Life science companies have traditionally kept patients and consumers at arm’s length. Pharmaceutical, biotech, and medtech companies have viewed providers and payers, not patients, as their key customers and have rarely interacted with them as end customers. This approach has had to evolve in recent years. Consumers are now accustomed to apps and smartwatches that provide a 360-degree view of their well-being, and they engage with direct-to-consumer brands such as Apple Health, Hims & Hers, and Noom to manage their own health.
In response, life science companies have rapidly launched new ventures and spinouts offering consumer wellness products and services that are not beholden to the same level of regulatory approvals as their main drugs and devices. Whether it’s a medical-device company building a diet-and-recipe app or a pharmaceutical company launching an online destination for information on menopause, the trend is clear: patient engagement is now critical for life science companies’ long-term success. Companies that do not build successful consumer businesses risk losing significant market share to nimbler competitors and digital disruptors.
Business building is a popular way for companies across industries to attract new customer segments and generate additional revenue from existing strengths (for example, existing partnerships or customer relationships). More than half of the 1,100 CEOs surveyed in a 2024 McKinsey Global Survey identified business building as one of their top priorities.1 Life science companies are especially eager to launch consumer-centric businesses, especially those propelled by AI. Our survey shows that 45 percent of pharma and medtech companies plan to launch AI or analytics-driven businesses in the next five years, a 28 percent increase over 2023. Some of the consumer-focused ideas that life science companies are considering include virtual health platforms and benefit management apps that allow patients to track their healthcare spending.
But launching a new business is never easy; it takes a huge amount of strategic planning and execution. And the process is doubly hard in life sciences, where new ventures can fail due to regulatory complexities, talent acquisition issues, and lackluster go-to-market strategies. As a result, many life science leaders who are enthusiastic about building new businesses struggle with implementation.
This article provides life science CEOs with a practical guide to building consumer-centric businesses by highlighting five main pitfalls to avoid. CEOs who succeed with business building empower their teams to experiment, providing them access to the company’s core competencies, technical infrastructure, and operational resources but shielding them from top-heavy corporate practices. By watching for these five red flags, CEOs can steer a new business from start to finish.
1. Relying too much on in-house regulatory and compliance expertise
Life science CEOs typically trust that their in-house teams have the expertise needed to navigate the complex regulations governing the creation of new customer-centric businesses. After all, the life science industry is one of the most highly regulated. Companies have extensive legal and data teams focused on ensuring compliance, navigating regulations, and protecting patient information. With so many experts at their disposal, life science CEOs often assume their companies have an advantage when it comes to launching new businesses in highly regulated environments.
But that’s not always the case. When attempting to launch new consumer-centric businesses, many life science companies get bogged down in process, which can stifle innovation. In-house teams in compliance and legal—and HR, technology, and marketing—are familiar with taking measured steps to ensure strict compliance. That kind of diligence works well to support mature companies but can stall new-business creation. To succeed with business building, life science companies must often create independent business units or spinouts, distancing them from the parent organization.
A global medtech company is a case in point. The company launched a new consumer health business that was integrated into the larger company. It had to meet the same regulations as the parent company and abide by all corporate procedures. The team spent up to 30 percent of its time complying with these requirements. Meanwhile, the company’s competitors offering stand-alone consumer health products were not encumbered by so many processes and could thus grow more quickly. To keep up, the medtech company changed course and created a new independent process for releases. The team unit was given more leeway to experiment and had to meet company-wide regulations for only a few select releases that touched on the core medical aspects of the product. After implementing this change, the new venture shortened the time it took to release software updates by 60 percent.
2. Perfecting products before launch
In life sciences, the development of new products often requires extensive research and testing in the form of clinical trials and studies. To make it to the commercial market, a drug or medical device must clear numerous regulatory hurdles and risk assessments. Thus, life science companies are more apt to develop each potential product sequentially, waiting for trial results before advancing to wider consumer testing.
In the consumer arena, the product development process is quite the opposite. Companies create new concepts rapidly and take them to market as early as possible to test hypotheses in real-life settings. Consumer products often launch even if they are not yet perfect and improve over time as customers interact with them. Consumer companies know that reaching product-market fit may take several attempts, and they test different iterations in parallel to see which ones resonate best with customers. In a similar vein, life science companies seeking to build consumer-focused businesses can speed up the development process by testing hypotheses more frequently before an official launch. Of course, even when life science companies build consumer health and wellness businesses that aren’t beholden to the same strict regulatory approval processes that drugs and medical devices are, they still need to meet consumer protection rules during this iterative product development phase.
