global biopharma market is expected to reach approximately $856 billion (USD) by 2030, growing at a compound annual growth rate of 12.5% from 2021 to 2030, according to Precedence Research.
DISRUPTIVE FORCES & SUCCESS FACTORS | BIOPHARMA
These barriers make it even harder for biopharma companies to engage with and treat patients effectively.
The Impact of Generative AI and Emerging Technologies
Although trust in the pharma industry has improved, many patients still hold a cautious view of the healthcare system. According to the 2024 ZS Future of HealthReport, about half of healthcare consumers across six countries believe the system does not care about their communities.
GenAI, powered by large language models (LLMs), offers groundbreaking opportunities by enabling more advanced, human-like decision-making and contextual awareness. Biopharmaceutical companies are under increasing pressure to integrate this technology to remain competitive while managing associated risks.
According to Amazon CEO Andy Jassy, GenAI could be one of the most significant technological revolutions of the coming decades. It promises to improve productivity, but this potential also calls for responsible governance, as emphasized by World Economic Forum President Børge Brende.
The adoption of GenAI and other emerging technologies is already gaining momentum. In the Winter 2024 Fortune CEO Survey, close to 60% of CEOs reported plans to integrate new technologies to unlock growth opportunities, and nearly the same number are already using GenAI to enhance efficiency. In the biopharmaceutical space, this can translate to faster drug development, better decisionmaking in research, and more personalized healthcare solutions. However, the challenge lies in harnessing the full potential of these technologies while ensuring they align with enterprise values and operational integrity.
Cost-Optimization Versus the Need to Innovate
Biopharmaceutical companies will most likely face rising manufacturing costs, driven by external factors such as inflation, regulatory changes, and new policies like the Inflation Reduction Act of 2022. At the same time, internal decisions related to
emerging technologies and supply chain management also contribute to higher costs. To stay competitive, biopharma companies must adopt strategic approaches to cost management without losing momentum in product innovation.
One critical area where biopharma companies can optimize costs is in their manufacturing networks. Companies need to ensure their production capabilities are aligned with both current and future demands, especially as more drugs based on new modalities like gene therapies and RNA-based treatments are developed. By periodically reevaluating their manufacturing strategies and considering modular plant designs, biopharma firms can better scale production and adapt to market demands without unnecessary expenses.
Supply chain resilience is another important focus area. While global supply chains have traditionally prioritized efficiency, recent disruptions have highlighted the need for more regionalized and redundant systems. Although regionalization may raise costs due to smaller scales of production, it also mitigates the risks of supply chain disruptions.
Lastly, optimizing procurement and managing portfolio complexity are essential. By controlling spending on both indirect and direct materials, companies can realize immediate savings. Balancing the complexity of drug portfolios with the associated production costs ensures that biopharma companies can maintain innovation while managing expenses effectively.
Critical Success Factors
In a 1984 Sloan Management Review article titled, “An Assessment of Critical Success Factors,” A.C. Boynlon and R.W. Zmud wrote:
“Critical success factors [CSFs] are those few things that must go well to ensure success for a manager or an organization, and therefore, they represent
those managerial or enterprise areas that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization’s current operating activities and to its future success.”
For biopharmaceutical executives and enterprises to survive—and thrive—over the next five years, capitalizing on the following critical success factors will be key:
R&D Must Lead the Way
Without question, R&D will be a crucial component for biopharmaceutical companies to survive and thrive over the next five years. The biotech sector has always relied on innovation, and with growing investments in early-stage ventures, companies must continue prioritizing cutting-edge technologies. Advances such as CRISPR, AI, and machine learning are revolutionizing drug discovery and development by speeding up the process and improving the accuracy of creating new therapies.
According to industry estimates using AI in drug discovery could reduce R&D costs by as much as 15%, helping companies streamline operations and manage financial risks more effectively. Additionally, CRISPR technology, which allows for precise gene editing, is opening the door to revolutionary treatments for genetic diseases and cancers, further expanding the scope of innovation.
The biopharmaceutical industry’s focus on R&D is not only about discovering new drugs but also about improving existing processes. Personalized medicine, another growing area, allows treatments to be tailored to individual patients, enhancing efficacy and reducing side effects.
A Laser-Focus on Regulatory Compliance and Advocacy
Regulatory compliance and advocacy will be essential for biopharmaceutical companies to succeed over the next five years. As regulations evolve, staying up to date with changes and working proactively with regulatory bodies
Race Against the Clock According to WHO 2023 data, every year, 41 million people die due to non-communicable diseases or chronic diseases, which is equivalent to 74% of all global deaths.
Labor & Delivery
A report from the U.S. Bureau of Labor Statistics says the biopharmaceutical industry is expected to experience a significant increase in employment, with projections indicating a growth rate of approximately 7.7% over the 2020–2030 decade. On a global level, emerging markets particularly in Asia-Pacific are expected to see a rise in biopharmaceutical employment due to increased investments and regional market expansion.
will help companies ensure compliance and influence policies that promote innovation and patient access to treatments. Biopharmaceutical companies that build strong relationships with regulators, such as the FDA in the U.S. or the EMA in Europe, can help streamline the approval process for new therapies and reduce delays that could hinder progress.
In a funding environment that is becoming more cautious, regulatory hurdles can significantly affect investment decisions. Investors are more likely to back companies that have a clear understanding of regulatory pathways and are proactive in addressing compliance issues early in the development process. For instance, delays in meeting regulatory requirements can increase costs and slow down time-to-market, making companies less attractive to potential investors.
According to industry reports, regulatory compliance is becoming more complex as governments introduce stricter policies aimed at ensuring drug safety and efficacy. By engaging in advocacy, biopharma companies can help shape the regulatory landscape to support their interests while also safeguarding public health. Industry groups, such as the Biotechnology Innovation Organization (BIO), play a key role in advocating for policies that foster innovation and patient access.
Biopharma companies that embrace a proactive approach to compliance and advocacy will be better equipped to navigate these challenges, secure funding, and bring innovative treatments to patients more efficiently.
Leverage AI and Digital Health Technologies
Leveraging AI and digital health technologies will be crucial for biopharmaceutical companies to thrive in the next five years. As funding for AI and digital health tools increases, integrating these technologies into operations is key to advancing digital transformation and boosting efficiency across the healthcare industry. AI-powered tools, such as remote patient monitoring (RPM) and point-of-care diagnostics, are becoming essential for real-time data collection and interpretation. These innovations allow healthcare providers to monitor patients more effectively, leading to better, more coordinated care.
According to a report published in PharmaExec, AI and digital health will enable more cost-effective and efficient healthcare delivery. AI-driven tools can also help biopharmaceutical companies reduce costs by streamlining drug discovery and clinical trials, speeding up time-to-market for
new therapies. For example, AI can rapidly analyze vast amounts of data to identify potential drug candidates, shortening the R&D timeline significantly. Additionally, digital health technologies like wearable devices and mobile health apps provide patients and healthcare providers with critical health data, facilitating earlier intervention and better patient outcomes.
Additionally, AI could also transform the biopharma value chain, improving productivity by automating routine tasks such as data analysis and patient record management. This increased efficiency not only reduces operational costs but also allows healthcare professionals to focus more on patient care.
Ensure You Can Navigate Complex Geopolitical Landscapes
Navigating economic and political challenges will be a key factor for biopharmaceutical companies to succeed over the next five years. Economic conditions, government policies, and political events can significantly impact the strategies and operations of biopharma companies.
According to BlackRock, historical stock performance during U.S. election years has shown that despite political uncertainty, there are opportunities for investors. For biopharma companies, focusing on core fundamentals while staying aware of political developments is critical to maintaining stability and growth.
One important shift is the movement of healthcare services from hospitals to home settings, with up to $265 billion worth of care potentially moving by 2025. This shift will require biopharma companies to adapt to changing healthcare delivery models. For example, home-based care and remote health monitoring will necessitate new approaches to drug distribution, patient care, and even R&D practices.
Political factors, such as healthcare reforms and pricing regulations, also play a significant role in shaping the future of the biopharma industry. Legislative changes can affect drug pricing, intellectual property laws, and access to treatments, making it crucial for companies to engage with policymakers and be proactive in their advocacy efforts.
Don’t Neglect Talent Acquisition and Retention
Attracting skilled professionals and keeping them engaged is essential to driving innovation and maintaining growth in an industry that is rapidly evolving. Biopharma companies need to foster a culture of continuous learning and development, ensuring that employees stay ahead of new technologies and industry trends. As digital health, artificial intelligence, and advanced research techniques become integral to the sector, having a workforce equipped to navigate these changes will be critical.
Competitive compensation packages, including benefits and career growth opportunities, are key to retaining top talent. According to a 2023 industry survey, nearly 60% of life sciences executives identified talent acquisition and retention as a top priority, with many noting that competition for skilled workers is fierce. Offering opportunities for professional development and a supportive work environment will help companies retain employees who can contribute to long-term success.
