Sproxil Innovative Solutions to Counterfeit - The Market Immplications

By Lukmon Sumola

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Table of Contents
Table of Contents .......................................................................................................................... 2 List of Abbreviations .....................................................................................................................3 1.0 Introduction ............................................................................................................................. 4 1.1 Company Profiles ....................................................................................................................4 2.0 The Counterfeit Products Market ............................................................................................ 5 2.2 Sproxil Solutions to Counterfeit Medicines ............................................................................6 3.0 The attractiveness of the market Segment Sproxil Operates...................................................6 3.1 Sproxil Value Chain Analysis .................................................................................................7 3.1.1 Inbound Logistics: ................................................................................................................8 3.1.2 Operations ............................................................................................................................ 8 3.1.3 Outbound Logistics ..............................................................................................................8 3.1.4 Marketing and sales ..............................................................................................................8 3.1.5 Services ................................................................................................................................ 9 3.1.6 Procurement ......................................................................................................................... 9 3.1.7 Human Resources .................................................................................................................9 3.1.8 Technological development ............................................................................................... 10 3.1.9 Infrastructure ...................................................................................................................... 10 4.0 Six Thinking Hat as an Improvement Mechanism ................................................................ 10 5.0 Recommendation ...................................................................................................................11 6.0 Reference ............................................................................................................................... 12

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List of Abbreviations
The Organisation for Economic Co-operation and Development OECD MPA WHO RFID ERP SC Mobile Product Authentication World Health Organisation Radio Frequency Identification Enterprise resource Planning Supply Chain

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1.0 Introduction
The number of manufacturing products moving backward and forward across global marketplaces due to the integration of world economy, globalisation, increase in high speed internet and telecommunication is astonishing. It provides substantial business opportunities and challenges, products and services can be purchased from suppliers in different geographical locations. Therefore, it opens doors for the counterfeit products to travel easily to countries with weak regulatory and enforcement systems. The fake goods is manufactured across every business sectors and the list of counterfeit products create a daunting challenge to compile. However, the socioeconomy implication of counterfeiting cannot be overlooked, the magnitude and impact compel tougher action from governments, consumers, and businesses alike. The counterfeiting of pharmaceuticals further highlight the danger, fake medical products are a major health risk for us all. The amount of counterfeit pharmaceuticals sold across border is staggering, the third world countries are the likely destination and the breeding ground often used by the counterfeit criminals.
This writing aims to present the innovative solution leverage by Sproxil to eradicate counterfeit

medical products market in the less developed countries. It looks into how the company capitalised in the gap in pharmaceutical security market to provide differentiated service offerings that open up a new market and create immense value to their customers, government, and customers customers. In this article, we delineate the constituent components of value chain as it applied to Sproxil operations and recommend six thinking hats to bring out workforce creativity.

1.1 Company Profiles

Sproxil is a mobile product authentication (MPA) solution provider based in Cambridge Massachusetts founded in 2009. The company provides mobile-based solutions to combat counterfeit pharmaceuticals for the emerging market. The solution is compatible with any tangible products and widely used by many leading pharmaceutical companies to eliminate multi-billion dollar counterfeit drugs industry. Sproxil operates in Africa, Asia, and North America. The company continue to broaden market share in the industry through expansion into other geographical region and penetration into non-pharmaceutical industries, such as cosmetics, automobiles, electrical cables, and luxury under wear products. Sproxil was named 7th most innovative company in 2013 by fast company.

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2.0 The Counterfeit Products Market