The Apple Heart Study is an example of relying on rapid user testing to quickly launch a new consumer-facing service, all without compromising data privacy.2 Collaborating with Stanford Medicine, Apple extended the value of an existing product, the Apple Watch, into a health diagnostic service. Using the watch to monitor heart rhythms in more than 400,000 participants, Apple studied the device’s ability to detect atrial fibrillation in real time. To collect this data, Apple recruited participants by emailing customers who had bought Apple Watches and promoting the Apple Heart application in its app store, emphasizing the ease and accessibility of signing up for the program.3 This opt-in approach allowed Apple to quickly test a hypothesis for a new potential service in parallel with an already-commercialized product without needing to go through the official clinical trial process.
In another example of how life science companies can roll out consumer-facing businesses through an iterative process, a global company used several types of user testing to build a business-to-business-to-consumer (B2B2C) marketplace. The company designed an initial minimal viable product (MVP) in two months and then tested it extensively with users. The company was able to release a closed beta within six months of starting development. Through this launch-fast, test-often model, the product team could rapidly assess and improve the marketplace to gain product-market fit.
3. Expecting consumer tech talent will be easy to attract
Most corporations, including those in life sciences, have large recruiting functions and established practices for onboarding new talent. Many life science CEOs assume it will be business as usual when hiring teams to build and launch new businesses. In our experience, this is not the case. Corporate hiring practices can often be slow, and HR teams can struggle to attract the caliber of talent needed to build new consumer businesses.
Instead of relying on current recruiting practices, life science companies can employ new processes to hire digital talent, including setting up separate people functions for this effort. The type of employees who succeed in the fast-paced, nonlinear process of business building are often different from those who prefer traditional hierarchies. They have a start-up mentality, can pivot quickly, and thrive wearing multiple hats. The separate people function will need recruiters who “speak the language” of candidates looking to join innovative teams. These recruiters must be surgical in their approach to finding external talent with the right mindset for the new business unit. Of course, every company also has at least some employees with the skills to build a new business, so identifying those people and asking them to take part in the project can also help build the team.
One global medtech company built a new consumer health venture in part by creating a separate people function. The new HR team crafted a unique value proposition to attract the type of consumer tech talent needed to make the venture a long-term success. The team modeled recruitment processes on those used by successful start-ups, partnering with external tech recruiters. With a streamlined interview process that went from application to offer in ten days or fewer, plus weekly check-ins with the CEO to ensure hires aligned with the company’s long-term vision, the separate HR team successfully hired top data science and consumer tech talent, onboarding more than 200 new hires within a year.
4. Relying on healthcare providers to propel sales
For typical product launches, life science brands look to evoke reliability and scientific pedigree by selling their products through trusted channels such as doctors and pharmacies. Even for an over-the-counter product, the route to market is often through doctors’ offices or pharmacy-led wholesalers. When launching a consumer health product or service, life science companies may need to rethink their go-to-market approach to tap into current trends and desires. They can start by taking a page out of the consumer marketing playbook, adopting viral and product-led growth tactics.
The makers of popular consumer health products such as weight loss platform Noom, optometry and eyeglass provider Warby Parker, and online pharmacy Capsule have used these strategies from day one. These companies are experts at using digital marketing to evoke a value proposition that is both trustworthy and desirable. They use common consumer marketing strategies such as savvy branding and social media promotions to attract customers, and then deploy proven consumer user experience (UX) designs such as gamification and social networks to provide a sticky user experience.
One global life science company successfully scaled a B2B2C marketplace by leveraging a traditional sales force approach to onboard healthcare service professionals, combined with digital-marketing campaigns to reach patients. The company’s agile, omnichannel marketing model included running rapid sprints and quickly diagnosing challenges, which led to fast adoption of its new marketplace.
5. Not using the full power of AI
AI is likely a part of nearly any business-building journey. The newest forms of AI tools and agents can help companies brainstorm, iterate, prototype, and test new product ideas far faster than before. Using AI to build new businesses can accelerate time to market and generate consumer insights at scale, all without compromising consumer privacy.
Unfortunately, many life science companies fail to use AI in the business-building process because they often lack the internal resources to create AI agents capable of performing this level of iterative work. Whether life science companies build AI capabilities in-house or partner with a third party, the investment can be well worth it. AI tools can allow companies to validate potential venture ideas rapidly, which can help them get from idea to the first launch in days or weeks instead of months or years.
AI can continue to offer value even after launch by helping product teams improve offerings based on predictive analytics, marketing teams improve campaigns to boost customer acquisition, and customer success teams increase retention. Of course, using AI in a business-building capacity means navigating today’s quickly evolving regulatory environment regarding AI. This means employing either in-house or external data scientists, project managers, and compliance professionals who have expertise in implementing AI solutions that meet all legal requirements.
When starting any new business, CEOs who stay actively involved with the venture from ideation through execution can help transform their companies from the edge to deliver real ROI. Engaged CEOs set clear expectations about what success looks like, determine the right pace for growth, and champion the innovators who help take the company in a new direction. They also know how to avoid common pitfalls that can stymie business-building efforts. Once life science CEOs get a taste of building successful consumer-focused businesses, they almost always come back for more.