Take Five
To thrive amidst the formidable disruptions reshaping biopharma, executives must move boldly and decisively. Investing in cuttingedge R&D, from AI-driven drug discovery to personalized medicine, is essential to stay competitive. Equally vital is a proactive approach to regulatory engagement and geopolitical challenges, which will ensure smoother market entry and adaptability in diverse regions. Integrating digital health and AI technologies will accelerate both innovation and cost-efficiency. Ultimately, building a skilled, adaptable workforce will empower companies to seize emerging opportunities. In the face of rapid change, a forward-looking, agile strategy will be the key to leading—and defining—the future of healthcare. IQ
8.5%
According to Fortune Business Insights, the oncology segment within the biopharmaceutical market is expected to grow at a CAGR of 8.5% from 2024 to 2032— one of the fastest growing in the industry.
DISRUPTIVE FORCES & SUCCESS FACTORS | BIOPHARMA
EXECUTIVE PERSPECTIVE: BIOPHARMA
To get a tactile sense of what will be required of biopharmaceutical leaders and enterprises over the next five years, IQ spoke with Catherine Owen Adams, who is the new CEO of Acadia pharmaceuticals, serves on the boards at several leading life science organizations, including AssistRX, and Agios Pharmaceuticals, and previously on the Executive committee of BIO—the world’s largest biotechnology organization, providing advocacy, business development and communications services for more than 1,200 members worldwide. Ms. Owen Adams has over 25 years of global leadership in the pharmaceutical industry at Bristol Myers Squibb, Johnson & Johnson, and AstraZeneca. She has been recognized as a “Groundbreaking Woman” by MAKER, consecutively recognized as Next Gen FORTUNE Most Powerful Woman, honored as a Luminary for J&J at the Healthcare Businesswomen’s Association, and acknowledged as one of the Top 100 Executive Women by INvolve HERoes.
CATHERINE OWEN ADAMS
Chief Executive Officer Acadia Pharmaceuticals
IQ: From your perspective, what are the top challenges biopharma executives and enterprises must contend with over the next five years, and why?
Ms. Owen Adams: I’d say there are three major challenges, although you could argue for more. The first one is health system reform. Globally, healthcare has long been a significant part of government spending, making up a large percentage of GDP. Since COVID, the focus on controlling healthcare costs has intensified.
Governments worldwide are under pressure to manage spending after the financial strain caused by the pandemic, leading to new and unique measures.
In the U.S., for example, the Inflation Reduction Act is a big deal. For the first time, the government will negotiate prices for Medicare, starting with ten products whose prices have already been set, and continuing to focus on more each year. This will have a major impact moving forward. In Europe, the proposed Pharmaceutical
Strategy will require companies to launch in all 27 EU member states within two years of the first launch. If they don’t, their exclusivity window will shrink from 10 years to eight. This creates a lot of pressure, especially in countries where launching and obtaining reimbursement is more difficult. On top of that, individual governments like Germany and Italy are revisiting their drug pricing policies, and countries like Japan and China are also tightening their regulations. So, there’s enormous pressure on global pharmaceutical pricing, tied closely with health system reform.
The second challenge is the personalization of medicine and communication. With the rise of digital technology, customers including physicians, payers and patients expect information from the pharma industry to be highly relevant and tailored to their specific needs. The old, broad-brush approach of simply reaching out to doctors with the same message is over. Now, engagement needs
to be personalized, timely and relevant. In addition, medical treatments are becoming more personalized as well. For example, in fields like oncology, hematology, and immunology, we can now tailor treatments to individual patients. A good example is CAR T-cell therapy, where a patient’s cells are engineered to fight their specific cancer. Genomic testing ensures the right tumor variant is being targeted, and mRNA technology, as we saw with COVID-19 vaccines, is leading to more personalized approaches in medicine.
The third challenge, which is related to the first, but broader than that is the increasing cost pressures across the industry. With personalized treatments and new innovations, our entire business model needs to evolve. We’re now focused on working faster, to deliver medicines more efficiently. In research and development, we’re trying to accelerate patient recruitment for clinical trials, streamline those trials, and use AI to speed up the early stages of development.
Despite automation, the need for skilled workers in biopharmaceutical manufacturing is expected to persist, with a focus on roles requiring advanced technical expertise, says research from CBRE. The influx of new professionals is fueled by 54% growth in U.S. biological and biomedical sciences degrees and certifications from 2011 to 2022.
In our commercial functions we are looking at tailored, highly segmented marketing communications driven by digital AI and analytics.. It used to take 15 to 20 years to get a product to market, but with the current pressures, we can’t accept that timeline anymore. Everything is accelerating as we strive to deliver innovation and life saving medication to the healthcare system.
IQ: One of the main drivers in healthcare reform is a push to control spending— yet the market is also moving toward personalized medicine and treatments, which seem expensive. From a biopharma perspective, are these two goals at odds? What does the right balance look like?
Ms. Owen Adams: That’s a great question, and in many ways, they do seem at odds. Personalized medicine typically involves biologic products that are more expensive to develop and manufacture. So, yes, the cost per treatment is higher. However, the benefit is that we can now better identify the patients who will actually benefit from these treatments.
In the past, we might have treated 100 patients with a drug that worked for only 60%, based on clinical trial results.
With personalized medicine, we can focus on the patients who are most likely to respond, which reduces waste. So, while individual treatments may cost more, the overall expense to the healthcare system could actually decrease because we’re not spending money on ineffective treatments for the wrong patients.
At the same time, there are still broad treatments, like GLP-1 drugs for obesity, which aren’t personalized but have a widereaching societal impact. We’re balancing two approaches: one focused on new, broad treatments for widespread conditions and the other on highly targeted, personalized care.
IQ: When it comes to adapting strategies around healthcare reform, can you explain how budget reduction and spending control are impacting the industry?
Ms. Owen Adams: It’s difficult to pinpoint exactly where all the effects are because reforms like the Inflation Reduction Act (IRA) are having a huge impact across the entire U.S. healthcare system. As part of my previous involvement with BIO, representing a mix of small and large biotech companies lobbying in D.C., we’re trying to help legislators understand that pricing pressures
The Human Touch
can lead to profound unintended changes in R&D decisions, that adversely affect patients. R&D already takes years to bring a product through clinical trials and to market. With the government now setting prices for small molecules after nine years and large molecules after 13 years, companies are reevaluating which drugs to develop and prioritize. For example, suppose you have a lot of small molecules in early development. In that case, you might drop some of them because, especially in chronic diseases where uptake is generally slower, the window to get a return on investment is too short.
This is concerning in areas with high unmet medical needs. Small molecules, for instance, can cross the blood-brain barrier, which large molecules can’t. This makes small molecules crucial for potentially treating conditions like Alzheimer’s, Parkinson’s, and depression. Unfortunately, these new IRA driven time and pricing pressures are leading companies to rethink their development plans for these kinds of drugs, which is not the intended outcome of the policy. This could have profound impact on patients and future innovations.
It’s a tough situation, and big decisions are being made about how much time, effort, and money to invest in different programs.
We’re also working to speed up development using AI and big data to make processes more efficient. However, overall, the pricing pressures and the shortened window to recoup investments are driving these changes in innovation strategy.
IQ: Is there a game-changer on the horizon that could transform the industry in the next five years?
Ms. Owen Adams: Absolutely. From a medical perspective, GLP-1s have been a great example of large population innovation, and similarly there’s lot of hope for Alzheimer’s treatments in the coming years. Several companies have promising Alzheimer’s drugs that could make a real difference for millions of patients.
In cardiovascular disease, there’s exciting progress, especially around a molecule called lipoprotein (a) which is linked to early cardiovascular deaths; here there are two or three treatments in development that could significantly reduce those risks.
Neurology and CNS are particularly exciting, beyond Alzheimers with Parkinson’s disease, schizophrenia and depression being major focuses for new mechanisms of action. It’s gratifying to see major innovations in
“It used to take 15 to 20 years to get a product to market, but with the current pressures, we can’t accept that timeline anymore. Everything is accelerating as we strive to deliver innovation and life saving medication to the healthcare system.”
Catherine Owen Adams CEO, Acadia Pharmaceuticals
“With personalized medicine, we can focus on the patients who are most likely to respond, which reduces waste. The overall expense to the healthcare system could decrease because we’re not spending money on ineffective treatments for the wrong patients.”
more rare disease and precision therapeutics, including gene therapy, biomarker driven oncology treatments and CAR-T therapies. So, I feel very hopeful about future advancements coming, especially in areas with high unmet medical needs.
On the business side, the industry is evolving too. Companies are becoming more nimble and agile in how they develop products and go to market. Instead of large field teams, we’re seeing smaller, more targeted roles, with specialized roles providing personalized information to healthcare providers. This shift is making businesses leaner, more efficient, and likely more effective. So, while the pressures are real, they’re also driving positive change.