The counterfeit products are found everywhere in the world and in all sectors of the economy. The accuracy of defining the extent of fake products is a problem, obtaining accurate field statistic is a herculean task, and the estimate varies. However, the counterfeit products is a multi-billion dollar underground economy producing hundreds of billion dollars fake products yearly. The Organisation for Economic Co-operation and Development (OECD) statistic shows that counterfeit products rate is minimum in the industrial countries but high in the countries where regulatory and enforcement systems are weak. The region with the highest rate of counterfeit products are African countries, Asia, and Latin America. In most of these countries, more than 30% of the prescription drugs in the market can be counterfeit. The counterfeit products market is estimated by the OECD to be at region of $250 billion annually in 2009. There are other studies that report approximately $600 billion annual increase in the counterfeit products in the last four years, of which Counterfeit medicine alone accounts for $200 billion. The pharmaceutical industry world-wide loses considerable amounts to counterfeit criminal. However, the ultimate losers are the customers that received suboptimal prescription drugs at excessive price which can sometimes exposed them to health and safety risk or possibly death. In some less developed countries, the counterfeit pharmaceutical fatalities yearly statistic figures can be in the estimate of six figures. Although, the death tolls is unknown but significant number of people have lost their life. According to WHO, over 100,000 deaths yearly are linked to counterfeit pharmaceuticals in Africa alone. The estimate of 700,000 deaths globally caused by counterfeit malaria and tuberculosis medicines reported by The British think-thank network. Therefore, to reduce and eradicate counterfeit pharmaceutical, discourage counterfeiters, minimise death tolls caused by usage of fake products, and improve sales of genuine prescription drugs, the investment in technology present the best way forward.

2.1 The anti-Counterfeit Technologies for the Pharmaceuticals

There are many anti-counterfeit technological products available today in the market for the manufacturers, government agencies, wholesale distributors, and end-users. The technology adopted to fight counterfeit medicines war can varies from one country to another. The existing technologies deployed to fight the counterfeit pharmaceuticals are classified as follows. Overt The overt features enable the end users to verify the authentication of a pharmaceutical product package, the feature is attached to the pack but it is difficult and expensive to
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reproduce. The most popular overt features is the dove hologram used to protect credit cards. The examples include, unique sequential numbering, Holograms, optical variable devices, security graphics etc. Covert- The covert features have hidden component not visible to outsider, it helps the brand owner to identify fake medicines. The example of Covert include, embedded image, digital watermarks, laser coding etc. Forensic Markers- use require laboratory testing or field test kits to scientifically prove authentication. The example include, Biological taggants, DNA taggants etc. Track and Trace It involves assigning a unique identification number to each product unit during manufacture, which then remain with the product throughout it life cycle. The example include, serialisation, barcodes, radio frequency Identification (RFID) etc.

2.2 Sproxil Solutions to Counterfeit Medicines

The company provides a unique solutions to combat counterfeit products using mobile based verification service. The customers are empowered to act against counterfeit products by utilising there mobile phone to confirm the authentication of every products they purchase to ensure genuine products are purchased at the point of sale. How sproxil works?. Once a consumer purchase a product, there is a label on the package they can scratch-off to reveal a one-time use product unique code. They then text the code via SMS to a toll-free number using their respective mobile phone. The consumer will then receive instant respond confirming that the product is genuine or warning that it may be a fake. Sproxil differentiate its service offering from other competitors by leverage the existing growing technology at our fingertips to prevent consumers of being reap off and expose to health and safety risk by the counterfeiters.

3.0 The attractiveness of the market Segment Sproxil Operates

The anti-counterfeit market has a significant growth potential in the under developed and emerging economy countries. In most of the countries in Asia, Middle-East, South America and Africa, anti-counterfeit market remain untapped and have high level of counterfeiting. The technological solutions offered by Sproxil provides better security, reliability, and peace of mind for the end-users, manufacturers and government than many competitors in the market. According to 2013 Smithers Pira market intelligent report, the anti-counterfeit market is

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expected to worth about US$79.3 billion by 2014, the compound annual growth rate is estimate at 8.6% from 2009 to 2014. The financial outlook of anti-counterfeit market is quite attractive, and the external factors of five competitive forces swing in favour of Sproxil at the moment. Being the early adopter, the company could earn attractive return on investment. Although, the new entrant to the market posed low threat due to setup cost and technological knowhow. The substitute brand in the market technology systems are not as effective. The industry competitors will need to reinvent the wheel to retain the market share. The product manufacturers will do anything to keep counterfeiters at bay. The backward integrations from the mobile network, software and hardware suppliers are the major worries that pose high threat to the Sproxil existence.

3.1 Sproxil Value Chain Analysis

Sproxil used a simple but effective solutions. Combining mobile network, IBM cloud services and track and trace technological system to provide exceptional value-added services tailored to the specific market segment. The innovative solutions leverage by the company to combat counterfeit pharmaceuticals created unrivalled competitive advantage. The question that come to mind now, is that, how sustainable is the competitive edge enjoy by the company at the moment. To sustain its market position, Sproxil must design a defensive strategy to protect and grow its current market share.

