Amazon, LillyDirect and Big Market Innovation
Infrastructural Advantage
Markets aren’t about technical push; they’re about gravitational pull.
An ‘Amazon Strategy’ *works* with a higher systemic logic, a completely different conceptual frame. It’s more like a sixth sense.
Amazon intuitively understands how to see and sustain itself as a self-generating market, one that is able to keep feeding an economic system that Andy Jassy believes has the potential to become a $10 trillion company — the world’s largest by valuation — over the next decade. Writes Dana Mattioni here in an excerpt from her book, The Everything War: Amazon’s Ruthless Quest to Own the World and Remake Corporate Power:
"Amazon is the number one, two or three player in a staggering number of industries from e-commerce to cloud computing, giving the company unrivaled access to partner, seller and even competitor data. An intense culture combined with unparalleled leverage and data across industries has made Amazon one of the most powerful and most feared companies in business history.
As it continues entering industries, watching Amazon decimate rivals has become a pastime on Wall Street, with one firm even keeping a “Death by Amazon” index. The astonishing range of commercial activities the company entered has put it head-to-head with juggernauts such as FedEx, Google, Netflix, Microsoft, Apple, Walmart and Kroger. "
Anyone who was surprised that Amazon acquired One Medical last year, and is now adding clinics and expanding into new markets, is misreading the nature of growth and management innovation Amazon uses to sustain itself as the keystone to an infinitely expanding, living ecosystem. What the Stargate Project underscores is this: infrastructure is the new sexy. And once you have the foundation in place, really big money is made by sustaining gravitational pull into it, progressively integrating products and services — storylines of value — in a way that produces a self-generating system of markets.
Missing from the conventional perspective in healthcare, the Standard Model of thought and logic, is understanding that technical pieces and inputs matter less than how they are assembled and interact within the context of a better care and service infrastructure.
The "things" themselves are secondary to the experience with their integration; and that experience needs to be ‘consumer-grade’. In other words, the new business value to create from healthcare is not from the discrete use of an iPhone application or GenAi to make legacy operating systems more efficient, but the way these components can meld together to interact and form a broader architecture for managing information, all done in a way that a competitor can’t.
Amazon is an infrastructural technology. It looks set to become the dominant design for healthcare delivery in the United States, the backbone to match clinical outcomes with business and administrative processes. To put it another way, Amazon has solved for ‘market interoperability’ at a national level. It is one or two acquisitions away from becoming its own health system.
An ‘Amazon Strategy’ Thinks at a System Level
Our brains, the neural engines of the mind, will have to work with a new frame around the new world we're encountering. The ecology of mentally processing a complicated zoo of interaction requires a different lens:
Seeing technology as a form of biology. "We are morphing so fast that our ability to invent new things outpaces the rate we can civilize them," says Kevin Kelly, the visionary thinker and founder of Wired who foresaw the scope of the internet revolution. We're less multichannel than infinite channel. All things being equal, the physics that govern the dynamics of technology creation outweigh the specific features of a piece of technology, or the particular instances in which it gets used.
Making agility a strategic imperative. Adapting to the disruptions of modernity rides on an operating model that is agile, one that is capable of managing a circular expansion of both problems and solutions as a living, breathing thing. Patience is needed to reward and nurture a steady accumulation of small net benefits over time. (Where Walmart exits, Amazon enters. This is why Amazon has been called the world’s most patient company.)
Understanding ‘ecosystems’ as a form of economic development, the interface layer around which a set of markets can cohere and align value to engage with the new healthcare persona: patients-as-physicians-as-consumers-as-employees-as-customers.
Looking beyond the clinical setting to improve outcomes. More than 2 billion people worldwide are overweight or obese; more than 400 million people worldwide have diabetes. The next design frontier is less connected health, more distributed health managed within new industry ecosystems. It's about dissolving boundaries between pieces -- market, industry, technology -- to sustain ‘continuous health engagement’ as a new economic concept. In meetings with senior leaders, writes Mattioli, Bezos would describe a world where customers didn’t visit Amazon.com once a month for various items like paper towels and batteries. Instead, Amazon would become embedded in the customer’s lifestyle. Bezos came to call this the “daily habit,” which would make Amazon an essential part of people’s lives in both implicit and explicit ways. Where Walgreen’s (and many other retail pharmacies) is failing is in positioning roadmaps that lead to this objective. Which is why “This Is How Walgreens' New CEO Thinks the Company Can Beat Amazon” is more a lesson in how Walgreens is misreading and misunderstanding where strategic differentiation comes from.