Another exciting area is the globalization of data. Being able to work with large healthcare systems to analyze their data, not just for the industry but for population health management, is incredibly powerful. Some countries, like those in the Nordics, are already using comprehensive medical records to track population health trends and develop solutions. While there are privacy concerns, this approach offers huge potential. The U.S. is a bit behind due to its fragmented healthcare system and inconsistent use of electronic medical records, but once that gap closes, the possibilities are exciting.
IQ: From a leadership perspective, what will be required of biotech executives over the next five years? How will they need to evolve their skills to meet upcoming challenges?
Ms. Owen Adams: You have to love and embrace change—there’s no way around it. There’s been a big shift in mindset. Instead of resisting change, leaders now realize they need to move with it and evolve. The most successful leaders will be those ahead of the curve and able to adapt quickly. Leaders who are agile, intellectually curious, and not afraid to fail will thrive. I’d put that in the “fast-fail” category—try new things, and if they don’t work, learn quickly and move on. Positive failure is essential because the way we do business is evolving.
Resilience is also critical, especially in biotech. It can take years to bring a drug to market, so leaders need to stay committed, ensure proper funding, and be prepared for setbacks along the way. When things don’t go as planned, quick decision-making is key. So, overall, embracing change, seeing failure as a learning opportunity, staying resilient, and maintaining a positive outlook is crucial.
Most importantly, leaders need to inspire a positive vision of the future. While some of the challenges we face may seem daunting, there’s always a different way to approach them. Leaders who can turn headwinds into tailwinds and create a positive narrative around the changes we’re driving in healthcare will be successful. The old “command and control” style isn’t effective anymore. Now, more than ever, it’s about being a servant leader—staying positive, being in the trenches with your team during tough times, and leading from the front when needed. IQ
DISRUPTIVE FORCES & SUCCESS FACTORS | BIOPHARMA
EXECUTIVE PERSPECTIVE: BIOPHARMA
With over 25 years of pharmaceutical industry experience, James Mackay, PhD, is the founder and CEO of Kateran Consulting and is an independent board Member at ImmunoBrain, Privo Technologies, Curadh MTR, MatriSys Bioscience, CorHepta Pharmaceuticas and Venquis Therapeutics. Mr. Mackay’s expertise in the pharmaceutical industry including six drug product approvals across multiple therapeutic areas. Prior to Kateran Consulting, Dr. Mackay served as founder, president and CEO of Aristea Therapeutics. Additionallly, he served as president and CEO of Ardea Biosciences, Inc., following the company’s acquisition by AstraZeneca in 2012. Dr. Mackay was instrumental to setting up an innovative model for Ardea Biosciences that retained the biotech’s independence and accountability for the development of the gout franchise while also developing a synergistic and collaborative relationship with the parent company, AstraZeneca.
IQ: From your vantagepoint, what are the top challenges that you forsee biopharma companies having to contend with over the next five years?
Dr. Mackay: There are definitely some big shifts coming for the industry. First, I think artificial intelligence will have a major impact, and to be honest, I don’t think most of us are fully prepared to handle or even understand the changes it will bring. I’m happy to dive into that more because I have some thoughts on what we might need to focus on.
Secondly, the digitalization of clinical trials and drug delivery is another huge shift. I don’t believe we’re fully equipped yet to grasp the full impact of this either, and that could present challenges in terms of our ability to adapt and thrive over the next few years. Third, having the right talent and leadership is going to be crucial. This has always been important, but with the rapid changes ahead—some of which we can’t even foresee right now—it becomes even more vital. Ensuring we have the right people in place to navigate those changes is key.
PHOTO COURTESY OF DR. JAMES MACKAY
Finally, I’d highlight the geopolitical environment. While we can’t control it, we need to be aware of how it affects investor confidence. Over the past few years, we’ve seen how global events can make investors hesitant to fund biotech. We can’t force them to invest, but we can adapt, cut costs where needed, and act quickly to ensure our companies survive during those tough periods of reduced investment.
IQ: You mentioned investor confidence being an ongoing issue. What concerns do investors have?
Dr. Mackay: Well, I think we’re in a cycle that we’ve seen before. Investors got a bit too eager and poured money into companies, including some that probably weren’t ready to go public. That created a bubble, and when it burst, people lost money. On top of that, we’ve had high inflation and interest rates, which make investors more cautious. They know they can get a decent return in other ways, so they’re less willing to take risks in biotech.
That said, I believe the fundamentals in healthcare are still strong. Innovation in developing new drugs remains impressive, and with an aging population, the demand for treatments will only grow. Despite the economic challenges and pricing pressures, I think we’ll see investors returning to this space—it’s just going to take some time. Interest rate cuts will help, and we have just seen the second of likely multiple cuts of the next few months.
Once investors start coming back, they’ll see the returns and be encouraged to invest more. But when it comes to geopolitical issues, that’s something we can’t control. We just have to be ready to adapt quickly when those challenges arise.
IQ: On the topic of AI, is it seen more as a tool to unlock innovation, or is it about driving efficiency and cutting costs? Or is it a mix of both?
Dr. Mackay: In the discovery space, AI is already being used to rapidly identify and screen molecules, which makes sense, and some companies are doing this really well.
“Over the past few years, we’ve seen how global events can make investors hesitant to fund biotech. We can’t force them to invest, but we can adapt, cut costs where needed, and act quickly to ensure our companies survive during those tough periods of reduced investment.”
Dr. James Mackay CEO, Kateran Consulting
For example, I chair the Therapeutic Advisory Board for Enveda Bio, which uses AI to identify drugs from natural plant products. I’ve been impressed by how quickly they’re moving through the discovery phase—faster than I’ve ever seen before. However, where we haven’t fully grasped AI’s potential yet is in drug development. I believe AI will completely transform how we conduct clinical trials, though I’m not entirely sure what that will look like. I expect AI to disrupt the entire trial process, with contract research organizations (CROs) likely leading this shift. AI will make trials faster and more efficient, and we’ll probably see more digital tools, such as wearables and ingestible sensors, collecting real-time data from inside the patient—something that seemed like science fiction when I was a kid. AI and nanotechnology are on the verge of major breakthroughs, and they’re poised to create much more efficient ways to run clinical trials. The challenge for biotech leaders will be figuring out how to prepare for these changes and move beyond the traditional trial methods we’ve used for decades.
IQ: You serve on the boards of several biopharma and lifescience organizations. Can you share how companies within this space are adapting their corporate strategies to manage and mitigate risks and threats over the next five years?
Dr. Mackay: There’s a wide range of strategies in play. Interestingly, this is a topic I frequently discuss with peers throughout the industry. Some leaders are entirely focused on immediate challenges, such as securing funding to keep their companies afloat, and aren’t addressing these larger issues at all. On the other end, there are companies that are more forward-thinking and already planning for the future.The reality is that every company will eventually need to confront these concerns.
Mind Over Matter
The integration of AI in neuroscience research is expected to accelerate drug discovery processes, potentially reducing R&D costs by up to 15%. This expansion will be essential for Alzheimer’s research, for instance, which is projected to reach $13.57 billion (USD) by 2030, driven by advancements in disease-modifying therapies.
It won’t happen automatically as they grow; it will require boards and CEOs to invest significant time and effort into identifying both risks and opportunities. Those companies that take a proactive approach will be the ones that thrive, while those that wait too long may struggle to survive.
IQ: From a leadership perspective, what qualities will be required of board directors and corporate governors to support their organizations as they navigate the challenges ahead?
Dr. Mackay: The ability to embrace and adapt to change will be essential for board members. They need to work closely with their CEO to ensure their companies keep pace with evolving trends and innovations. It’s about understanding the shifts happening in the industry and moving with them. Boards that don’t actively engage with these changes will likely struggle to keep their organizations viable in the coming years. Another important factor is that board members will need to grasp concepts that may be unfamiliar today—like artificial intelligence. I’ll admit, I don’t believe many people fully understand the potential impacts and results of AI-integrated platforms yet, but I know we need to. While most of us have a general understanding, it’s critical to dig deeper into its potential and risks. This requires ongoing effort and a willingness to welcome a new generation of leaders who can help guide us through these technological advancements. At the same time, we can share our experience with them, creating a two-way learning process that ensures AI is used both effectively and responsibly. IQ
Bio Breakthroughs
Dr. Mackay forsees major breakthroughs as a result of AI and nanotechnology in clinical trials. The challenge for biotech leaders, he says, will be figuring out how to prepare for these changes and move beyond the traditional trial methods they have used for decades.
Executives in the consumer packaged goods industry face a complex landscape marked by increased competition, evolving consumer behaviors, and the need for sustainability. Although inflation is expected to stabilize, ongoing shifts in consumer expectations and market dynamics demand innovative strategies to preserve profitability and enhance resilience.
As interest rates begin to decrease, a potential rise in consumer confidence could fuel spending, providing new growth opportunities for brands that are prepared to meet the demand.
