Walmart Checks Out
War and Patience
Here’s how to blow $230 million a year:
Sell a big market forecast to the board
Base the big market forecast on Standard Model thinking
Confuse said big market forecast (i.e., metrics) for a strategy
Point resources and capabilities in the wrong direction
Change said wrong direction early and often
Assume expert knowledge of the past is the way to construct a future
Ignore, misread or pretend-away the ‘ground truth’ from the frontline
And when the mathematical gymnastics packaged and presented in the PowerPoint don't manifest NOW in terms of the 'next $1 billion in growth' or, even better, deliver on the true center of the American Way of Healthcare (i.e., more shareholder value, ideally next quarter), throw in the towel. Restructure, reorganize and revert to the place you're comfortable with conceptually.
Walmart announced a surprise shutdown of its primary care business in April, just one month after it said it was expanding the initiative. The exit comes five years after launching Walmart Health with great ambitions shared by many other retailers, who likewise attempted to enter the healthcare services industry and are now looking for an out (Walgreens and Dollar General), looking for money (CVS Health) or looking for new vision (Teladoc).
In positioning its logic for the closure, Walmart blamed poor healthcare payments and rising operating cots for a lack of profits. According to Endpoints News exclusive reporting last week unpacking what happened and why, it reveals that Walmart had lost $230 million last year alone on the effort.
Endpoints, writes senior health tech reporter Shelby Livingston, sent a detailed list of questions to Walmart, which didn't dispute the characterization of the healthcare business’ operations and closure. “We’ve determined this is not a sustainable business model for us at this time,” the company said in a statement.
Walmart’s public relations team then added this thought bubble:
"What we learned through Walmart Health centers will help us continue to innovate and support the healthcare needs of our communities through our legacy pharmacy and vision."
Possible, but not probable.
By definition, the only place a "legacy" vision can lead is back to the past.
If there's a "learning" here -- the kind of thing Harvard Business School et. al. can package in a PowerPoint to sell as part of a customized C-suite pathway program -- it’s that making market innovation come to life is hard work. It isn't a solo sport (Walmart can/would have fared better collaborating with a big pharmaceutical company on a roadmap). And it doesn't start with a forecast that everyone knows is bullshit, particularly the people buying and selling it.
The upside of a new market is unknowable at the start, just ask the team at Amazon/Amazon Web Services, who twenty years ago invented what is now a $600 billion market for 'cloud infrastructure' services.
They had no idea it could be that large. What turned an “awkward side project” into a behemoth that is now four times bigger than the original shopping business was because of an operating philosophy that encourages deep thinking over PowerPoints (Amazon is famous for banning them), system entrepreneurship, and what I would describe as a Punk Rock Ethos of disruption:
“To me, it’s the concept of insurgents versus incumbents,” said Adam Selipsky, who became AWS’s CEO when his predecessor, Jassy, took over as Amazon CEO, in a story for Fortune by Geoff Colvin (see Over Two Decades, AWS has Become the Ultimate Case Study in Corporate Innovation).
It took three years before AWS went live. In 2005 Jassy hired Selipsky from a software firm to run marketing, sales, and support, Selipsky recalls: “Amazon called and told me there was this initiative for something about turning the guts of Amazon inside out, but other companies could use it.” AWS’s first service, for data storage, “was such a novel concept that it was even hard to explain and hard for me to understand,” he says.
Wall Street didn’t get it. “I have yet to see how these investments are producing any profit,” a Piper Jaffray analyst said in 2006. “They’re probably more of a distraction than anything else.”
The rest of the world didn’t get it either. “I cannot tell you the number of times I got asked, with a quizzical look on people’s faces, ‘But what does this have to do with selling books?’ ” Selipsky recalls. “The answer, of course, was: AWS has nothing to do with selling books. But the technology we use to sell books has everything to do with AWS and what we can offer customers.” Those customers were software developers, an entirely new target market that baffled outsiders.
AWS was prepared for that eaction. One of Amazon’s principles reads in part: “As we do new things, we accept that we may be misunderstood for long periods of time.”
So maybe the biggest learning of all from Walmart’s (and Walgreen’s and Dollar General’s and CVS Health’s) flailing foray into health market innovation is that making a Big Dent happen takes time, a more original vision and a completely different starting point. Something both Jeff Bezos and Leo Tolstoy understood.
Quoting from the epigraph to War and Peace:
"The two most powerful warriors are patience and time.”
/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. To engage: john@bluespoonconsulting.com