According to Porter (1998) it is necessary to examine all the activities a company performs and how they interact to analyse the source of competitive advantage. The source of Sproxil competitive advantage stem from series of activities the company perform to deliver valueadded services the customers are willing to pay for. These discrete activities a company perform in designing, producing, marketing, delivering and supporting was coined by Porter (1998) as a value chain. The concept of value chain is based on a process view of an organisation, it is the idea of viewing organisation as a system made up of subsystems each with inputs, transformation processes and output that acquire and consume resources. In the form of labour, money, materials, building, equipment, land, administration and management. Porter (1998) further stated that how company manage value chain activities determines costs and affect profit. The two main categories of business activities identified are primary and support activities, of which all the activities are interlinked and act as a complete business system.

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The primary activities consist of the following:

3.1.1 Inbound Logistics:

This involve the partnership relationship Sproxil build with the suppliers of the frontend and backend technology system the company used to carry out its daily business activities. The national mobile network carrier, the IBM and the hardware vendors. Sproxil receive and store products data on IBM cloud services and also pass information to the customers (Pharmaceutical companies, Cable Company etc) on the customers customer purchase experience, geographical locations etc to improve customer service. It uses the national mobile network to disseminate information back and forth to their customers customer and relied on third party company for products serialisation.

3.1.2 Operations
All the activities Sproxil required to transform input into outputs to satisfy their customers (The consumer, the distributor and the brand owners). The daily operations will include collection of products data from the manufacturers, through integrated ERP system between Sproxil and the customers. The backend system will use the data to monitor customers products as it travel through the supply chain pipeline until it finally consumed. The customer support desk designed to give 24/7 support to their customers customers by providing assistance during verification process, give medical advice, and escalate counterfeit or stolen products. The backend system response to SMS text message in real time alerting consumers of fake/nor fake or stolen products.

3.1.3 Outbound Logistics

It relates to the relationship Sproxil have with the customers and all the activities required to collect, store, and distribute the output. The manufacturers have now tag the finished products with a covered unique identification code already in Sproxil system. Sproxil will now monitor the products movement as it travels from the manufacturing factory to the regional distributors warehouse, and to the individual pharmacy being stored until the product finally consume. It is at this point the company will act as a direct link between the customers and their end-users

3.1.4 Marketing and sales

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It refers to all activities Sproxil deployed to inform prospect client about the services the company provides, persuade buyers to purchase their solutions and facilitate their purchase. Sproxil prepare a unique service offering that meet specific needs of the customers and focus on delivering of exceptional value difficult for prospect customers to turn down. The company use various medium of market communicate tools suitable to the targeted region to promote its products. In addition, due to the nature of the solutions the company provide, Sproxil supports anti-counterfeit campaign to raise awareness of it services and lobby the countries policy makers and the regulators. The code counter on the website used as a testimony to show that the service is effective and efficient in combating fake pharmaceuticals and that people are using the services.

3.1.5 Services
It includes all the activities required to keep the services provided by Sproxil to be working effectively for the customers. Sproxil offers exceptional customer service to the customers customer at zero cost. It partners with all local mobile network providers to ensure that the confirmation SMS text message is at no cost for the end users. The company respond on time to customers customer queries and formed a partnership arrangement with their key customers. Sproxils client portal provides access to pharmaceutical manufacturers concerning pharmaceutical sales, stolen drugs, and suspected counterfeit.

Porter (1998) tells us that support activities are divide into four generic categories, each activity have numerous distinct value activities, which includes:- Procurement, Human Resources, Technological development, and Infrastructure.

3.1.6 Procurement
The function responsible for all the purchasing of materials, services, and other consumable items. This will includes the building sproxil used to carry out its operations, the office equipment, hardware and software, stationery etc. The company outsource all components or operations that cannot be performed in-house without incur high cost to third-party company to concentrate on core competence.

3.1.7 Human Resources

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It consists of all the activities involve in recruiting, training and development, compensation, selection, and maintenance. In Sproxil, employees are considered as the most vital resources, an important human capital the company cannot do without. The only inimitable and nonsubstitutable source of competitive advantage. The company invest in staff development program and training.