Based on research and insights from global executives across the consumer packaged goods industry, the top five disruptive forces are:
Economic Uncertainty Abounds
Although presently decreasing, persistent inflation drives up costs for raw materials, transportation, and overall operations, leading to higher prices for consumers. This reduces consumer spending power, particularly for non-essential goods, and can negatively impact sales and profitability.
To address these challenges, CPG companies are implementing cost management and efficiency improvements, with many companies streamlining operations, optimizing supply chains, and adopting lean manufacturing principles to reduce waste. Some companies are also cutting non-essential expenses by renegotiating supplier contracts and reducing marketing budgets to achieve economies of scale.
Pricing strategies have become critical in managing inflation. Dynamic pricing, using data analytics to adjust prices in real-time,
helps maintain profit margins while staying competitive. Additionally, companies are adopting value-based pricing, emphasizing the quality and benefits of their products to justify higher costs to consumers.
Diversification and innovation play a crucial role in mitigating the effects of inflation, as well. Companies are expanding their product lines to include both premium and budget-friendly options, catering to different consumer segments. Investing in R&D for new products, sustainable materials, and packaging innovations helps drive growth and create new revenue streams.
Supply Chain Vulnerabilities
Ongoing geopolitical tensions, natural disasters, and logistical issues will continue to cause delays, increased shipping costs, and shortages of essential materials, all of which can severely disrupt production schedules and lead to stockouts.
To combat these challenges, CPG and FMCG companies are actively diversifying their supply chain sources and building relationships with multiple suppliers across different regions to reduce dependency on any single supplier. Nearshoring and onshoring will remain popular as they reduce transportation times and costs while minimizing exposure to global disruptions. Enhanced inventory management is another important approach. Companies are maintaining higher levels of safety stock and strategically stockpiling essential materials to buffer against disruptions. Investment in technology is also essential, with realtime monitoring and predictive analytics helping companies identify and respond to issues more quickly. As hinted at above, strengthening supplier relationships is also
vital for long-term resilience. Collaborative partnerships with key suppliers and regular supplier audits help ensure that suppliers are prepared for disruptions. Flexible logistics, including multi-modal transport and partnerships with third-party logistics providers, enable companies to adapt quickly when one transportation mode is impacted.
Lastly, financial strategies like hedging and maintaining flexible financing options help companies manage liquidity and protect against losses during disruptions. Companies are focusing on contingency planning by conducting scenario planning and developing business continuity plans.
Sustainability and Regulatory Challenges
Growing environmental awareness and stricter regulations are pushing CPG and FMCG companies to adopt more sustainable practices, including reducing carbon emissions, minimizing waste, and ensuring ethical sourcing. However, complying with these regulations often requires significant investment in new technologies and processes, which can strain resources and affect profitability.
To manage these challenges, companies are implementing sustainable practices that reduce overall environmental impact. This includes cutting carbon footprints
Less Waste, More Taste
The global food and grocery retail market is projected to reach $14.78 trillion by 2030, expanding at a compound annual growth rate of 3.2% from 2024 to 2030. Furthermore, according to the World Economic Forum, the grocery sector is targeting a 50% reduction in food waste by 2030, aligning with global sustainability objectives.
Supply Chain Science
By 2030, 70% of CPG companies plan to implement advanced supply chain analytics to improve resilience and responsiveness to market changes, says ABI Research. Furthermore, by 2030, 60% of manufacturing roles in the CPG industry will require advanced digital skills, reflecting the sector’s shift towards technology-driven operations.
through renewable energy and energy efficiency, ensuring sustainable sourcing of raw materials, and implementing waste reduction initiatives like zero-waste and recyclable packaging.
Compliance with environmental regulations is another critical focus, with companies setting up systems to monitor their environmental impact and meet regulatory requirements. Regular reporting on sustainability metrics and obtaining certifications like ISO 14001 help demonstrate compliance to stakeholders. Though, sheer regulatory compliance ensures a license to operate and does not provide any competitive advantage on the sustainability scale. More and more players seeking differentiation are setting themselves up with ambitious targets on more proactive scales, such as the Science Based Targets Initiative (SBTI) or the 17 Sustainable Development Goals of the United Nations Development Program (UNDP).
Innovation and technology are playing a key role in developing eco-friendly products, such as those made from biodegradable
materials or designed for a circular economy. Companies are exploring product take-back schemes and designing goods for easier recycling and disassembly.
Stakeholder engagement and collaboration are also essential, with companies working closely with suppliers, consumers, and regulatory bodies to align on sustainability goals. Corporate governance is being enhanced, with dedicated sustainability teams overseeing the integration of sustainable practices into company strategy.
4
Tech Disruption and Digital Transformation
Rapid developments in areas like AI and machine learning require companies to continually adapt and invest in new technologies. While these advancements can enhance operational efficiency and customer experience, they also demand significant resources, infrastructure, and specialized skills.
To address these challenges, companies are investing heavily in digital
infrastructure, such as cloud computing for improved scalability and IoT technologies to streamline operations and enhance supply chain visibility. However, the increasing reliance on digital platforms makes cybersecurity a top priority. Organizations are deploying advanced security protocols, conducting regular employee training, and creating incident response plans to mitigate cyber threats.
Data analytics will continue to be essential for companies to gain deeper insights into consumer behavior and optimize inventory management. Predictive analytics, powered by AI, helps companies forecast demand and enhance decisionmaking processes. Additionally, AI enables personalized customer experiences through tailored product recommendations and targeted marketing.
5Ever-Evolving Consumer Behaviors
Shifts in preferences, driven by demographic changes, digital engagement, and evolving lifestyle trends, demand that companies remain agile and innovative. To address these shifts, companies are further diversifying product offerings to include healthier, organic, and eco-friendly options, as well as offering customizable products to meet individual preferences. By engaging customers through social media and loyalty programs, companies are building stronger relationships and staying attuned to trends.
Data-driven decision-making is another key strategy. Advanced analytics and market research are essential for gaining insights into consumer behavior and predicting future trends. This helps companies tailor their offerings and marketing strategies to meet changing demands.
Flexibility in production and supply chains is also essential for responding quickly to changes in demand. By adopting agile manufacturing processes and sourcing materials locally, companies can reduce lead times and improve supply chain resilience. Additionally, companies across the CPG sector are focusing on health and wellness by expanding product lines with low-sugar, low-fat, and nutrient-rich options for those in food service. Clear labeling and transparency help consumers make informed choices.
Critical Success Factors
In a 1984 Sloan Management Review article titled, “An Assessment of Critical Success Factors,” A.C. Boynlon and R.W. Zmud wrote:
“Critical success factors [CSFs] are those few things that must go well to ensure success for a manager or an organization, and therefore, they represent those managerial or enterprise areas that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization’s current operating activities and to its future success.”
For CPG executives and enterprises to survive—and thrive—over the next five years, capitalizing on the following critical success factors will be key:
Embrace Advanced AI
As digital transformation reaches new heights, companies need to go beyond basic e-commerce capabilities to truly revolutionize customer engagement, streamline supply chains, and enhance operational efficiency.
AI is reshaping how consumers browse, research, and buy products. Through predictive analytics and AI-powered recommendation engines, companies can offer highly personalized shopping experiences that anticipate consumer needs and suggest relevant products. This creates a tailored experience that captures attention and increases conversions, moving beyond traditional browsing to a more intuitive, data-driven model of engagement.
Customer service is also undergoing a transformation with AI. Tools like chatbots and virtual assistants are handling routine inquiries, providing instant, 24/7 support, and freeing up human agents to focus on complex issues. Advanced AI can even predict potential service needs based on purchasing patterns, making customer interactions proactive rather than reactive, which boosts satisfaction and strengthens brand loyalty.
AI’s impact extends deep into the supply chain. Predictive analytics enable companies to forecast demand with greater accuracy, optimize inventory levels, and prevent stockouts or overstock situations.
Furthermore, AI-driven automation in logistics and procurement can streamline
The demand for personalized products is expected to drive a 20% increase in flexible manufacturing systems by 2030, allowing for customized production at scale, says ABI Research.
operations, reduce costs, and enhance responsiveness, allowing companies to adapt swiftly to changing market conditions.
Prioritize Sustainability
Flexibility in production and supply chains is also essential for responding quickly to changes in demand. By adopting agile manufacturing processes and sourcing materials locally, companies can reduce lead times and improve supply chain resilience.
With growing consumer demand for ecofriendly products, companies are focusing on developing sustainable goods with attributes like biodegradable packaging and responsibly sourced ingredients.
In addition to product innovation, many companies are adopting circular economy practices, such as product take-back programs and recycling initiatives. These efforts help reduce waste and promote a more sustainable production cycle, appealing to consumers who prioritize environmental responsibility. Climate action is another key focus, with companies investing in renewable energy and reducing their carbon and water footprints. Meeting regulatory requirements while appealing to environmentally conscious customers is critical in maintaining competitiveness. To succeed, companies are prioritizing sustainable product design and exploring new materials that have less environmental impact, implementing new approaches such as low-carbon-by-design R&D. Equally important is effectively communicating sustainability efforts to build brand loyalty and distinguish themselves from competitors.
