An increasingly, hot topic among the life sciences industry is Gross-to-Net; and while the discussion is typically geared towards the various problems and pain-points surrounding it, revenue management finance professionals are hard-pressed to find one, standard working solution. The Gross-to-Net Standard (GTNS) is a cross-functional, business process-focused, solution-based approach to stopping revenue leakage and implementing process improvement with a focus on internal controls and policy and procedure. The GTNS also utilizes innovating analytics through subject matter expertise and leverage of existing technical tools used in maximizing profitability. Its disciplined methods will save your organization time and money, while maximizing the potential and profitability of your revenue management stream. In this article it is my goal to explain to what GTNS is, how it works and how it can improve revenue management practices and outcomes for your organization.
The Current Gross-to-Net Landscape
In this economy and especially in an industry facing many changes, I have found that senior-level management within the life sciences industry has exhausted their efforts on the front-end, through sales and marketing tactics, to maximize profits and secure their current and future place for their organizations and their success. Finding themselves in such a place, they are now forced to focus on what dollars they are losing in the process. Because of this, senior-level management is forced to look at the back-end; downstream operational and financial processes that are causing their revenue to leak out, sometimes faster than they can bring it in. In their attempts to control this ‘back-end revenue leakage,’ they have looked to many of the following solution offerings, with often less-than-desired results.
|Solution Offering||Ineffective Outcomes|
|Software Solution||Over-time, over-budget|
|Staff Augmentation||High, Internal Resource Stress|
|Business Process Outsourcing||Scope Creep|
|Business Change Unmanaged|
|Disconnect to Business Processes|
In turn, it is found that the ‘solution’ adds little to no actual value (or ROI) realized to the company itself. I’d call it the ol’, one step forward, two steps back. I’ve seen it, so have you; and we can now do something about it.
What’s Missing: The Practice of Disciplined Business Process Management
Venturing into this endeavor of solving the all-too-familiar pains of revenue management, I wanted to make sure that I not only got to the root of the problem but was careful to emphasize more so on the solution. All of the other related publications, advice, etc. seem to be confined to the problems associated with revenue management, instead of the problems existing within the solution itself.
This is where I come in, the Gross-to-Net Practitioner. A practitioner: as one who engages in a profession or occupation, one who practices. In my practice of gross-to-net at varying organizations, within different functional groups, even varying industries, I have come to find the ways of the business and its processes that are truly the meat and potatoes of revenue management. Yes, the business and its processes, and the discipline that goes with it.
In starting off, I wanted to get to the very core of what revenue management was, before I found myself on a tangent relating to only certain industries, companies of a certain demographic, particular business processes themselves or even potential, segmented solutions. These segmented ‘solutions,’ have already been brought to our attention, and it is my belief, that no particular solution will address the issue holistically. Here, I’d like the whole to be greater than the sum of its parts. Don’t get me wrong, I will certainly be discussing the parts, i.e., technology solutions, data, analytics, awareness, training, documentation, etc., but as I’ve always believed, if you don’t take care of the roots, the leaves and flowers bloom, yet eventually die. Mind the silly play on words: if you don’t begin with a solid foundation, a strong, all-encompassing understanding of what you’re attempting to achieve, you will achieve only what you’ve prepared yourself to do so, and eventually fizzle out, or fail, on the front of the larger subject.
What is Revenue Management
Revenue management, I once read in a text, is the “application of disciplined analytics.” Disciplined; I liked that. As I’ve said, I have spent most of my career thus far either deep in the weeds or sitting at the surface of all of these businesses and the discipline of their processes, or lack thereof. Discipline, among many other definitions of the word, I find such explanations as: instruction, a field of study, training that corrects, molds or perfects, control gained by enforcing order, a rule or system of rules governing activity. I think maybe, just maybe, this discipline is a major piece of what everyone else is missing. Discipline in implementing a new revenue management solution. Discipline in the awareness, recognition and eventual integration of the business processes involved, no matter upstream or downstream, no matter what function, how detailed or high-level. And we must not ignore the organization around it all.
Stay tuned for my next blog in this series where I dive into and discuss the Cross-Functional Organization.
Interested in learning more about how Paragon Solutions can help with your revenue management needs? Contact a Paragon revenue management expert today.
[i] Cross, R. (1997) Revenue Management: Hard-Core Tactics for Market Domination. New York, NY: Broadway Books.
[ii] "Discipline." Merriam-Webster.com. Merriam-Webster, n.d. Web. 14 Aug. 2013. <http://www.merriam-webster.com/dictionary/discipline>.