The diffusion of innovation theory describes the pattern and speed at which new ideas, practices, or products spread through a target population or target industry.
Euromed managing director Edo Madussi talks about how pharma companies could use some of the theory’s principles to select vendors for outsourcing activities. The selection can be done by evaluating the size of the company and its type using the diffusion of innovation model.
What is the diffusion of innovation model?
The theory was developed by E.M. Rogers, a communication theorist at the University of New Mexico, integrating previous sociological theories of behavioral change, it explains the passage of an idea through stages of adoption by different actors.
The theory conceptualizes different types of consumers of a product and/or service. These are the different types:
- Innovators: People who are open to risks and the first to try new ideas.
- Early adopters: People who are interested in trying new technologies and establishing their utility in society.
- Early majority: The early majority paves the way for use of innovation within mainstream society and are part of the general population.
- Late majority: The late majority is also part of the general population and refers to the set of people who follow the early majority into adopting innovation as part of their daily life.
- Laggards: As the name indicates, laggards lag the general population in adopting innovative products and new ideas. This is primarily because they are risk-averse and set in their ways of doing things. But the sweep of innovation through mainstream society makes it impossible for them to conduct their daily life (and work) without it. As a result, they are forced to begin using it.
These categories can be adopted and formulated also for enterprises, and in general, the size of an enterprise will have an impact on its ability to innovate. In trying to simplify these concepts, one may assume that the larger the company the slower its ability to adopt innovation.
Edo says: “If you picture a normal distribution curve, on the left side of the spectrum are the so-called Innovators, which are only 2.5% of the entire target population we’re referring to. Then we have the early adopters that come as the people that like and wish to implement and follow the idea and are therefore testing these new technologies, services, and approaches.
After the early adopters have implemented the change for the innovation, a new product or service has a breaking point, there’s either a majority of followers – known as the early majority, so these are the people that will implement or adapt and use this service, or then the curve simply stops and the technology and innovation come to an end.
After the early majority or when something becomes a trend, you can call them the late majority, because they’re the people that want to follow and use the product simply because now everybody has it. If you combine the early adopters, the innovators and the early majority, this is the actual real majority of the population that is already using this technology.
You can look at these groups of people and apply the same phases for outsourcing vendors. Certain companies are quick to innovate. Others are quick to pick up new innovations and try to implement bringing ameliorations. Other companies, tend to lack the speed and the willingness to take on the risks associated with change.
SMEs and the evolution of technology in the pharmaceutical sector
Referring to the model, Edo continues: “If you are a pharma company interested in using an innovative service and you are looking to outsource this service to whom you perceive to be “the expert” of this innovative technology, you should try to understand what is the real level of expertise of the vendors on this new service.
Depending on the size of the company and how recent this technology is (so where is positioned on the diffusion of innovation curve) you should be able to categorize vendors by their size and their approach to change.
For example, a large outsourcing vendor trying to follow the industry trends with regards to a new service is probably not a real innovator simply due to the lengthy operating procedures they may face in adopting the new service. A new technology, a new service is more likely to have been properly developed and tested in a small to medium size company as they most likely were among the earlier adopter of that service thanks to their flexibility.
“Reversibly – if you’re trying to find an outsourcing vendor for a service that has been on the market for many years, for which the technology, the processes, and the general guidelines have been tested, vetted, and remained the same for several years – it only makes sense to try selecting an experienced large provider that will have probably implemented several safety features, in addition to the actual service to ensure that despite their size the service can be offered consistently to all their customers.
“In the clinical trials space, with the constant addition of compliance requirements stemming from new regulations, laws, and the expectation of large pharma on vendors to continuously innovate, there is a very fine balance between innovation and stability. It is fundamental for pharma companies to find a good balance between the size of the company they’re picking, and the type of service they are seeking the outsourced vendor for.
Edo mentions that size of a company can affect the quality of a new product or service, as larger organizations tend to be later adopters of innovation and therefore may not be the real experts of the innovation at issue before launching it to market.
He continues: “Let’s take an example: for instance, QR codes and track and trace guidelines with regards to labelling activities of pharmaceutical products. The technology is no longer “new”, but at its infancy, this was something that had to be tested: How are we going to use QR codes? How are we going to use this particular label on the products? Where are we going to put it physically – on the actual box or pharmaceutical products?
“If you think about the size of vendors and their agility to test different applications on the labelling solutions, small to medium size outsourcing vendors were favoured by their size and flexibility and succeeded in bringing their solutions to the market. It is not a coincidence that the most adopted track and trace platforms we use today were created by new small players and not by the large technology vendors who dominated the market.
Large pharma versus smaller early adopters
So, when it comes to innovation, what happens in the pharmaceutical space?
From Edo’s personal experience, it is common that larger pharmaceutical companies wait to identify the early adopters ahead of potential acquisitions.
He says: “A good example would be the pharmaceutical company Genentech, which acquired Flatiron, one of the most renowned companies that specialized in artificial intelligence used within the healthcare sector.”
The future of outsourcing services post-Covid
Edo continues: “As far as innovation, I think that when we are faced with sudden situations that disrupt our habits, for instance: the pandemic, it is in our nature to find creative ways to re-establish a balance. This pandemic brought to light faster than many would have expected the innovative mindset of certain organizations. Now, more than ever, for instance, the industry of clinical trials has finally accelerated on the idea of being able to have clinical trials done remotely. And so indirectly, patient centricity has become, now more than ever, the most important focus. Outsourcing vendors, obviously, pharma outsourcing organizations, have found great ways to bring remote trials to reality.
So, within the last two years, I have assisted to more innovations in our industry than in the last ten years combined. We found better solutions to provide and deliver medications to patients that before were not being considered.
As far as the distribution of the innovation model goes, this can be implemented and can be used in any circumstance. You could alienate it from the actual contents and use it for any sort of adoption. The bigger the company is, the less flexible and less agile they will be to be in the first part of the actual diffusion model.
With regards to the diffusion model, Edo concludes it may be key to help Pharma Companies select vendors that can bring innovations faster to market.
He concludes: “If we were to recognize which are the players that are bringing this innovation quicker, and we would invest in them and use their services, rather than waiting or going with the older organizations that are resistant to change, a lot of the innovations that have been probably lagging because of insufficient funds or a lack of trust, could probably be or have been implemented before.
“So hopefully, the idea of looking at the size of the vendors and selecting them based on the type of service you need, and where is the service situated on the diffusion model, will help pharma companies make the right choices and work with the right partners.”