Necessary for the long-term continuity of their business, these investments do not necessarily lead to short-term returns when they are confronted with large portion of their consumers who “care for the environment but do not act” in their purchase behaviors.
Don’t Ignore Emerging Markets
With expanding middle-class populations and rising consumer spending in these regions, companies are focusing on entering new markets to capture this growth.
Businesses are adapting their products and marketing strategies to align with local preferences, tastes, and cultural norms. This customization ensures that brands resonate with local consumers and meet their specific needs.
Forming strategic partnerships and joint ventures with local businesses is another critical factor. These collaborations help CPG companies navigate the regulatory and logistical challenges unique to emerging markets. A strategic focus on market research is essential for identifying high-growth regions and understanding local consumer trends. Additionally, building local supply chains and distribution networks supports long-term market entry and growth. By seizing these opportunities, CPG companies can tap into untapped markets, drive revenue growth, and secure a competitive edge in rapidly developing regions.
Innovating Innovation
Many CPG and FMCG companies are focusing on innovating and integrating smart technologies into their products, such as IoTenabled devices and connected appliances, to meet the growing demand for convenience and enhanced functionality.
As consumer expectations for convenience and personalized experiences rise, companies are increasingly integrating smart technologies like IoT-enabled devices and connected appliances into their product offerings. For instance, the global IoT in retail market is projected to reach $94 billion by 2025, according to Statista research, growing at a compound annual growth rate of 21.5%. This growth reflects the demand for devices that enhance consumer convenience and enable data-driven insights into usage patterns. In addition, companies are investing in technology R&D and incubation zones, where cross-functional teams work on a portfolio of experiments that address the
three-to-five year horizon. An environment of open innovation and the ability to partner with startups and other potential partners is a key component to this. For example, Unilever has partnered with multiple tech startups through its Foundry program, accelerating digital innovation across its product lines. Open innovation and partnerships with startups also play a critical role in driving this progress. By collaborating with external innovators, CPG companies can access a broader range of expertise and solutions, from eco-friendly packaging to AI-driven consumer insights. According to recent industry research, nearly 80% of consumer goods companies report that partnerships and collaborations are a primary way they are driving innovation.
Leverage Data-Driven Insights for Enhanced Personalization
By leveraging big data and analytics, companies can gain valuable insights into consumer behavior, preferences, and trends, allowing them to make more informed decisions in real-time. Personalization is becoming increasingly important, with companies implementing personalized marketing strategies tailored to individual consumers. This approach helps drive engagement, improve customer experiences, and boost conversion rates by offering products and services that meet specific needs.
Take Five
Research suggests that by 2030, 80% of consumers are likely to expect personalized products and services, prompting FMCG companies to leverage data analytics for customization.
In the fast-evolving CPG industry, the future belongs to companies that can adapt to economic pressures, supply chain disruptions, and rapidly changing consumer demands. Success will depend on embracing digital transformation, streamlining operations, and fostering sustainable practices. By leveraging cuttingedge technologies like AI and data analytics, CPG companies can personalize consumer experiences and optimize production efficiency. Additionally, diversifying supply chains and strengthening relationships with suppliers will enhance resilience against ongoing global disruptions. However, it’s not just about technology—responding to consumer preferences for eco-friendly products and healthier lifestyles will also be critical. Companies that can seamlessly integrate sustainability with innovation will stand out in a crowded market. The race is on for companies to stay agile, manage costs, and anticipate market shifts to thrive over the next five years.
Companies must invest in data analytics tools and technologies to better capture, analyze, and interpret consumer data. This enables the development of more targeted marketing campaigns and product offerings that align with consumer desires and behavior.
Those that capitalize on emerging markets, build omnichannel customer experiences, and prioritize sustainability will emerge as industry leaders, while those that fail to innovate risk being left behind. The future of CPG is being shaped right now, and the most adaptable companies will seize the opportunity. IQ
Meeting regulatory requirements while appealing to environmentally conscious customers is critical in maintaining competitiveness. To succeed, companies are implementing new approaches such as lowcarbon-by-design R&D, prioritizing sustainable products and exploring new materials that have less environmental impact.
Frank Iannella is SVP, Digital and Technology and Chief Information Officer at HEINEKEN USA—the American subsidiary of Heineken N.V. In his role, Mr. Iannella is responsible for driving the digital and technology agenda while demonstrating the importance that digital innovation has for Heineken’s brands, distributors, and employees. Before joining HEINEKEN USA, Mr. Iannella led the IT vision and strategy at FreshPet to support aggressive growth targets along with increased supply chain capacity. Prior to that, he spent 22 years at PepsiCo, where he led IT teams across various business functions including sales & marketing, go-to-market, innovation, supply chain, and enterprise data at both local and global levels. His extensive experience at PepsiCo allowed him to develop a deep understanding of how technology can drive business success and operational efficiency, making significant contributions to the company’s digital transformation initiatives.
FRANK IANNELLA
SVP & CIO, Digital and Technology HEINEKEN USA
IQ: What are the top challenges you’re focusing on over the next five years?
Mr. Iannella: First, the pace of digital change is a huge challenge. Every process is moving into the digital realm, and if companies don’t adapt, they’ll fall behind competitors who are leveraging new technologies. This also includes the data space—being able to compete with digital-native companies is crucial.
Data regulation is also becoming more stringent, which poses a challenge.
Consumer data collection may become more difficult, especially with growing regulations in Europe and parts of the U.S. As we move toward a cookie-less world, finding new ways to connect with consumers and personalize messaging will be more challenging. And I would be remiss not to mention how critical supply chain resilience is. Over the last few years, we’ve faced significant disruptions, such as port issues and geopolitical risks. Companies need to build stronger, more resilient supply chains to handle future challenges.
PHOTO COURTESY OF FRANK IANNELLA
IQ: You mentioned pressure-testing your supply chain, but what other strategies is HEINEKEN USA focused on to anticipate and mitigate future risks?
Mr. Iannella: As an importer one key area for us is indeed our supply chain. The distance we cover—and the need to get products to demand points and on the shelf across the country—can present challenges. We’re building a more resilient supply chain, allowing us to forecast our response to issues like supply chain disruptions, port strikes or container delays in advance, rather than just reacting when they happen. We’re also building better data capabilities to improve our forecasting and to gain more visibility across our supply chain.
Another focus is becoming a more data-driven organization. We’re working to leverage data in every aspect of the business—from identifying opportunities to engaging with our customers and consumers. While data can be hard to gather, and it’s not always clear what the insights are, our goal is to translate that data into actionable insights. This is a big part of how we’re shaping our future strategies.
IQ: Based on your experience, is there a unique challenge working for a company with such a long history like Heineken, especially when it comes to shifting the focus toward data and making the case for investing in these capabilities?
Mr. Iannella: Heineken N.V. is proud of its history and what it has built over more than 150 years. As a family-owned business, the company thinks in generations with the goal of delivering long-term, sustainable value. So it is safe to say we are in this for the long haul. To address modern market challenges, it is essential to be forward-thinking and that of course includes focusing on digital capabilities. The value that the brand places on this is reflected in the positioning of our global CIO—who directly reports to the CEO—who is a member of the executive leadership team and is a leading advocate for data, technology, and digital innovation.
IQ: When you think about opportunities fueled by data and technology, where do you see the greatest potential for growth? Is there something that could truly disrupt the industry beyond AI?
Mr. Iannella: I think a key opportunity lies in personalization and engagement. In a world where capturing consumer attention and their spending is increasingly difficult, the more you can tailor your messaging to individuals, the more competitive you will be. Digital natives are consuming information and making purchases online, so if you can reach them with personalized, meaningful content, you’ll win their loyalty. Additionally, immersive technologies like augmented reality (AR) and virtual reality (VR) are starting to change how consumers experience brands, blending both the digital and physical worlds in new and innovative ways.
I also see supply chain optimization through data as another massive area of opportunity. Data can enable real-time insights, not only to streamline operations and reduce costs but also to make our
Gold
According to the Global Alcoholic Beverages Market Report and Forecast 2024-2032, published by Expert Market Research, beer is expected to maintain a significant share of the alcoholic beverages market, accounting for approximately 41.9% of total alcohol sales in the U.S. As a whole, the global spirits segment is anticipated to grow at a CAGR of 9.7% from 2025 to 2030, according to data from Grand View Research.
supply chain more resilient, sustainable, and responsive to global disruptions—like we’ve seen over the past few years. The use of IoT devices to track shipments or AI to forecast demand more accurately is revolutionizing how we operate.
IQ : What will executives need to lead their companies through challenges and ensure success over the next five years?