Becoming the authoritative source of a particular kind of information. As more and more data (and data providers) flood the market, a competitive position based solely on “data” becomes impossible to defend. ‘Specialized cognition’ is the thing around which to build a system advantage. If you can construct superior insight into how to manage unique sub-populations, or invent the ‘large language model’ by which others organize care delivery and administrative processes, then you have better leverage. Think ‘the production of cardiometablic health’ as an economic idea, an original strategy story around which to reshape power and control in ‘the mother of all markets”.
The health plan industry’s worst nightmare is employers realizing they are actually the insurance company. DJ Wilson, President and CEO of State of Reform, explored the concept of Amazon-as-health-insurance-company in a provocative blog:
Amazon looks for industries that are not sensitive to the customer, that have profits or premium pricing based on barriers to entry (often capital related), and looks to exploit those opportunities. It’s pretty straight forward. And, whether that industry is cloud storage space or groceries or “last mile” distribution networks, Amazon is thinking about it.
Amazon continues to forge ahead, seeking new areas to spread its tentacles, says Mattioli in her piece for the Wall Street Journal. “As regulators around the world decry the company as being too big, Amazon’s CEO Andy Jassy has told his senior leaders it isn’t big enough. Jassy recently told his deputies that Amazon could become a $10 trillion company — the world’s largest by valuation — over the next decade.”
If you understand how to work with systems, then it’s not hard to see how this is entirely possible.
What is clear is that quality and convenience -- a consumer-grade experience -- is shaping the emergence of new healthcare infrastructures.
LIllyDirect as Template for Big Market Innovation
The deeper story here is about positioning leverage.
How can a pharmaceutical business create 'gravitational pull' into a better care and service infrastructure? How do brand teams break from the Standard Model of check-the-box product marketing and sales? How does an industry displace or degrade the control of an embedded economic system, that orbits around the Big PBM market + the Big EBC market operating as a single organism?
”In an email conversation with Mark Cuban co-founder of Cost Plus Drugs, TheStreet found that the Dallas Mavericks owner and Shark Tank investor had some insight on his own efforts to help distribute these medicines,” writes Jeffery Quiggle on Saturday (April 13). “He also had some encouraging words about Eli Lilly's new approach for serving patients in general.”
After following up with Cuban on TheStreet's coverage of diabetes and weight-loss medicines, he gave an update on his company's progress.
"We are talking to manufacturers about GLP-1s that we can sell through costplusdrugs.com," he explained in an email. "But we aren't there yet." Then Cuban offered a question and a statement for TheStreet about Eli Lilly. "Have you dug into LillyDirect?" Cuban asked. "I think they are doing it right and might be a template for others. I just think it's a template for manufacturers to better serve patients," he added.
A thought experiment: How can Big Pharma spark a Big Strategic Rotation away from the control of Big PBMs?
The answer looks something like this:
LillyDirect + AbbVieDirect + AmgenDirect + BiogenDirect + BristolMyersSquibbDirect + JNJDirect + MerckDirect + NovoNordiskDirect + PfizerDirect + RocheDirect + SanofiDirect, + TakedaDirect......an entire industry 'Powered by AmazonInside' able to cut out industry middlemen and sell straight to consumers. Writes Oliver Barnes in his reporting for the Financial Times of Pfizer’s follow of the LillyDirect model:
“Pfizer is developing an online platform for patients to order medicine including anti-Covid drug Paxlovid and a migraine nasal spray. The website is part of an effort by drug companies to sell drugs directly to patients and simplify a system for distributing medication that is facing growing criticism for its complexity. It comes after Eli Lilly, the world’s largest drugmaker by market value, launched a similar platform in an industry first earlier this year.”
Timothy Mackey, professor of global health at University of California San Diego, predicted that other pharma companies would probably follow Eli Lilly and Pfizer. “All it takes is one large company like Eli Lilly to do it and then more risk-averse companies follow suit.”
An Infrastructural Advantage
Healthcare is a system of mysterious tubes on a massive scale, with various portals that take money in, do expensive and incomprehensible things to it, and spits it out somewhere else. No one fully understands the machinery, least of all the people in charge.
The ability to quickly assemble new 'care and service infrastructures' — to invent your own channel — is the ability to dislodge embedded economic systems, to degrade or displace control points like ExpressScripts or Epic whose staying power comes from processing the economics of healthcare. For the pharmaceutical industry, this is about approaching commercial strategy through the lens of infrastructure-as-a-service, as the means to create gravitational pull into a new orbit, to invent leverage, to define the rules by which others have to play.
Which is what Amazon understands so well.
/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy and innovation at a system level. Blue Spoon specializes in constructing new industry ecosystems.