Lessons from the Ocado business model


I remember attending an very interesting talk given by Tim Steiner, the co-founder of Ocado. This might seem fairly tangential to a healthcare based consultancy, but in fact there were several useful learnings.

It is well documented that the pharma business model is outdated and requires a serious shake up to be fit for the cost constrained, personalised healthcare based future. So, why not look to a sector where the landscape is changing dramatically – the online grocery sector. Ocado, a UK based online grocery store, is challenging the traditional retail business model.

The adoption of Ocado by new consumers every day is driven by their broader value proposition of service, price, range, freshness, availability and ease of use. This is much more of a value sell versus the traditional retail cost/price sell driven by the majority of the big UK supermarkets (Tesco, Asda/Walmart etc.).

Home delivery completes the retailer's mission of food from the shelf to the fridge, and almost goes back to the good old days of the butcher's boy delivering the meat to the customer's door.  People want to be treated as individuals and have choice; Ocado work hard to form partnerships with smaller, specialist food manufactures e.g. Daylesford Farm Shop, to provide both a sense of individualisation as well as consumer choice. Interestingly, Ocado makes shopping simple by providing a wide range of recipes; helping customers to move from the shopping for desperate items model, to a hassle-free, complete meal based solution. The Ocado business model is underpinned by technological innovation and centralised/automated distribution which continues to enhance customer service and drive operational efficiency allowing costs to remain competitive.

So, the questions I was left asking myself were: How can pharma best innovate their business model? How can they persuade payers to focus on the value of a package of care rather than the cost of a drug? How can pharma complete the 'healthcare' mission and become a solution provider fit for the 21st century rather than a drug manufacturer of yesteryear?  How can pharma provide patients and customers with a more seamless experience when using their products?  How can technology be embraced more effectively by pharma to improve outcomes and cost effectiveness?  All food for thought (forgive the pun!).

By Debbie Allman