Mr. Iannella: Leaders need to be resilient to change and able to guide their organizations through it. You can have the best strategy or product, but if you don’t bring the organization along with you, it won’t work. Change is constant, and every year presents new challenges that leaders must help their teams absorb and adapt to.
An innovation mindset is also essential. Especially in IT, leaders must think a few steps ahead and be ready to test new ideas, whether it’s AI, data, or marketing automation. This future-focused thinking is key to staying competitive and helping business partners navigate what’s next.
Digital and data literacy is another critical area. It’s not enough to talk about using AI; you need the right data infrastructure and skilled people to manage it. Without a solid foundation, advanced
analytics like predictive insights won’t work. Raising the baseline of digital and data proficiency within the organization is essential for future success.
Lastly, leaders need empathy. Change is happening fast, and it’s important to acknowledge the challenges it creates. People will fail, but what matters is learning from those failures and moving forward. Leaders who foster this mindset create a healthier environment for navigating rapid change.
IQ: One question we always like to ask— what keeps you up at night and what keeps you passionate about your work?
Mr. Iannella: What keeps me up at night is the need to stay relevant. With the rapid developments in AI and how it’s affecting every business process, function, and competition, I feel the weight of making sure we, as a company, stay on track. It’s not just about my role personally, but about ensuring that HEINEKEN USA remains competitive and that my voice has the necessary influence to make an impact. Staying relevant in this everchanging environment requires constant learning, understanding, and synthesizing
Liquid
new information. I don’t want to become a leader who gets stuck in old ways and is no longer adding value.
On the other hand, what excites me is the incredible time we’re living in. The level of innovation and progress is extraordinary, and digital capabilities are now driving real impact across industries. It’s no longer just about managing costs through ERPs; it’s about creating digital products and solutions that truly matter.
That’s what drives me—the opportunity to make a real difference and knowing there’s so much potential for growth and innovation in what we do.
IQ : Is there anything else you would recommend to peers in the fast-moving consumer goods and beverage industry, or to executives in general, about what it will take to keep businesses successful and thriving over the next five years?
Mr. Iannella: First, organizations need to know how to operate their business and how to transform it simultaneously. This is tough because you have people who are great at day-to-day operations and others focused on transformation, which often requires a different mindset and approach. These
two areas can sometimes conflict, so it’s important to consciously think about how to balance both. Successful transformation requires organizing around change while keeping the business running smoothly.
Second, specifically for IT leaders, we now have a seat at the table, and it’s crucial to bring strong business acumen to that role. It’s not enough to just focus on technology— you need to think more broadly about business challenges, processes, people, and the competitive landscape. Once you’re at the table, you must act as a business leader, not just a tech expert.
Lastly, the pace of change is relentless, and having the right leaders and change agents is essential to navigating that. Surround yourself with a diverse group of people who can help you manage change— some who embrace it and some who are more cautious. A balanced approach will help you lead through constant shifts while ensuring stability and innovation. IQ
We’re working to leverage data in every aspect of the business from identifying opportunities to engaging with our customers and consumers. Our goal is to translate that data into actionable insights. This is a big part of how we’re shaping our future strategies.
Frank Iannella SVP & CIO, Digital & Technology HEINEKEN USA
The global medtech industry is standing on the edge of significant transformation, driven by powerful disruptive forces and new critical success factors that will define the next five years. With annual healthcare spending in the U.S. alone projected to hit $6.8 trillion by 2030, medtech companies have a unique opportunity to seize a share of the $300 billion to $400 billion expected to be spent on medical devices. However, navigating this fast-evolving landscape requires more than incremental innovations; it demands a complete rethinking of strategies and capabilities.
Several key disruptors will reshape the industry: the AI-powered digital health revolution, where smarter, connected devices will drive personalized care; the shift to consumer-centric healthcare, placing patients at the center of care delivery through remote monitoring and digital therapeutics; the expanding regulatory frontier, requiring companies to balance cutting-edge innovation with complex compliance; converging sectors and partnerships, where medtech must collaborate with tech giants to create integrated health ecosystems; and the ongoing challenges of supply chain disruptions and inflation, which demand new strategies for resilience and cost management.
To thrive in this environment, companies must strengthen core capabilities, expand offerings, explore new markets, integrate hardware and software, and reinvent their commercial models. However, the biggest question for senior leaders: Are you up for the challenge?
Based on industry research and insights from global executives across the medtech industry, the top five disruptive forces are:
An AI-Powered Digital Health Revolution
AI integrations are fundamentally reshaping the medtech and medical device industries, driving innovations that are changing how care is delivered and managed. AI-enabled devices are transforming diagnostics, treatment personalization, and patient monitoring by leveraging real-time data analytics. In 2023 alone, AI-driven technologies hit record numbers of FDA approvals, showcasing the rapid acceleration of this trend.
AI algorithms are enhancing the accuracy of imaging, predicting patient outcomes, and providing personalized therapeutic recommendations, which enables more precise interventions and better patient outcomes.
Beyond diagnostics, AI’s ability to integrate vast amounts of patient data from wearable devices, electronic health records, and other sources is empowering providers to offer more targeted care. This datadriven approach not only helps in managing chronic diseases but also pushes preventive healthcare by identifying risks before they escalate. However, as this transformation unfolds, medtech companies face significant challenges. Navigating the evolving regulatory landscape is crucial, especially as many AI applications fall outside traditional approval frameworks.
Data privacy and security concerns also loom large, as companies must safeguard sensitive patient information while adopting AI-driven solutions.
Consumers are in the Driver’s Seat
The shift to consumer-centric healthcare is rapidly emerging as one of the most significant disruptors in the medtech and medical device industries over the next
“By 2030, AI is projected to be integrated iwnto 90% of medical devices, enhancing diagnostics and patient care.”
Gartner
Top 10 Strategic Technology Trends for 2025
five years. Patients increasingly demand “anywhere, everywhere” care, moving healthcare delivery away from hospitals and into homes, ambulatory care settings, and virtual platforms.
This trend is forcing medtech companies to rethink their business models and focus on developing connected products and services that continuously engage patients throughout their healthcare journey.
At the heart of this disruption is the rise of digital therapeutics and remote monitoring technologies. Devices that track vital signs, manage chronic conditions, or provide personalized feedback in real-time are now essential tools, enabling patients to take control of their health from anywhere. For medtech companies, success will hinge on creating seamless, intuitive experiences that integrate into patients’ daily lives.
This consumer-driven shift also forces medtech firms to adopt new business models that prioritize long-term patient engagement over episodic care. The focus will move from selling individual devices to delivering ongoing services and support, often enabled by digital ecosystems and partnerships with consumer tech companies.
Companies that fail to embrace this shift risk losing relevance in an increasingly patient-empowered landscape, as healthcare moves beyond traditional settings into the hands of the consumers themselves.
The Regulatory Frontier is Expanding
Emerging regulatory pathways are becoming one of the most critical disruptors in the medtech and medical device industries. As AI-powered technologies and digital health solutions rapidly evolve, regulatory bodies are scrambling to keep pace with the innovations. Technologies such as machine
Ulta-Modern Medtech
According to Gartner, by 2030, roboticassisted surgeries are expected to constitute 20% of all surgical procedures globally. Additionally, investments in digital health technologies are projected to reach $100 billion annually that same year.
learning, AI-driven diagnostics, and wearable devices blur the lines between traditional medical devices and new digital health ecosystems. As a result, medtech companies face a growing challenge: how to balance cutting-edge innovation with evolving regulatory requirements. Historically, regulatory approval processes were built around hardwarebased medical devices, but with the rise of AI and data-driven technologies, those frameworks are increasingly outdated. The challenge is exacerbated by the fact that AI technologies continuously learn and evolve, which conflicts with static approval systems designed for non-dynamic devices. Companies must now navigate new pathways to ensure compliance while ensuring their AI algorithms and digital health products remain flexible and effective. Regulatory bodies are working to address these gaps, but the evolving nature of regulations means medtech companies will need to be agile, investing heavily in compliance teams that can stay ahead of shifting rules. In parallel, they must continue innovating to meet patient and provider
demands. Companies that fail to navigate these emerging pathways risk falling behind competitors in a highly disruptive landscape, where compliance and innovation must coexist.
Converging Sectors and Partnerships
Converging sectors and partnerships are reshaping the medtech industry, and this trend will become one of the greatest disruptors over the next five years. As the lines between medtech, healthcare, and consumer technology blur, medtech companies must adapt by forging strategic partnerships to remain competitive. Collaborations with consumer tech firms, digital health companies, and data analytics providers are essential for delivering integrated, patientcentric care solutions.
This convergence demands that medtech companies move beyond traditional device manufacturing and incorporate software, data analytics, and connectivity into their products. The result is a shift from standalone devices to connected health ecosystems that offer realtime patient monitoring, personalized care, and improved outcomes.
Efforts to harmonize global medtech regulations are expected to reduce approval times by 50% by 2030, says Markets Insider.
