CIOs in the pharmaceutical industry have an opportunity to become true pioneers. That's the good news—and the bad news. With the business model straining to operate at scale, pharma companies are asking their IT leaders to do two things at once: dramatically improve the efficiency of IT and use it to drive business innovation. Never before have CIOs in any industry had to face these challenges at the same time and to meet them so quickly.

The need to face both challenges at once arises from a convergence of factors. The pharma industry—buffeted by the possibility of price controls, declining drug-development productivity (higher costs, fewer drugs), stricter regulatory scrutiny, and competition from a growing number of "me-too" drugs—is in a state of turbulence. This instability is putting financial pressure on all the industry players, not just the weaker ones; earnings of the sector's top companies have fallen by 25 percent since 2002 (Exhibit 1). Meanwhile, companies must rethink core business processes (such as drug development and commercialization) and seek new ways to increase their yield and productivity.

IT is critical to meeting both challenges. Big pharma...