3.1.8 Technological development

Technology is essential for every business in the modern era, according to Porter (1989) every value activity embodies technology. In fact, technological system is the backbone of Sproxil operations and the source of the company competitive advantage. It is used to perform a range of value-added activities to carry out the day to day business operations. Sproxil uses different software application system and hardware to perform it operations, such as 2D capturing software, Track & Trace solutions, Mobile App, IBM ILOG Elixir Enterprise, IBM cloud service etc. Partnering with IBM help Sproxil to benefit immensely from the cost saving associated with the cloud environment.

3.1.9 Infrastructure
It consists of numerous activities including planning, management, finance, accounting, quality management, and government affairs. Effective management of all sproxil information and technological systems can contribute significantly to the company cost position. While at the same time, service offerings quality lapse will have direct implication on revenue thereby threat the market position of Sproxil.

4.0 Six Thinking Hat as an Improvement Mechanism

The method of Six Thinking Hat is a brainchild of Edward de Bono, he used six metaphorical hats with different colours to describe certain way of thinking. The concept is a way of putting parallel thinking into practice instead of argument that yield no immediate result. The six thinking hats are to be worn one at a time as each hat define different thinking. It is an evolutionary way of focusing thinking in one direction, it enables everyone to think together in parallel and on the same page cooperatively. When a hat is put on, everyone adopt the style of thinking and behaviour associate with the hat think.

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The six thinking hats are characterised by the following colours White Red Black Yellow Green Blue
It focuses on information and data. The white hat is neutral and objective. It is about feelings, intuitions and emotions. The hat allow you to present view without justification and explanation. It is for caution, risk assessment, and critical. It is possibly the most useful hat. It should not be overused, though, it is easy to be overused. It can be dangerous when overused. The logical positive. It is about hope and positivity. It help find benefits and value in a situation. It a creative hat, about generating new ideas, concepts, and perceptions. When this hat is put on, everybody is creative, find possibilities and alternatives. It is use for thinking about thinking. It is about process, control, and taking overview.

5.0 Recommendation
The anti-counterfeit technologies market is growing at a rapid rate. The individual market players will continue to fight to widen their market share and extend competitive advantage. Sproxil cannot continue to rely and depend on the old recipes, standing still mean falling down. Therefore, for Sproxil to sustain and improve competitive position, and continue to provide value-added services customers are willing to pay for. The company must create a learning workforce through education and training to promote innovative skills within. Education and training is a predictor of employees commitment and job satisfaction. When employees are committed, they stays with the company through thick and thin, and shares company goals. Investment in six thinking hats training to invent constructive medium of thinking among workforce bring huge benefits, especially in generating creative and innovative ideas.

Deployment of De Bono literal thinking tools in Sproxil will ensure that all workforce are thinking in the same direction cooperatively. Thinking together in parallel will improve meeting time and boost innovation. The training should start from the top management cascading downward to the floor workers.

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6.0 Reference
http://www.unodc.org/documents/data-and-analysis/tocta/8.Counterfeit_products.pdf viewed on 5th Nov.,2013. IMPACT (2006-2010) International Medical Products Anti-Counterfeiting Taskforce, Publisher, Italian Medicines Agency (AIFA). Viewed on 6th Nov, 2013 on
http://www.who.int/impact/FinalBrochureWHA2008a.pdf

Morris, J. & Stevens, P. (2006) Counterfeit medicines in less developed countries: Problems and solutions, publisher, MacGuru Ltd, UK. Viewed on 6th Nov, 2013 on
http://www.hks.harvard.edu/var/ezp_site/storage/fckeditor/file/Morris_Stevens.pdf

Porter, M.E (1998) Competitive Advantage: Creating and Sustaining Superior Performance. Bansal, D., Malla, S., Gudala, K., and Tiwari, P. (2012) Anti-Counterfeit Technologies: A Pharmaceutical Industry Perspective Sci. Pharm. Vol. 81, no.1, Pp. 113. http://www.sproxil.com viewed on 5th Nov, 2013 Bono, E.D. (1985) Six Thinking Hats: An Essential Approach to Business Management.

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