Partnerships with tech giants are crucial for accessing the expertise in AI, machine learning, and user-friendly software that MedTech companies may lack. These collaborations enable firms to innovate faster, deliver more comprehensive solutions, and meet the rising demand for consumercentric healthcare.
However, these partnerships come with challenges. Medtech companies must navigate data security, regulatory compliance, and protect their intellectual property while sharing resources with tech partners. Companies that master these collaborations will thrive, while those that fail to adapt risk being left behind as new entrants capture market share by delivering holistic, tech-enabled healthcare solutions.
5
Turbulent Supply Chains and Inflation
Supply chain disruptions and inflation are proving to be among the greatest disruptors medtech companies will face over the next five years. Global supply chains, still reeling from pandemic-driven shocks, continue to experience bottlenecks and rising costs, while inflation exacerbates the problem by driving up the price of raw materials, labor, and transportation.
For medtech manufacturers, this poses a two-fold challenge: maintaining the affordability of their products while ensuring consistent delivery in an increasingly volatile supply chain environment.
Executives will need to rethink their supply chain strategies to build resilience. This might involve relocalizing production, diversifying suppliers, and deepening partnerships with logistics providers.
Strengthening local production capabilities can reduce reliance on global supply chains, offering medtech firms more control over the manufacturing process and better protection against external shocks. Additionally, companies may need to adopt more flexible inventory management systems to manage fluctuating material costs.
The pressure to remain cost-effective while managing higher production costs will force companies to innovate. Medtech firms might explore advanced manufacturing technologies or adopt digital supply chain solutions to boost efficiency and lower costs.
Navigating this landscape will require
agility, as only companies that can adapt to the evolving dynamics of inflation and supply chain disruptions will maintain competitive advantage and profitability in the long term.
Critical Success Factors
In a 1984 Sloan Management Review article titled, “An Assessment of Critical Success Factors,” A.C. Boynlon and R.W. Zmud wrote: “Critical success factors [CSFs] are those few things that must go well to ensure success for a manager in an organization, and therefore, they represent those managerial or enterprise areas that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization’s current operating activities and to its future success.”
For medtech executives and enterprises to survive—and thrive—over the next five years, capitalizing on the following critical success factors will be key:
A Strong Core is Key To Longevity
To survive and thrive over the next five years, medtech companies must begin by identifying their core strengths. This requires a comprehensive evaluation of existing capabilities, from AI-driven technologies to digital health offerings. By understanding where their products and expertise already excel, companies can focus on amplifying these strengths as part of their differentiation strategy, ensuring they stand out in a crowded market.
Next, companies should embrace AI innovations and digital therapeutics as foundational elements. These technologies are rapidly transforming healthcare, providing more accurate diagnostics and personalized care. By investing in cuttingedge software development, machine learning, and data analytics, medtech firms can enhance their offerings and stay ahead of competitors.
At the same time, medtech companies need to enhance patient-centric solutions. Expanding into consumer-friendly healthcare options, such as remote monitoring devices and connected health systems, allows companies to improve patient engagement and provide long-term value. By making healthcare more accessible and intuitive, firms can build deeper connections with consumers.
Furthermore, medtech companies must streamline operations and supply chains. Strengthening local partnerships and investing in advanced manufacturing technologies will help manage supply chain disruptions and inflation, ensuring consistent product delivery.
Lastly, leveraging strategic partnerships with tech firms and healthcare providers is essential. Collaborations enable companies to create integrated health ecosystems, speeding up innovation and market penetration, solidifying their differentiated position.
Think Bigger and Expand Offerings
Expanding offerings is a critical strategy that will help medtech companies survive and thrive over the next five years. As healthcare rapidly evolves, companies that broaden their product and service portfolios will unlock new growth opportunities, adapt to changing consumer demands, and differentiate themselves from competitors.
The first step is to assess market needs and emerging trends. Companies must invest in market research and data analytics to identify gaps in the healthcare market. Whether it’s remote monitoring, AI-driven diagnostics, or digital therapeutics, understanding consumer pain points and provider needs will reveal areas ripe for expansion.
Next, medtech firms should focus on developing complementary products and services. This may involve expanding beyond traditional medical devices into connected health ecosystems, creating a seamless integration of hardware, software, and digital platforms. By offering holistic solutions, companies can build stronger relationships with patients and providers.
Once new offerings are in development, strategic partnerships become essential. Collaborating with consumer tech companies, digital health firms, and healthcare systems will enable faster
innovation and market penetration. These alliances can enhance the value of expanded offerings and accelerate time-to-market.
Finally, companies must ensure regulatory compliance and operational agility. Adapting to new regulatory frameworks and streamlining supply chains will be key to maintaining cost-effectiveness.
Set Your Sights on New Markets
Exploring new markets will be a game-changer for medtech companies over the next five years, helping them survive and thrive in an evolving healthcare landscape. As traditional markets become saturated and competition intensifies, expanding into new geographic regions, therapeutic areas, or consumer segments offers fresh growth avenues.
The first step in this process is to conduct a thorough market analysis. Medtech executives must evaluate global healthcare trends, regulatory environments, and unmet needs in different regions. Emerging markets, particularly in Asia, Latin America, and Africa, present significant opportunities for growth due to expanding healthcare infrastructure and rising demand for affordable medical technologies. By understanding regional healthcare needs, companies can tailor their offerings to fit local demands and regulatory frameworks.
Next, adapt and localize product portfolios for new markets. This means not only complying with local regulations but also customizing products to address specific regional health challenges. For example, low-cost, high-impact devices could thrive in developing regions, where healthcare budgets are constrained.
Building strategic partnerships is essential to market entry. Collaborating with local distributors, healthcare providers, and government agencies will ease entry barriers and provide critical market insights.
According to Market Insider , the medtech sector is projected to create 2 million new jobs globally by 2030, reflecting a 30% increase from 2020 levels.
These partnerships allow medtech companies to scale quickly and efficiently.
Finally, ensure operational agility by adjusting supply chains, manufacturing, and distribution networks to accommodate new markets. Expanding logistics capabilities to meet the demands of unfamiliar environments will be crucial for consistent delivery and long-term success.
Melding Hardware and Software
Bringing hardware and software together into digital health ecosystems will be a crucial driver for medtech companies to survive and thrive over the next five years. As medical devices become smarter, combining them with software to create connected ecosystems will allow companies to capture and leverage data, improve patient outcomes, and gain a competitive edge in the growing $140 billion digital health market.
The first step is for companies to integrate hardware with software platforms that aggregate and analyze data from connected devices. This means leveraging medical devices to capture patient health metrics in real time, enabling clinicians to
make data-driven decisions faster and more accurately. This is particularly crucial in areas like chronic disease management, where continuous monitoring and data insights can drive early interventions and better outcomes.
Next, medtech firms must invest in interoperability. Ensuring that devices can communicate seamlessly with electronic health records (EHRs) and other healthcare IT systems is essential for creating a fully functioning ecosystem. This integration allows for smoother workflows and real-time data sharing between patients, providers, and healthcare systems.
To scale effectively, companies should form strategic partnerships with tech firms specializing in data analytics and cloudbased platforms. These collaborations will allow medtech firms to deliver more robust, scalable ecosystems that provide long-term patient engagement and loyalty.
Finally, companies need to focus on regulatory compliance and data security, ensuring that sensitive patient information is protected while navigating the evolving landscape of digital health regulations.
A Revolution in Motion Garnter forecasts the market for wearable medical devices will grow at a CAGR of 20%, reaching $150 billion by 2030. Additionally, the use of 3D printing in healthcare is projected to reach $10 billion that year as well.
Reinventing the commercial model is critical for medtech companies to survive and thrive over the next five years as they face unprecedented changes in customer expectations, cost pressures, and digital transformation. Traditional commercial approaches are becoming outdated, especially in a post-pandemic world where healthcare professionals and procurement departments expect more from their engagements with medtech companies.
The first step is to rethink customer engagement by transitioning from transactional models to ones that build longterm relationships. This involves adopting customer-centric approaches, which require medtech companies to deeply understand their customers’ evolving needs and preferences. Tools like digital engagement platforms and AI-driven insights can help companies offer personalized, value-driven solutions.
Next, companies should focus on streamlining operations and increasing efficiency by leveraging digital tools and automation. This reduces reliance on traditional sales approaches and allows sales teams to engage more strategically with customers. SG&A (selling, general, and administrative) costs must be optimized, but more importantly, companies should invest in transforming their salesforce with advanced training and tools that enable datadriven decision-making.
Finally, the alignment of incentives is crucial. Medtech executives must ensure that leadership teams are incentivized to prioritize customer engagement, adopt new technologies, and lead transformation across the organization. Incentive structures must be tied to the successful adoption of digital health ecosystems, value-based care, and innovative commercial models.
Take Five
As medtech companies prepare to face the next five years of disruption and transformation, the path forward is clear: adaptability and innovation are nonnegotiable. Navigating the AI-powered digital health revolution, addressing the rising demands of consumer-centric healthcare, and mastering the expanding regulatory landscape will be crucial. Medtech leaders must also embrace strategic partnerships as sector convergence accelerates, and they must develop supply chain strategies that withstand the pressures of inflation and global disruption.
However, disruption also presents incredible opportunity. Companies that leverage their core strengths, expand into new markets, and evolve their commercial models to be more customer-focused will unlock not only financial growth but industry leadership. By embracing digital health ecosystems and forming partnerships across sectors, medtech companies can deliver more comprehensive care solutions and enhance patient outcomes. The question isn’t if medtech will evolve—it’s how prepared companies are to thrive in this environment. Are you ready to reinvent, adapt, and lead in the medtech revolution?
The future is promising, but it will reward only those companies that boldly embrace innovation and execute strategic shifts to stay ahead of the curve. IQ
Faster. Better. Stronger. Bringing hardware and software together into digital health ecosystems will be a crucial driver for medtech companies to survive and thrive over the next five years. As medical devices become smarter, combining them with software to create connected ecosystems will allow companies to capture and leverage data, improve patient outcomes, and gain a competitive edge in the growing $140 billion digital health market.
Raj Thomas is the president of Medtronic’s endoscopy business, a role he assumed in February 2024. Mr. Thomas joined Medtronic in 2014 as an R&D Program Director for the Pelvic Health (PH) organization. He proceeded to become the VP of R&D for Pelvic Health and then the VP & General Manager of the Mechanical Circulatory Support (MCS) organization before taking on the role of President of the Endoscopy operating unit. Prior to his tenure at Medtronic, Mr. Thomas spent over 14 years at Boston Scientific, where he gained extensive experience in the medical device industry. In his current role, Mr. Thomas is committed to advancing patient outcomes and operational efficiency by empowering physicians worldwide through the integration of artificial intelligence other disruptive therapeutic technologies into endoscopic procedures.
RAJ THOMAS
President, Endoscopy
Medtronic
IQ: What are the top challenges executives and enterprises within the medtech industry must contend with over the next five years?
Mr. Thomas: I think the most pressing challenges the industry will face will be navigating the seismic shifts brought on by digital transformation. Our field goes through cycles of incremental progress punctuated by periods of rapid, disruptive innovation—right now, we’re living in one of those transformative times. The convergence of digital technologies with healthcare has revolutionized patient care, yet with that comes a set of entirely
new challenges we haven’t had to grapple with before. For one, transitioning to these advanced technologies—whether it’s implementing AI in diagnostics or fully integrating EMRs—requires not only infrastructure investments but also a cultural shift within organizations. And let’s not overlook the fact that these technologies unveil new problems we haven’t faced before, such as data security and patient privacy in an increasingly connected world. But the promise and potential of these innovations make those challenges worth tackling. At the end of the day, these are good problems to have because solving them means we’re making meaningful
progress. It’s an exciting time to be part of medtech, as the solutions we develop will have a profound and lasting impact on healthcare.
Another major challenge is the presence of Big Tech in healthcare. Companies like Apple, Google, and Amazon are making remarkable strides in health technologies, which is great for innovation but brings with it an accelerated pace that sometimes clashes with the more measured, regulation-heavy nature of medtech. Regulatory pathways in our industry are necessarily rigorous, designed to ensure safety and efficacy, but they can’t always keep up with the speed of technological advancements. That’s where we as medtech leaders need to work closely with regulatory bodies to strike the right balance—mitigating risks without stifling innovation.
And lastly, regulation itself is a growing challenge. As technologies like AI and machine learning evolve at lightning speed, regulatory frameworks often lag behind. These frameworks need time to adapt, but at the same time, we have a responsibility to ensure that impactful, life-saving technologies reach the patients who need them as soon as possible. Achieving that balance will be crucial as we move forward.
IQ: How are companies and leaders currently adapting their strategies to manage and mitigate these risks?
Mr. Thomas: At Medtronic, we’ve come to realize that what worked in the past five years won’t necessarily work in the next five. Larger organizations like ours can be like big ships— it takes more effort and time to pivot when market conditions change, but that’s exactly what we need to do. The future of medtech won’t wait for anyone, and as leaders, we can’t afford to take a ‘wait and see’ approach. We need the confidence to lead the way and make bold moves, even if it means being the first mover in uncharted territories.
That said, we’re always keeping one principle at the center of everything we do—the patient. Adapting our strategies isn’t just about mitigating risk or staying ahead of the competition. It’s about making sure we’re reaching more patients, meeting them where they are, and offering solutions that truly improve their lives. In an era where technology evolves so rapidly, there’s a temptation to chase the next big thing or focus on monetizing new services.
According to data from KPMG, the medical device industry is poised for steady growth, with global annual sales forecast to rise by over 5% a year, reaching nearly $800 billion (USD) by 2030. The U.S. is expected to continue dominating the medical device industry in 2030, crossing $300 billion in sales.
But for us, it’s always about the impact on patients first and foremost. If a new technology or solution doesn’t drive real value for them, it’s simply not worth pursuing.
Ultimately, our goal is to navigate this fastmoving landscape with foresight, ensuring that while we’re embracing change, we’re also staying true to our mission: delivering solutions that make a real difference in the lives of patients. That’s how we continue to lead the industry, not just follow trends.
IQ: Despite the challenges, what are the most promising opportunities for growth within medtech over the next five years? Is there a potential game-changer?
Mr. Thomas: The opportunities for growth in medtech over the next five years are immense, and there isn’t just one gamechanger; there are several. Technologies like AI, cloud computing, robotics, and the rise of Personalized Care are driving this transformation, and they’re not just promising—they’re disruptive in the best possible way.
Personalized care is where I see the most exciting potential. The ability to offer treatments and procedures tailored to each patient’s unique biology and lifestyle is revolutionizing medicine. We’re moving away from generalized care and into an era
where every patient receives what’s right for them—better outcomes, faster recovery, and a more human-centered approach to healthcare. That’s what makes this so powerful; it’s not just about the technology, it’s about improving lives in a deeply personal way.
And these advances don’t stop at care personalization. AI is already reshaping diagnostics, helping us catch things earlier and more accurately, while robotics is making surgeries less invasive and more precise. Then, there’s the miniaturization of devices—another game-changer that often gets overlooked. In our business, for example, the PillCamTM Genius SB Kit has streamlined an entire process by replacing multiple peripherals with one smaller, easier-to-use device. Not only does this make procedures more comfortable for the patient, but it simplifies the workflow for healthcare providers, enhancing efficiency.
When you combine all these technologies, the potential is mindblowing. They’re not just about faster or smarter care—they’re about fundamentally changing the way we think about and deliver healthcare. That’s the real opportunity here. The convergence of these advancements will enable us to create a future where care is more effective, more personalized, and more accessible for patients everywhere. That’s the
Medtech Milestones
kind of future we’re working toward, and it’s why we’re so excited about the path ahead.
IQ: What attributes will be required of leaders and executives in medtech to ensure their organizations survive and thrive over the next five years?
Mr. Thomas: The most critical attribute for leaders in medtech remains adaptability. It’s always been a key leadership skill, but the pace of change we’re seeing now makes it essential for survival and success. Technology is evolving fast, regulations are shifting, and what worked yesterday won’t necessarily work tomorrow. Leaders have to be ready to pivot, embrace new strategies, and adapt to the unexpected at every turn.
But adaptability alone isn’t enough. It also takes courage. It’s not just about reacting to change as it happens, it’s about having the boldness to make decisions before others do. We can’t afford to simply follow the trends once they’re proven—we have to lead the way. That means taking calculated risks, pushing forward even when the outcome isn’t guaranteed, and being unafraid to make the first move in uncharted territory.
And through it all, we must keep the patient at the center of every decision. As leaders, our responsibility is to ensure that whatever changes we make, whatever risks
we take, ultimately serve to improve the lives of patients. Adaptability and courage will be the defining qualities of the leaders who thrive in this era of transformation, but it’s that unwavering focus on patient impact that will drive real success.
IQ: As you look toward the horizon, do you have any final recommendations for your colleagues in the medtech field?
Mr. Thomas: I believe collaboration is key –we’re navigating some really complex work and some challenges are too big to tackle alone. Partnering with other innovators, healthcare professionals, and organizations, even outside our usual circles, is critical to staying ahead and driving real impact.
Ultimately, I think it’s important to stay grounded in your mission, especially in times of rapid change. In medtech, it can be easy to get swept up in the excitement of new technologies or market opportunities. But at the end of the day, we’re here to improve people’s lives. Every decision we make, every innovation we pursue, has to tie back to that purpose. Our greatest responsibility is to the people who trust us with their health. If we keep that in mind, we’ll continue to drive meaningful change in this industry. IQ
“What worked in the past five years won’t necessarily work in the next five. Larger organizations like ours can be like big ships—it takes more effort and time to pivot when market conditions change, but that’s exactly what we need to do.”
